-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LQk6O7yYDSu2fwkA3gzITRTzIb2ZSfA577FMIFR+9vXDiG7VhD3JFDlSOxfdOzfR q1AgINigCg1spEsWtnsUlQ== 0000950123-99-001659.txt : 19990301 0000950123-99-001659.hdr.sgml : 19990301 ACCESSION NUMBER: 0000950123-99-001659 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990226 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURLINGTON RESOURCES INC CENTRAL INDEX KEY: 0000833320 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 911413284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-09971 FILM NUMBER: 99551337 BUSINESS ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: SUITE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136249500 MAIL ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: STE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 10-K405 1 BURLINGTON RESOURCES INC. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-9971 BURLINGTON RESOURCES INC. 5051 WESTHEIMER, SUITE 1400, HOUSTON, TEXAS 77056 TELEPHONE: (713) 624-9500 INCORPORATED IN THE STATE OF DELAWARE EMPLOYER IDENTIFICATION NO. 91-1413284
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE PREFERRED STOCK PURCHASE RIGHTS THE ABOVE SECURITIES ARE REGISTERED ON THE NEW YORK STOCK EXCHANGE. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by non-affiliates of the registrant: Common Stock aggregate market value as of December 31, 1998: $6,352,244,802 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class: Common Stock, par value $.01 per share, on December 31, 1998, Shares Outstanding: 177,375,073 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: Burlington Resources Inc. 1998 Annual Report to stockholders, which is incorporated by reference into Part I and Part II of this Form 10-K. Burlington Resources Inc. definitive proxy statement, to be filed not later than 120 days after the end of the fiscal year covered by this report, is incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 BURLINGTON RESOURCES INC. TABLE OF CONTENTS
PAGE PART I Items One and Two Business and Properties................................ 1 Employees.............................................. 2 Item Three Legal Proceedings...................................... 2 Item Four Submission of Matters to a Vote of Security Holders.... 4 PART II Item Five Market for Registrant's Common Equity and Related Stockholder Matters................................... 4 Item Six Selected Financial Data................................ 4 Item Seven and Seven A Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk......... 4 Item Eight Financial Statements and Supplementary Financial Information........................................... 7 Item Nine Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 7 PART III Items Ten and Eleven Directors and Executive Officers of the Registrant and Executive Compensation................................ 7 Item Twelve Security Ownership of Certain Beneficial Owners and Management............................................ 7 Item Thirteen Certain Relationships and Related Transactions......... 8 PART IV Item Fourteen Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 8
3 PART I ITEMS ONE AND TWO BUSINESS AND PROPERTIES Burlington Resources Inc. ("BR") is a holding company engaged, through its principal subsidiaries, Burlington Resources Oil & Gas Company and The Louisiana Land and Exploration Company ("LL&E"), acquired October 22, 1997, and their affiliated companies (collectively the "Company"), in the exploration, development, production and marketing of oil and gas. For additional information concerning Items One and Two, see pages 6 through 19 of the BR 1998 Annual Report, which information is incorporated herein by reference. OTHER MATTERS Competition. The Company actively competes for reserve acquisitions, exploration leases and sales of oil and gas, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for the sale of oil, gas and natural gas liquids ("NGLs"). Competitive factors in the Company's business include price, contract terms, quality of service, pipeline access, transportation discounts and distribution efficiencies. Regulation of Oil and Gas Production, Sales and Transportation. The oil and gas industry is subject to regulation by numerous national, state and local governmental agencies and departments in the countries in which the Company operates, compliance with which is often difficult and costly and some of which carry substantial noncompliance penalties and risks. Statutes, rules, regulations or guidelines require drilling permits, drilling bonds and operating reports. Most jurisdictions in which the Company operates also have statutes, rules, regulations or guidelines governing conservation matters, including the unitization or pooling of oil and gas properties and the establishment of maximum rates of production from oil and gas wells. Many jurisdictions also limit production to the market demand for oil and gas. Such statutes, rules, regulations or guidelines may limit the rate at which oil and gas could otherwise be produced from the Company's properties. All of the Company's sales of its domestic gas are deregulated. The Company operates various gathering systems. The United States Department of Transportation and certain state agencies regulate, under various statutes, rules or regulations, the safety and operating aspects of the transportation and storage activities of these facilities by prescribing standards. The Federal Energy Regulatory Commission ("FERC") has implemented policies, subject to court review, allowing interstate pipeline companies to negotiate their rates with individual shippers. The FERC is also considering allowing the interstate pipeline companies to negotiate tariffed terms and conditions of service. The Company will monitor the effects of these programs on its marketing efforts but does not expect that these actions will have a material adverse effect on the consolidated financial position or results of operations of the Company. Environmental Regulation. Various federal, state and local laws and regulations relating to the protection of the environment, including the discharge of materials into the environment, may affect the Company's domestic operations and costs as a result of their effect on oil and gas exploration, development and production operations. In addition, certain of the Company's international operations are subject to environmental regulations administered by foreign governments, including political subdivisions thereof, or by international organizations. Offshore oil and gas operations in the United States ("U.S.") are subject to regulations of the U.S. Department of the Interior which currently imposes absolute liability upon the lessee under a federal lease for the cost of pollution cleanup resulting from the lessee's operations and could subject the lessee to possible liability for pollution damages. In the event of a serious incident of pollution, the U.S. 1 4 Department of the Interior may require a lessee under a federal lease to suspend or cease operations in the affected area. The Company believes it is in substantial compliance with applicable environmental laws and regulations. The Company does not anticipate that it will be required under current environmental laws and regulations to expend amounts that will have a material adverse effect on the consolidated financial position or results of operations of the Company. Filings of Reserve Estimates With Other Agencies. During 1998, the Company filed estimates of oil and gas reserves for the year 1997 with the Department of Energy. These estimates were not materially different from the reserve data presented. For information concerning proved oil and gas reserves, see page 48 of the BR 1998 Annual Report, which information is incorporated herein by reference. EMPLOYEES The Company had 1,678 and 1,819 employees at December 31, 1998 and 1997, respectively. Currently, the Company has no union employees. ITEM THREE LEGAL PROCEEDINGS The Company is involved in several proceedings challenging payment of royalties for its crude oil and natural gas production. On November 20, 1997, the Company and numerous other defendants entered into a settlement agreement in a lawsuit styled as The McMahon Foundation, et al. v. Amerada Hess Corporation, et al. This lawsuit is a proposed class action consisting of both working interest owners and royalty owners against numerous defendants, all of which are oil companies and/or purchasers of oil from oil companies, including Burlington Resources Oil & Gas Company, formerly known as Meridian Oil Inc. ("BROG") and LL&E. The plaintiffs allege that the defendants conspired to fix, depress, stabilize and maintain at artificially low levels the prices paid for oil by, among other things, setting their posted prices at arbitrary levels below competitive market prices. Cases involving similar allegations have been filed in federal courts in other states. On January 14, 1998, the United States Judicial Panel on Multidistrict Litigation issued an order consolidating these cases and transferring the McMahon case to the United States District Court for the Southern District of Texas in Corpus Christi. The Company and other defendants have entered into a Settlement Agreement which received preliminary approval by the Court on October 28, 1998. The Court has set a hearing to finally determine the fairness, accuracy and reasonableness of the Settlement Agreement beginning in April 1999. The Company is also involved in several governmental proceedings relating to the payment of royalties. Various administrative proceedings are pending before the Minerals Management Service ("MMS") of the United States Department of the Interior with respect to the proper valuation of oil and gas produced on federal and Indian lands for purposes of paying royalties on production sold by BROG to its affiliate, Burlington Resources Trading Inc. ("BRTI"), or gathered by its affiliate, Burlington Resources Gathering Inc. In general, these proceedings stem from regular MMS audits of the Company's royalty payments over various periods of time and involve the interpretation of the relevant federal regulations. Most of these administrative proceedings currently have been suspended pending negotiations between the Company and the MMS to resolve their disputes regarding the appropriate valuation methodology or pending resolution of the federal False Claims Act litigation as hereinafter described. In late February 1998, the Company and numerous other oil and gas companies received a complaint filed in the United States District Court for the Eastern District of Texas in Lufkin in a lawsuit styled as United States of America ex rel J. Benjamin Johnson, Jr., et al. v. Shell Oil Company, et 2 5 al. alleging violations of the civil False Claims Act. The United States has intervened in this lawsuit as to some of the defendants, including the Company, and has filed a separate complaint. This suit alleges that the Company underpaid royalties for crude oil produced on federal and Indian lands through the use of below-market posted prices in the sale of oil from BROG to BRTI. The suit alleges that royalties paid by BROG based on these posted prices were lower than the royalties allegedly required to be paid under federal regulations, and that the forms filed by BROG with the MMS reporting the royalties paid were false, thereby violating the civil False Claims Act. The Company and others have also received document subpoenas and other inquiries from the Department of Justice relating to the payment of royalties to the federal government for natural gas production. These requests and inquiries have been made in the context of one or more other False Claims Act cases brought by individuals which remain under seal and are now being investigated by the Civil Division of the Department of Justice. The Company has responded and continues to respond to these requests and inquiries, but the Company does not know what action, if any, the Department of Justice will take with regard to these other cases. If the government chooses not to intervene and pursue these cases, the individuals who initially brought these cases are free to pursue them in return for a share, if any, of any final settlement or judgment. In addition, the Company has been advised that it is a target of a criminal investigation by the United States Attorney for the District of Wyoming into the alleged underpayment of oil and gas royalties. The Company has responded to numerous grand jury document subpoenas in connection with an investigation and is otherwise cooperating with the investigation. Management cannot predict when the investigation will be completed or its ultimate outcome. Based on the Company's present understanding of the various governmental proceedings relating to royalty payments, descibed in the preceding two paragraphs, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. However, in the event that the Company is found to have violated the civil False Claims Act or is indicted or convicted on criminal charges, the Company could be subjected to a variety of sanctions, including treble damages, substantial monetary fines, civil and/or criminal penalties and a temporary suspension from entering into future federal mineral leases and other federal contracts for a defined period of time. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will have a material adverse effect on the consolidated financial position of the Company, although results of operations and cash flows could be significantly impacted in the reporting periods in which such matters are resolved. In addition to the foregoing, the Company and its subsidiaries are named defendants in numerous other lawsuits and named parties in numerous governmental and other proceedings arising in the ordinary course of business. While the outcome of these other lawsuits and proceedings cannot be predicted with certainty, management believes these matters, other than the above-described proceedings, will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. 3 6 ITEM FOUR SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM FIVE MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the New York Stock Exchange under the symbol "BR." At December 31, 1998, the number of common stockholders was 21,538. For information concerning common stock prices and quarterly dividends, see page 50 of the BR 1998 Annual Report, which information is incorporated herein by reference. ITEM SIX SELECTED FINANCIAL DATA For information concerning Item Six, see page 21 of the BR 1998 Annual Report, which information is incorporated herein by reference. ITEM SEVEN AND SEVEN A MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For information concerning Item Seven, see pages 22, through 25 of the BR 1998 Annual Report, which information is incorporated herein by reference. FORWARD-LOOKING STATEMENTS The Company, in discussions of its future plans, objectives and expected performance in periodic reports filed by the Company with the Securities and Exchange Commission (or documents incorporated by reference therein) and in written and oral presentations made by the Company, may include projections or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, as amended. Such projections and forward-looking statements are based on assumptions which the Company believes are reasonable, but are by their nature inherently uncertain. In all cases, there can be no assurance that such assumptions will prove correct or that projected events will occur, and actual results could differ materially from those projected. Some of the important factors that could cause actual results to differ from any such projections or other forward-looking statements follow. Commodity Pricing and Demand. Substantially all of the Company's crude oil and natural gas production is sold on the spot market or under short-term contracts at market sensitive prices. Spot market prices for domestic crude oil and natural gas are subject to volatile trading patterns in the commodity futures markets, including among others, the New York Mercantile Exchange ("NYMEX"), because of seasonal weather patterns, national supply and demand factors and general economic conditions. Crude oil prices are also affected by quality differentials, by worldwide political developments and by actions of the Organization of Petroleum Exporting Countries. Although the futures markets provide some indication of crude oil and natural gas prices for the subsequent 12 to 18 months, prices in the futures markets are subject to substantial changes in relatively short periods of time. 4 7 There is also a difference between the NYMEX futures contract price for a particular month and the actual cash price received for that month in a U.S. producing basin or at a U.S. market hub, which is referred to as the "basis differential." Basis differentials, like the underlying commodity prices, can be volatile because of regional supply and demand factors, including seasonal factors and the availability and price of transportation to consuming areas. In the ordinary course and conduct of its business, the Company utilizes futures contracts traded on the NYMEX and the Kansas City Board of Trade, and over-the-counter price and basis swaps and options with major crude oil and natural gas merchants and financial institutions to hedge its price risk exposure related to the Company's U.S. production. The gains and losses realized as a result of these derivatives transactions are substantially offset in the cash market when the hedged commodity is delivered. In order to accommodate the needs of its customers, the Company also uses price swaps to convert gas sold under fixed price contracts to market prices. The Company uses a sensitivity analysis technique to evaluate the hypothetical effect that changes in the market value of crude oil and natural gas may have on the fair value of the Company's derivative instruments. At December 31, 1998, the potential decrease in fair value of commodity derivative instruments assuming a 10 percent adverse movement in the underlying commodities would result in an 89% decrease in the net deferred amount. For purposes of calculating the hypothetical change in fair value, the relevant variables are the type of commodity (crude oil or natural gas), the commodity futures prices, the volatility of commodity prices and the basis and quality differentials. The hypothetical change in fair value is calculated by multiplying the difference between the hypothetical price (adjusted for any basis or quality differentials) and the contractual price by the contractual volumes. Changes in crude oil and natural gas prices (including basis differentials) from those assumed in preparing projections and forward-looking statements could cause the Company's actual financial results to differ materially from projected financial results and can also impact the Company's determination of proved reserves and the standardized measure of discounted future net cash flows relative to crude oil and natural gas reserves. In addition, periods of sharply lower commodity prices could affect the Company's production levels and/or cause it to curtail capital spending projects and delay or defer exploration, exploitation or development projects. Projections relating to the price received by the Company for natural gas also rely on assumptions regarding the availability and pricing of transportation to the Company's key markets. In particular, the Company has contractual arrangements for the transportation of natural gas from the San Juan Basin eastward to Eastern and Midwestern markets or to market hubs in Texas, Oklahoma and Louisiana. The natural gas price received by the Company could be adversely affected by any constraints in pipeline capacity to serve these markets. Exploration and Production Risks. The Company's business is subject to all of the risks and uncertainties normally associated with the exploration for and development and production of crude oil and natural gas. Reserves which require the use of improved recovery techniques for production are included in proved reserves if supported by a successful pilot project or the operation of an installed program. The process of estimating quantities of proved reserves is inherently uncertain and involves subjective engineering and economic determinations. In this regard, changes in the economic conditions (including commodity prices) or operating conditions (including, without limitation, exploration, development and production costs and expenses and drilling results from exploration and development activity) could cause the Company's estimated proved reserves or production to differ from those included in any such forward-looking statements or projections. 5 8 Projecting future crude oil and natural gas production is imprecise. Producing oil and gas reservoirs eventually have declining production rates. Projections of production rates rely on certain assumptions regarding historical production patterns in the area or formation tests for a particular producing horizon. Actual production rates could differ materially from such projections. Production rates depend on a number of additional factors, including commodity prices, market demand and the political, economic and regulatory climate. Another major factor affecting the Company's production is its ability to replace depleting reservoirs with new reserves through acquisition, exploration or development programs. Exploration success is extremely difficult to predict with certainty, particularly over the short term where the timing and extent of successful results vary widely. Over the long term, the ability to replace reserves depends not only on the Company's ability to locate crude oil and natural gas reserves, but on the cost of finding and developing such reserves. Moreover, development of any particular exploration or development project may not be justified because of the commodity price environment at the time or because of the Company's finding and development costs for such project. No assurances can be given as to the level or timing of success that the Company will be able to achieve in acquiring or finding and developing additional reserves. Projections relating to the Company's production and financial results rely on certain assumptions about the Company's continued success in its acquisition and asset rationalization programs and in its cost management efforts. The Company's drilling operations are subject to various hazards common to the oil and gas industry, including explosions, fires, and blowouts, which could result in damage to or destruction of oil and gas wells or formations, production facilities and other property and injury to people. They are also subject to the additional hazards of marine operations, such as capsizing, collision and damage or loss from severe weather conditions. Development Risk. A significant portion of the Company's development plans involve large projects in the Gulf of Mexico and other areas. A variety of factors affect the timing and outcome of such projects including, without limitation, approval by the other parties owning working interests in the project, receipt of necessary permits and approvals by applicable governmental agencies, the availability of the necessary drilling equipment, delivery schedules for critical equipment and arrangements for the gathering and transportation of the produced hydrocarbons. Foreign Operations Risk. The Company's operations outside of the U.S. are subject to risks inherent in foreign operations, including, without limitation, the loss of revenue, property and equipment from hazards such as expropriation, nationalization, war, insurrection and other political risks, increases in taxes and governmental royalties, renegotiation of contracts with governmental entities, changes in laws and policies governing operations of foreign-based companies, currency restrictions and exchange rate fluctuations and other uncertainties arising out of foreign government sovereignty over the Company's international operations. Laws and policies of the U.S. affecting foreign trade and taxation may also adversely affect the Company's international operations. The Company's ability to market oil and natural gas discovered or produced in its foreign operations, and the price the Company could obtain for such production, depends on many factors beyond the Company's control, including ready markets for oil and natural gas, the proximity and capacity of pipelines and other transportation facilities, fluctuating demand for oil and natural gas, the availability and cost of competing fuels, and the effects of foreign governmental regulation of oil and gas production and sales. Pipeline and processing facilities do not exist in certain areas of exploration and, therefore, any actual sales of the Company's production could be delayed for extended periods of time until such facilities are constructed. Competition. The Company actively competes for property acquisitions, exploration leases and sales of crude oil and natural gas, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for gas 6 9 purchasing and processing contracts and for natural gas and NGLs at several steps in the distribution chain. Competitive factors in the Company's business include price, contract terms, quality of service, pipeline access, transportation discounts and distribution efficiencies. Political and Regulatory Risk. The Company's operations are affected by national, state and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls and environmental protection regulations. Changes in such laws and regulations, or interpretations thereof, could have a significant effect on the Company's operations or financial results. Potential Environmental Liabilities. The Company's operations are subject to various national, state and local laws and regulations covering the discharge of material into, and protection of, the environment. Such regulations affect the costs of planning, designing, operating and abandoning facilities. The Company expends considerable resources, both financial and managerial, to comply with environmental regulations and permitting requirements. Although the Company believes that its operations and facilities are in general compliance with applicable environmental laws and regulations, risks of substantial costs and liabilities are inherent in crude oil and natural gas operations. Moreover, it is possible that other developments, such as increasingly strict environmental laws, regulations and enforcement, and claims for damage to property or persons resulting from the Company's current or discontinued operations, could result in substantial costs and liabilities in the future. ITEM EIGHT FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION For information concerning Item Eight, see pages 26 through 50 of the BR 1998 Annual Report, which information is incorporated herein by reference. ITEM NINE CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEMS TEN AND ELEVEN DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND EXECUTIVE COMPENSATION A definitive proxy statement for the 1999 Annual Meeting of Stockholders of BR will be filed no later than 120 days after the end of the fiscal year with the Securities and Exchange Commission. The information set forth therein under "Election of Directors" and "Executive Compensation" is incorporated herein by reference. Executive Officers of the Company are listed on page 51 of the BR 1998 Annual Report and this information is incorporated herein by reference. ITEM TWELVE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required is set forth under the caption "Election of Directors" in the Proxy Statement for the 1999 Annual Meeting of Stockholders and is incorporated herein by reference. 7 10 ITEM THIRTEEN CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required is set forth under the caption "Election of Directors" in the Proxy Statement for the 1999 Annual Meeting of Stockholders and is incorporated herein by reference. PART IV ITEM FOURTEEN EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE ---- FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION Consolidated Statement of Income.......................... ** Consolidated Balance Sheet................................ ** Consolidated Statement of Cash Flows...................... ** Consolidated Statement of Stockholders' Equity............ ** Notes to Consolidated Financial Statements................ ** Report of Independent Accountants......................... ** Supplemental Oil and Gas Disclosures -- Unaudited......... ** Quarterly Financial Data -- Unaudited..................... ** AMENDED EXHIBIT INDEX....................................... A-1
REPORTS ON FORM 8-K The Company has filed no reports on Form 8-K. - --------------- ** Included in Annual Report and incorporated herein by reference. 8 11 SIGNATURES REQUIRED FOR FORM 10-K Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Burlington Resources Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BURLINGTON RESOURCES INC. By BOBBY S. SHACKOULS ------------------------------------ Bobby S. Shackouls Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Burlington Resources Inc. and in the capacities and on the dates indicated. By BOBBY S. SHACKOULS Chairman of the Board, January 13, 1999 ----------------------------------------------------- President and Chief Bobby S. Shackouls Executive Officer JOHN E. HAGALE Executive Vice President and January 13, 1999 - -------------------------------------------------------- Chief Financial Officer John E. Hagale PHILIP W. COOK Vice President, January 13, 1999 - -------------------------------------------------------- Controller and Chief Philip W. Cook Accounting Officer H. LEIGHTON STEWARD Vice Chairman of the Board January 13, 1999 - -------------------------------------------------------- H. Leighton Steward JOHN V. BYRNE Director January 13, 1999 - -------------------------------------------------------- John V. Byrne S. PARKER GILBERT Director January 13, 1999 - -------------------------------------------------------- S. Parker Gilbert LAIRD I. GRANT Director January 13, 1999 - -------------------------------------------------------- Laird I. Grant JOHN T. LAMACCHIA Director January 13, 1999 - -------------------------------------------------------- John T. LaMacchia JAMES F. MCDONALD Director January 13, 1999 - -------------------------------------------------------- James F. McDonald KENNETH W. ORCE Director January 13, 1999 - -------------------------------------------------------- Kenneth W. Orce DONALD M. ROBERTS Director January 13, 1999 - -------------------------------------------------------- Donald M. Roberts JOHN F. SCHWARZ Director January 13, 1999 - -------------------------------------------------------- John F. Schwarz WALTER SCOTT, JR. Director January 13, 1999 - -------------------------------------------------------- Walter Scott, Jr. WILLIAM E. WALL Director January 13, 1999 - -------------------------------------------------------- William E. Wall
9 12 BURLINGTON RESOURCES INC. AMENDED EXHIBIT INDEX The following exhibits are filed as part of this report.
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ 3.1 Certificate of Incorporation of Burlington Resources Inc. as amended January 4, 1999..................................... 3.2 By-Laws of Burlington Resources Inc. amended as of January 13, 1999.................................................... 4.1 Form of Rights Agreement dated as of December 16, 1998, between Burlington Resources Inc. and The First National Bank of Boston which includes, as Exhibit A thereto, the form of Certificate of Designation specifying terms of the Series A Junior Participating Preferred Stock and, as Exhibit B thereto, the form of Rights Certificate (Exhibit 1 to Form 8-A, filed December 1998)........................... * 4.2 Indenture, dated as of June 15, 1990, between the registrant and Citibank, N.A., including Form of Debt Securities (Exhibit 4.2 to Form 8, filed February 1992)................ * 4.3 Indenture, dated as of October 1, 1991, between the registrant and Citibank, N.A., including Form of Debt Securities (Exhibit 4.3 to Form 8, filed February 1992)..... * 4.4 Indenture, dated as of April 1, 1992, between the registrant and Citibank, N.A., including Form of Debt Securities (Exhibit 4.4 to Form 8, filed March 1993)................... * 4.5 Indenture dated as of June 15, 1992 among the Registrant and Texas Commerce Bank National Association (as Trustee) (Exhibit 4.1 LL&E's Form S-3, as amended, filed November 1993)....................................................... * 10.1 The 1988 Burlington Resources Inc. Stock Option Incentive Plan as amended (Exhibit 10.4 to Form 8, filed March 1993)....................................................... * +10.2 Burlington Resources Inc. Incentive Compensation Plan as amended and restated (Exhibit 10.2 to Form 10-K, filed February 1997).............................................. * +10.3 Burlington Resources Inc. Senior Executive Survivor Benefit Plan dated as of January 1, 1989 (Exhibit 10.11 to Form 8, filed February 1989)........................................ * +10.4 Burlington Resources Inc. Deferred Compensation Plan as amended and restated (Exhibit 10.4 to Form 10-K, filed February 1997).............................................. * +10.5 Burlington Resources Inc. Supplemental Benefits Plan as amended and restated (Exhibit 10.5 to Form 10-K, filed February 1997).............................................. * +10.6 Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls (Exhibit 10.7 to Form 10-K, filed February 1996).............................................. * Amendment to Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls, dated July 9, 1997 (Exhibit 10.6 to Form 10-K, filed February 1998)............ * +10.7 Employment Contract between Burlington Resources Inc. and H. Leighton Steward, dated October 22, 1997 (Exhibit 10.7 to Form 10-K, filed February 1998)............................. * +10.8 Burlington Resources Inc. Compensation Plan for Non-Employee Directors as amended and restated (Exhibit 10.8 to Form 10-K, filed February 1997).................................. * +10.9 Burlington Resources Inc. Key Executive Severance Protection Plan as amended June 8, 1989 (Exhibit 10.20 to Form 8, filed February 1992).............................................. * +10.11 Burlington Resources Inc. Retirement Income Plan for Directors (Exhibit 10.21 to Form 8, filed February 1991).... * +10.12 Burlington Resources Inc. Phantom Stock Plan for Non-Employee Directors, effective March 21, 1996 (Exhibit 10.12 to Form 10-K, filed February 1996).................... * +10.13 Burlington Resources Inc. 1991 Director Charitable Award Plan, dated as of January 16, 1991 (Exhibit 10.22 to Form 8, filed February 1991)........................................ *
A-1 13
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ 10.14 Master Separation Agreement and documents related thereto dated January 15, 1992 by and among Burlington Resources Inc., El Paso Natural Gas Company and Meridian Oil Holding Inc., including exhibits (Exhibit 10.24 to Form 8, filed February 1992).............................................. * +10.15 Burlington Resources Inc. 1992 Stock Option Plan for Non-employee Directors (Exhibit 28.1 of Form S-8, No. 33-46518, filed March 1992)................................. * +10.16 Burlington Resources Inc. Key Executive Retention Plan and Amendments No. 1 and 2 (Exhibit 10.20 to Form 8, filed March 1993)....................................................... * Amendments No. 3 and 4 to the Burlington Resources Inc. Key Executive Retention Plan (Exhibit 10.17 to Form 10-K, filed February 1994).............................................. * +10.17 Burlington Resources Inc. 1992 Performance Share Unit Plan as amended and restated (Exhibit 10.17 to Form 10-K, filed February 1997).............................................. * +10.18 Burlington Resources Inc. 1993 Stock Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1994).................... * +10.20 Burlington Resources Inc. 1994 Restricted Stock Exchange Plan (Exhibit 10.23 to Form 10-K, filed February 1995)...... * +10.21 Burlington Resources Inc. 1997 Performance Share Unit Plan, (Exhibit 10.21 to Form 10-K, filed February 1997)........... * 10.22 $400 million Short-term Revolving Credit Agreement, dated as of February 25, 1998, as Amended and Restated February 23, 1999 between Burlington Resources Inc. and Chase Bank of Texas, N.A., as agent, dated as of February 23, 1999........ 10.23 $600 million Long-term Revolving Credit Agreement, dated as of February 25, 1998, between Burlington Resources Inc. and Morgan Guaranty Trust Company of New York as agent.......... Amendment and Restatement Agreement dated as of February 23, 1999 in respect of the Long-Term Credit Agreement........... +10.24 Form of Termination Agreement with Certain Senior Management Personnel as amended (Exhibit 10(a)(i) to LL&E's Form 10-K, filed March 1996)........................................... * +10.25 Pension Agreement, dated as of December 27, 1994 (Exhibit 10(e) to LL&E's Form 10-K filed March 1995)................. * +10.26 Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Exhibit 10(g) to LL&E's Form 10-K filed March 1991)................. * Amendment to the LL&E Deferred Compensation Arrangement for Selected Key Employees dated December 21, 1998.............. +10.27 The LL&E Supplemental Excess Plan (Exhibit 10(j) to LL&E's Form 10-K filed March 1993)................................. * 13.1 Burlington Resources Inc. 1998 Annual Report................ 21.1 Subsidiaries of the Registrant.............................. 23.1 Consent of Independent Accountants.......................... 27.1 Financial Data Schedule..................................... **
- --------------- *Exhibit incorporated herein by reference as indicated. **Exhibit required only for filings made electronically using the Securities and Exchange Commission's EDGAR System. +Exhibit constitutes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K. A-2 EX-3.1 2 CERTIFICATE OF INCORPORATION 1 BURLINGTON RESOURCES CERTIFICATE OF INCORPORATION OF BURLINGTON RESOURCES INC. As Amended Through January 4, 1999 2 CERTIFICATE OF INCORPORATION OF BURLINGTON RESOURCES INC. ARTICLE 1. NAME The name of this corporation is Burlington Resources Inc. ARTICLE 2. REGISTERED OFFICE AND AGENT The address of the initial registered office of this corporation is Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, State of Delaware 19081, and the name of its initial registered agent at such address is The Corporation Trust Company. ARTICLE 3. PURPOSES The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE 4. SHARES 4.1 Authorized Capital. The total authorized stock of this corporation shall consist of 325,000,000 shares of common stock having a par value of $.01 per share and 75,000,000 shares of preferred stock having a par value of $.01 per share. 4.2 Issuance of Preferred Stock in Series. The preferred stock may be issued from time to time in one or more series, the shares of each series to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as are stated and expressed herein or in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors. 4.3 Authority of the Board of Directors. Authority is hereby expressly granted to the Board of Directors of this corporation, subject to the provisions of this Article 4 and to the limitations prescribed by law, to authorize the issue of one or more series of preferred stock, and with respect to each such series to fix by resolution or resolutions providing for the issue of such series the number of shares of such series, the voting powers, full or limited, if any, of the shares of such series and the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series of preferred stock shall include, but not be limited to, the determination or fixing of the following: (a) The number of shares of such series; (b) The designation of such series; (c) The dividend on the shares of such series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes or on any other series of any class or classes of stock of this corporation and whether such dividends shall be cumulative or noncumulative; 1 3 (d) Whether the shares of such series shall be subject to redemption by this corporation and, if made subject to such redemption, the times, prices, rates, adjustments, and other terms and conditions of such redemption; (e) The terms and amounts of any sinking fund provided for the purchase or redemption of the shares of such series; (f) Whether or not the shares of such series shall be convertible into or exchangeable for shares of any other class or classes or of any other series of any class or classes of stock of this corporation and, if provision be made for conversion or exchange, the times, prices, rates, adjustments, and other terms and conditions of such conversion or exchange; (g) The extent, if any, to which the holders of the shares of such series shall be entitled to vote with respect to the election of directors or otherwise, including the right to elect a specified number or class of directors, the extent, if any, to which the holders of the shares of such series shall have (i) separate voting rights with respect to the matters solely affecting the preferences, rights or powers of such series but not so affecting the common stock or the entire class of preferred stock and (ii) on a pro rata basis with other shares of preferred stock having voting rights, voting rights with respect to matters solely affecting the preferences, rights or powers of the entire class of preferred stock but not so affecting the common stock, the number or percentage of votes required for certain actions, and the extent to which a vote by class or series shall be required for certain actions; (h) The restrictions, if any, on the issue or reissue of any preferred stock; (i) The amount or amounts payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation prior to any payment or distribution of the assets of the corporation to any class or classes of stock of the corporation ranking junior to the preferred stock; (j) Whether, and the extent to which, any of the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of any such series may be made dependent upon facts ascertainable outside this Certificate of Incorporation or of any amendment hereto, or outside the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors, provided that the manner in which such facts shall operate upon the voting powers, designations, preferences, rights and qualifications, limitations or restrictions of such series is clearly and expressly set forth in the resolution or resolutions providing for the issuance of such series adopted by the Board of Directors; (k) The extent, if any, to which any committee of the Board of Directors may fix the designations and any of the preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of the shares of such series relating to dividends, redemption, dissolution, any distribution of assets of this corporation or the conversion into or exchange of such shares for shares of any other class or classes of stock of this corporation or any other series of the same or any other class or classes of stock of this corporation, or fix the number of shares of any such series or authorize the increase or decrease in the shares of such series; and 2 4 (1) Any other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable, which shall not adversely affect any other class or series of preferred stock at the time outstanding and which shall not be inconsistent with the provisions hereof. 4.4 Dividends. Subject to any preferential rights granted to any series of preferred stock, the holders of shares of the common stock shall be entitled to receive dividends, out of the funds of this corporation legally available therefor, at the rate and at the time or times, whether cumulative or noncumulative, as may be provided by the Board of Directors. The holders of shares of the preferred stock shall be entitled to receive dividends to the extent provided by the Board of Directors in designating the particular series of preferred stock. The holders of shares of the common stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this section. 4.5 Voting. The holders of shares of the common stock, on the basis of one vote per share, shall have the right to vote for the election of members of the Board of Directors of this corporation and the right to vote on all other matters, except those matters on which the holders of a separate class or series of this corporation's stock are entitled to vote separately by class or series. To the extent provided by resolution or resolutions of the Board of Directors providing for the issue of a series of preferred stock, the holders of each such series of preferred stock shall have the right to vote for the election of members of the Board of Directors of this corporation and the right to vote on all other matters, except those matters on which the holders of a separate class or series of this corporation's stock are entitled to vote separately by class or series. ARTICLE 5. INCORPORATOR The name and mailing address of the incorporator are as follows: Andrew Bor 1900 Washington Building Seattle, Washington 98101 ARTICLE 6. DIRECTORS The powers of the incorporator shall terminate upon the filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware. The names and mailing addresses of the persons whom are to serve as Directors until the first annual meeting of stockholders or until their successors are elected and qualify are: James W. Becker 999 Third Avenue Seattle, Washington 98101 Luino Dell'Osso, Jr. 999 Third Avenue Seattle, Washington 98101 3 5 ARTICLE 7. BY-LAWS The Board of Directors shall have the power to adopt, amend or repeal the By-Laws of this corporation, subject to the power of the stockholders to amend or repeal such By-Laws. The stockholders having voting power shall also have the power to adopt, amend or repeal the By-Laws for this corporation. ARTICLE 8. ELECTION OF DIRECTORS Except as may be otherwise required by the By-Laws, written ballots are not required in the election of Directors. ARTICLE 9. PROVISIONS FOR A COMPROMISE OR ARRANGEMENT Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. ARTICLE 10. PREEMPTIVE RIGHTS No preemptive rights shall exist with respect to shares of stock or securities convertible into shares of stock of this corporation. ARTICLE 11. CUMULATIVE VOTING The right to cumulate votes in the election of Directors shall not exist with respect to shares of stock of this corporation. ARTICLE 12. AMENDMENTS TO CERTIFICATE OF INCORPORATION This corporation reserves the right to amend or repeal any of the provisions contained in this Certificate of Incorporation in any manner now or hereafter permitted by law, and the rights of the stockholders of this corporation are granted subject to this reservation. 4 6 ARTICLE 13. LIMITATION OF DIRECTOR LIABILITY To the full extent that the Delaware General Corporation Law, as it exists on the date hereof or may hereafter be amended, permits the limitation or elimination of the liability of directors, a director of this corporation shall not be liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any amendment to or repeal of this Article 13 shall not adversely affect any right or protection of a director of this corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. ARTICLE 14. ACTION BY STOCKHOLDERS WITHOUT A MEETING Any action by stockholders of this corporation shall be taken at a meeting of stockholders and no action may be taken by written consent of stockholders entitled to vote upon such action. ARTICLE 15. SPECIAL VOTING REQUIREMENTS In addition to any affirmative vote required by law, this Certificate of Incorporation, any agreement with any national securities exchange or otherwise, any "Business Combination" (as hereinafter defined) involving this corporation shall be subject to approval in the manner set forth in this Article 15. 15.1 Definitions For the purposes of this Article 15: (a) "Affiliate" and "beneficial owner" are used herein as defined in Rule 12b-2 and Rule 13d-3, respectively, under the Securities Exchange Act of 1934 as in effect on May 25, 1988 (the "1934 Act"). The term "Affiliate" as used herein shall exclude this corporation, but shall include the definition of "Associate" as contained in said Rule 12b-2. (b) An "Interested Stockholder" is a person other than (i) the corporation or (ii) Burlington Northern Inc., a Delaware corporation ("BNI"), as long as BNI continues to own at least a majority of the stock of this corporation entitled to vote for the election of directors ("Voting Stock") and there has been no Change in Control of BNI since May 25, 1988, who is (A) the beneficial owner of ten percent or more of the Voting Stock or (B) an Affiliate of this corporation which (1) at any time within a two-year period prior to the record date for the vote on a Business Combination was the beneficial owner of ten percent or more of the Voting Stock, or (2) at the completion of the Business Combination will be the beneficial owner of ten percent or more of the Voting Stock. (c) A "Person" is a natural person or a legal entity of any kind, together with any Affiliate of such person or entity, or any person or entity with whom such person, entity or any Affiliate has any agreement or understanding relating to acquiring, voting or holding Voting Stock. (d) A "Disinterested Director" is a member of the Board of Directors of this corporation (other than the Interested Stockholder) who was a director prior to the time the Interested Stockholder became an Interested Stockholder, or any director who was recommended for election by the 5 7 Disinterested Directors. Any action to be taken by the Disinterested Directors shall require the affirmative vote of at least two-thirds of the Disinterested Directors. (e) A "Business Combination" is (i) a merger or consolidation of this corporation or any of its subsidiaries with an Interested Stockholder; (ii) the sale, lease, exchange, pledge, transfer or other disposition (A) by this corporation or any of its subsidiaries of all or a Substantial Part of the corporation's Assets to an Interested Stockholder, or (B) by an Interested Stockholder of any of its assets, except in the ordinary course of business, to this corporation or any of its subsidiaries; (iii) the issuance of stock or other securities of this corporation or any of its subsidiaries to an Interested Stockholder, other than on a pro rata basis to all holders of Voting Stock of the same class held by the Interested Stockholder pursuant to a stock split, stock dividend or distribution of warrants or rights; (iv) the adoption of any plan or proposal for the liquidation or dissolution of this corporation proposed by or on behalf of an Interested Stockholder; (v) any reclassification of securities, recapitalization, merger or consolidation or other transaction which has the effect, directly or indirectly, of increasing the proportionate share of any Voting Stock beneficially owned by an Interested Stockholder; or (vi) any agreement, contract or other arrangement providing for any of the foregoing transactions. (f) A "Substantial Part of the corporation's Assets" shall mean assets of this corporation or any of its subsidiaries in an amount equal to twenty percent or more of the fair market value, as determined by the Disinterested Directors, of the total consolidated assets of this corporation and its subsidiaries taken as a whole as of the end of its most recent fiscal year ended prior to the time the determination is made. (g) A "Change in Control" shall be deemed to occur (i) if any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the 1934 Act), directly or indirectly, of securities of BNI representing twenty percent or more of the stock of BNI entitled to vote for directors of BNI, (ii) upon the first purchase of BNI's common stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by BNI), (iii) upon the approval by BNI's stockholders of a merger or consolidation, a sale or disposition of all or substantially all of BNI's assets or a plan of liquidation or dissolution of BNI, or (iv) if, during any period of two consecutive years, individuals who at the beginning of such period constitute the BNI board of directors cease for any reason to constitute at least a majority thereof, unless the election or nomination for the election by BNI's stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 15.2 Vote Required for Business Combinations The affirmative vote of not less than fifty-one percent of the Voting Stock, excluding the Voting Stock of an Interested Stockholder who is a party to the Business Combination, shall be required for the adoption or authorization of a Business Combination, unless the Disinterested Directors determine that: (a) The Interested Stockholder is the beneficial owner of not less than eighty percent of the Voting Stock and has declared its intention to vote in favor of or to approve such Business Combination: or (b) (i) The fair market value of the consideration per share to be received or retained by the holders of each class or series of stock of this corporation in a Business Combination is equal to or greater than the consideration per share (including brokerage commissions and soliciting dealer's 6 8 fees) paid by such Interested Stockholder in acquiring the largest number of shares of such class of stock previously acquired in any one transaction or series of related transactions, whether before or after the Interested Stockholder became an Interested Stockholder and (ii) the Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a stockholder), of any loans, advances, guarantees, pledges or other financial assistance provided by this corporation, whether in anticipation of or in connection with such Business Combination or otherwise. 15.3 Information Requirements In the event any vote of holders of Voting Stock is required for the adoption or approval of any Business Combination, a proxy or information statement describing the Business Combination and complying with the requirements of the 1934 Act shall be mailed at a date determined by the Disinterested Directors to all stockholders of this corporation whether or not such statement is required under the 1934 Act. The statement shall contain any recommendations as to the advisability of the Business Combination which the Disinterested Directors, or any of them, may choose to state and, if deemed advisable by the Disinterested Directors, an opinion of an investment banking firm as to the fairness of the terms of such Business Combination. Such firm shall be selected by the Disinterested Directors and be paid a fee for its services by this corporation as approved by the Disinterested Directors. 15.4 Amendment No amendment to this Certificate of Incorporation shall amend, alter, change or repeal any of the provisions of Article 14 or of this Article 15 unless such amendment shall receive the affirmative vote of not less than fifty-one percent of the Voting Stock, excluding the Voting Stock of any Interested Stockholder as defined in Section 15.1 of this Article 15. OTHER AMENDMENTS Section 1. Designation and Amount. There shall be a series of Preferred Stock, par value $.01 per share, of the Company which shall be designated as "Series A Junior Participating Preferred Stock," par value $.01 per share, and the number of shares constituting such series shall be 3,250,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to a number less than that of the shares then outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Company. Section 2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock in preference to the holders of shares of Common Stock, par value $.01 per share (the "Common Stock"), of the Company and any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of January, April, July, and October in each year (each such date being referred to 7 9 herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock in an amount per share (rounded to the nearest cent) equal to the greater of (a) $25, or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Company shall at any time after December 16, 1998 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Company shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $25 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters 8 10 submitted to a vote of the stockholders of the Company. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company. (C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of shareholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. 9 11 (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the Chairman of the Board or the President and Chief Executive Officer of the Company. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Company. Such meeting shall be called for a time not earlier than 10 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Company if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the Restated Certificate of Incorporation or By-laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Restated Certificate of Incorporation or By-laws). Any vacancies in the Board of Directors effected by the provisions of clause (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 10 12 Section 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Company shall not: (i) Declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) Declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) Redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or (iv) Purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Company shall not permit any subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 11 13 Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received per share, the greater of 100 times $200 or 100 times the payment made per share of Common Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. If the Company shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property then in any such event the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Company shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then 12 14 in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that are outstanding immediately prior to such event. Section 8. Redemption. The shares of Series A Junior Participating Preferred Stock shall not be redeemable. Section 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Company's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. 13 EX-3.2 3 BY-LAWS OF BURLING RESOURCES INC. 1 BY-LAWS OF BURLINGTON RESOURCES INC. AS AMENDED THROUGH JANUARY 13, 1999 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I OFFICES................................................................................. 1 Section 1 Registered Office and Agent........................................................ 1 Section 2 Other Offices...................................................................... 1 ARTICLE II STOCKHOLDERS............................................................................ 1 Section 1 Annual Meetings.................................................................... 1 Section 2 Special Meetings................................................................... 1 Section 3 Place of Meetings.................................................................. 2 Section 4 Notice of Meetings................................................................. 2 Section 5 Fixing of Record Date for Determining Stockholders................................. 2 Section 6 Quorum............................................................................. 3 Section 7 Organization....................................................................... 3 Section 8 Voting............................................................................. 4 Section 9 Inspectors......................................................................... 4 Section 10 List of Stockholders............................................................... 5 Section 11 Notice of Nominations and Business ................................................ 5 ARTICLE III BOARD OF DIRECTORS...................................................................... 7 Section 1 Number, Qualification and Term of Office........................................... 7 Section 2 Vacancies.......................................................................... 8 Section 3 Resignations....................................................................... 8 Section 4 Removals........................................................................... 8 Section 5 Place of Meetings; Books and Records............................................... 8 Section 6 Annual Meeting of the Board........................................................ 8 Section 7 Regular Meetings................................................................... 9 Section 8 Special Meetings................................................................... 9 Section 9 Quorum and Manner of Acting........................................................ 9 Section 10 Organization....................................................................... 9 Section 11 Consent of Directors in Lieu of Meeting............................................ 10 Section 12 Telephonic Meetings................................................................ 10 Section 13 Compensation....................................................................... 10
i 3
PAGE ---- ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS.................................................... 10 Section 1 Executive Committee................................................................ 10 Section 2 Finance Committee.................................................................. 11 Section 3 Audit Committee.................................................................... 11 Section 4 Compensation and Nominating Committee.............................................. 12 Section 5 Committee Chairman, Books and Records.............................................. 12 Section 6 Alternates......................................................................... 13 Section 7 Other Committees................................................................... 13 Section 8 Quorum and Manner of Acting........................................................ 13 ARTICLE V OFFICERS................................................................................ 13 Section 1 Number............................................................................. 13 Section 2 Election, Term of Office and Qualifications........................................ 14 Section 3 Resignations....................................................................... 14 Section 4 Removals........................................................................... 14 Section 5 Vacancies.......................................................................... 14 Section 6 Compensation of Officers........................................................... 14 Section 7 Chairman of the Board.............................................................. 14 Section 8 Vice Chairman of the Board......................................................... 15 Section 9 President.......................................................................... 15 Section 10 Chief Executive Officer ........................................................... 15 Section 11 Chief Financial Officer ........................................................... 16 Section 12 Secretary.......................................................................... 17 Section 13 Treasurer.......................................................................... 17 Section 14 Absence or Disability of Officers.................................................. 17 ARTICLE VI STOCK CERTIFICATES AND TRANSFER THEREOF................................................. 18 Section 1 Stock Certificates................................................................. 18 Section 2 Transfer of Stock.................................................................. 18 Section 3 Transfer Agent and Registrar....................................................... 18 Section 4 Additional Regulations............................................................. 19 Section 5 Lost, Destroyed or Mutilated Certificates.......................................... 19 ARTICLE VII DIVIDENDS, SURPLUS, ETC................................................................. 19 ARTICLE VIII SEAL.................................................................................... 19
ii 4
PAGE ---- ARTICLE IX FISCAL YEAR............................................................................. 20 ARTICLE X INDEMNIFICATION......................................................................... 20 Section 1 Right to Indemnification........................................................... 20 Section 2 Right of Indemnitee to Bring Suit.................................................. 20 Section 3 Nonexclusivity of Rights........................................................... 21 Section 4 Insurance, Contracts and Funding................................................... 21 Section 5 Definition of Director and Officer................................................. 22 Section 6 Indemnification of Employees and Agents of the Corporation......................... 22 ARTICLE XI CHECKS, DRAFTS, BANK ACCOUNTS, ETC...................................................... 22 Section 1 Checks, Drafts, Etc.; Loans........................................................ 22 Section 2 Deposits........................................................................... 22 ARTICLE XII AMENDMENTS.............................................................................. 23
iii 5 BY-LAWS OF BURLINGTON RESOURCES INC. ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE AND AGENT. The registered office of the corporation is located at Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware, and the name of its registered agent at such address is The Corporation Trust Company. SECTION 2. OTHER OFFICES. The corporation may have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II STOCKHOLDERS SECTION 1. ANNUAL MEETINGS. A meeting of the stockholders for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting shall be held annually at ten (10) o'clock A.M. on the third Thursday of April, or at such other time on such other day as shall be fixed by resolution of the Board of Directors. If the day fixed for the annual meeting shall be a legal holiday such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders for any purpose or purposes may be called only by a majority of the Board of Directors, the Chairman of the Board, or the President. (Amended February 22, 1989) 1 6 SECTION 3. PLACE OF MEETINGS. The annual meeting of the stockholders of the corporation shall be held at the general offices of the corporation in the City of Houston, State of Texas, or at such other place in the United States as may be stated in the notice of the meeting. All other meetings of the stockholders shall be held at such places within or without the State of Delaware as shall be stated in the notice of the meeting. (Amended December 6, 1995) SECTION 4. NOTICE OF MEETINGS. 4.1 Giving of Notice. Except as otherwise provided by statute, written notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice shall be given when deposited in the United States mails, postage prepaid, directed to such stockholder at his or her address as it appears in the stock ledger of the corporation. Each such notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 4.2 Notice of Adjourned Meetings. When a meeting is adjourned to another time and place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is given. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 4.3 Waiver of Notice. 4.3.1 Whenever any notice is required to be given to any stockholder under the provisions of these By-Laws, the Certificate of Incorporation or the General Corporation Law of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 4.3.2 The attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when a stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 5. FIXING OF RECORD DATE FOR DETERMINING STOCKHOLDERS. 5.1 Meetings. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board, the record date for 2 7 determining stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at the meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. 5.2 Dividends, Distributions and Other Rights. For the purpose of determining stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto. SECTION 6. QUORUM. A majority of the outstanding shares of stock of the corporation entitled to vote, present in person or represented by proxy, shall constitute a quorum at a meeting of the stockholders; provided that where a separate vote by a class or classes or by a series of a class is required, a majority of the outstanding shares of such class or classes or of such series of a class, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on that matter. If less than a majority of the outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. If a quorum is present or represented at a reconvened meeting following such an adjournment, any business may be transacted that might have been transacted at the meeting as originally called. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. SECTION 7. ORGANIZATION. At each meeting of the stockholders, the Chairman of the Board, or in his or her absence such person as shall have been designated by the Board of Directors, or in the absence of such designation a person elected by the holders of a majority in number of shares of stock present in person or represented by proxy and entitled to vote, shall act as Chairman of the meeting. The Secretary, or in his or her absence or in the event he or she shall be presiding over the meeting in accordance with the provisions of this Section, an Assistant Secretary or, in the absence of the Secretary and all of the Assistant Secretaries, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. 3 8 SECTION 8. VOTING. 8.1 Generally. Unless otherwise provided in the Certificate of Incorporation or a resolution of the Board of Directors creating a series of stock, at each meeting of the stockholders, each holder of shares of any series or class of stock entitled to vote at such meeting shall be entitled to one vote for each share of stock having voting power in respect of each matter upon which a vote is to be taken, standing in his or her name on the stock ledger of the corporation on the record date fixed as provided in these By-Laws for determining the stockholders entitled to vote at such meeting. In all matters other than the election of Directors, if a quorum is present, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the vote of a greater number is required by these By-Laws, the Certificate of Incorporation or the General Corporation Law of Delaware. Where a separate vote by a class or classes or by a series of a class is required, if a quorum is present, the affirmative vote of the majority of shares of such class or classes or series of a class present in person or represented by proxy at the meeting shall be the act of such class or classes or series of a class. 8.2 Voting for Directors. At each election of Directors the voting shall be by ballot. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors. 8.3 Shares Held or Controlled by the Corporation. Shares of its own capital stock belonging to the corporation, or to another corporation if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the corporation, shall neither be entitled to vote nor counted for quorum purposes. 8.4 Proxies. A stockholder may vote by proxy executed in writing by the stockholder or by his or her attorney-in-fact. Alternatively, a stockholder may vote by proxy by means of electronic transmission, including, but not limited to, electronic mail, telephonic transmission or telegram; provided that any such means of electronic transmission must set forth information from which it can be determined that such electronic transmission was authorized by the stockholder. Such written or electronically transmitted proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. A proxy shall become invalid three years after the date of its execution, unless otherwise provided in the proxy. A proxy with respect to a specified meeting shall entitle the holder thereof to vote at any reconvened meeting following adjournment of such meeting but shall not be valid after the final adjournment thereof. (Amended July 8, 1998) SECTION 9. INSPECTORS. Prior to each meeting of stockholders, the Board of Directors shall appoint one or more Inspectors who are not directors, candidates for directors or officers of the corporation, who shall receive and determine the validity of proxies and the qualifications of voters, and receive, inspect, count and report to the meeting in writing the votes cast on all matters submitted to a vote at such meeting. In case of failure of the Board of Directors to make such appointments or 4 9 in case of failure of any Inspector so appointed to act, the Chairman of the Board shall make such appointment or fill such vacancies. Each Inspector, immediately before entering upon his or her duties, shall subscribe to an oath or affirmation faithfully to execute the duties of Inspector at such meeting with strict impartiality and according to the best of his or her ability. (Amended July 8, 1998) SECTION 10. LIST OF STOCKHOLDERS. The Secretary or other officer or agent having charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares of each class and series registered in the name of each such stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. Such list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section, or the books of the corporation, or to vote in person or by proxy at any such meeting. SECTION 11. NOTICE OF NOMINATIONS AND BUSINESS. 11.1 Generally. Nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the stockholders may be made at an annual meeting of the stockholders (a) pursuant to the corporation's notice with respect to such meeting, (b) by or at the direction of the Board or (c) by any stockholder of record of the corporation who was a stockholder of record at the time of the giving of the notice provided for in Section 11.2, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 11. A stockholder proceeding under this Section 11 shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations thereunder with respect to matters set forth in this Section 11. Nothing in this Section 11 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. 11.2 Procedures. 11.2.1 For nominations or other business to be properly brought before an annual meeting of the stockholders by a stockholder pursuant to Section 11.1 (c), (1) the stockholder must have given timely notice thereof in writing to the Secretary, (2) such business must be a proper matter for stockholder action under the General Corporation Law of Delaware, (3) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the corporation with a Solicitation Notice, as that term is defined in subclause (c)(iii) of this Section 11.2, such stockholder or beneficial owner must, in the case of a proposal, 5 10 have delivered a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the corporation's voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (4) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 11, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 11. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the corporation in the City of Houston, State of Texas, not less than 60 days prior to the first anniversary (the "Anniversary") of the date on which the corporation first mailed its proxy materials for the preceding year's annual meeting of the stockholders. However, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the Anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A the Exchange Act, and such person's written consent to serve as a director if elected; (b) as to any other business that the stockholder proposes to bring before the annual meeting of the stockholders, a brief description of such business, the reasons for conducting such business at the annual meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (i) the name and address of such stockholder, as they appear on the corporation's books, and of such beneficial owner, (ii) the class and number of shares of the corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the corporation's voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice"). 11.2.2 If the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the corporation at least 70 days prior to the Anniversary, this Section 11.2.2 shall govern. In this case a stockholder's notice required by these By-Laws shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation in the City of Houston, State of Texas not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation. 6 11 11.2.3 Only such business shall be conducted at a special meeting of the stockholders as shall have been brought before the special meeting pursuant to the corporation's notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of the stockholders at which directors are to be elected pursuant to the corporation's notice of meeting (a) by or at the direction of the Board or (b) by any stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the special meeting and who complies with the notice procedures set forth in this Section 11. Nominations by stockholders of persons for election to the Board may be made at such a special meeting of the stockholder if the stockholder's notice required by the second paragraph of this Section 11 shall be delivered to the later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such special meeting. 11.2.4 Only persons nominated in accordance with the procedures set forth in this Section 11 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of the stockholders as shall have been brought before the annual meeting in accordance with the procedures set forth in this Section. The Chairman of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the annual meeting has been made in accordance with the procedures set forth in these By-Laws and, if any proposed nomination or business is not in compliance with these By-Laws, to declare that such defective proposed business or nomination shall not be presented for stockholder action at the annual meeting and shall be disregarded. 11.3 For purposes of this Section, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (Added January 13, 1999) ARTICLE III BOARD OF DIRECTORS SECTION 1. NUMBER, QUALIFICATION AND TERM OF OFFICE. The business, property and affairs of the corporation shall be managed by a Board consisting of not less than one Director. The Board of Directors shall from time to time by a vote of a majority of the Directors then in office fix the specific number of Directors to constitute the Board. At each annual meeting of stockholders a Board of Directors shall be elected by the stockholders for a term of one year. Each Director shall serve until his or her successor is elected and shall qualify. 7 12 SECTION 2. VACANCIES. Vacancies in the Board of Directors and newly created directorships resulting from any increase in the authorized number of Directors may be filled by a majority of the Directors then in office, although less than a quorum, or by a sole remaining Director, at any regular or special meeting of the Board of Directors. SECTION 3. RESIGNATIONS. Any Director may resign at any time upon written notice to the Secretary of the corporation. Such resignation shall take effect on the date of receipt of such notice or at any later date specified therein; and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make it effective. When one or more Directors shall resign effective at a future date, a majority of the Directors then in office, including those who have resigned, shall have power to fill such vacancy or vacancies to take effect when such resignation or resignations shall become effective. SECTION 4. REMOVALS. Any Director may be removed, with cause, at any special meeting of the stockholders called for that purpose, by the affirmative vote of the holders of a majority in number of shares of the corporation entitled to vote for the election of such Director, and the vacancy in the Board caused by any such removal may be filled by the stockholders at such a meeting. SECTION 5. PLACE OF MEETINGS; BOOKS AND RECORDS. The Board of Directors may hold its meetings, and have an office or offices, at such place or places within or without the State of Delaware as the Board from time to time may determine. The Board of Directors, subject to the provisions of applicable statutes, may authorize the books and records of the corporation, and offices or agencies for the issue, transfer and registration of the capital stock of the corporation, to be kept at such place or places outside of the State of Delaware as, from time to time, may be designated by the Board of Directors. SECTION 6. ANNUAL MEETING OF THE BOARD. The first meeting of each newly elected Board of Directors, to be known as the Annual Meeting of the Board, for the purpose of electing officers, designating committees and the transaction of such other business as may come before the Board, shall be held as soon as practicable after the adjournment of the annual meeting of stockholders, and no notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present. In the event such meeting is not held due to the absence of a quorum, the meeting may be held at such time and place as shall be specified in a 8 13 notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the newly elected Directors. SECTION 7. REGULAR MEETINGS. The Board of Directors shall, by resolution, provide for regular meetings of the Board at such times and at such places as it deems desirable. Notice of regular meetings need not be given. SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the Secretary on the written request of five Directors on such notice as the person or persons calling the meeting shall deem appropriate in the circumstances. Notice of each such special meeting shall be mailed to each Director or delivered to him or her by telephone, telegraph or any other means of electronic communication, in each case addressed to his or her residence or usual place of business, or delivered to him or her in person or given to him or her orally. The notice of meeting shall state the time and place of the meeting but need not state the purpose thereof. Whenever any notice is required to be given to any Director under the provisions of these By-Laws, the Certificate of Incorporation or the General Corporation Law of Delaware, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board or any committee appointed by the Board need be specified in the waiver of notice of such meeting. Attendance of a Director at any meeting shall constitute a waiver of notice of such meeting except when a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. (Amended July 7, 1992 and October 22, 1997) SECTION 9. QUORUM AND MANNER OF ACTING. Except as otherwise provided by statute, the Certificate of Incorporation, or these By-Laws, the presence of a majority of the total number of Directors shall constitute a quorum for the transaction of business at any regular or special meeting of the Board of Directors, and the act of a majority of the Directors present at any such meeting at which a quorum is present shall be the act of the Board of Directors. In the absence of a quorum, a majority of the Directors present may adjourn the meeting, from time to time, until a quorum is present. Notice of any such adjourned meeting need not be given. SECTION 10. ORGANIZATION. At every meeting of the Board of Directors, the Chairman of the Board or in his or her absence the President or, if both of the said officers are absent, a Chairman chosen by a majority of the Directors present shall act as Chairman of the meeting. The Secretary, or in his or her absence, an Assistant Secretary, or in the absence of the Secretary and all the Assistant 9 14 Secretaries, any person appointed by the Chairman of the meeting, shall act as Secretary of the meeting. (Amended July 7, 1992) SECTION 11. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation or by these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board, may be taken without a meeting if all members of the Board or committee consent thereto in writing, and such written consent is filed with the minutes of the proceedings of the Board or committee. SECTION 12. TELEPHONIC MEETINGS. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting. SECTION 13. COMPENSATION. Each Director, who is not a full-time salaried officer of the corporation or any of its wholly owned subsidiaries, when authorized by resolution of the Board of Directors, may receive as a Director a stated salary or an annual retainer and in addition may be allowed a fixed fee and his or her reasonable expenses for attendance at each regular or special meeting of the Board of any Committee thereof. ARTICLE IV COMMITTEES OF THE BOARD OF DIRECTORS SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may, in its discretion, designate annually an Executive Committee consisting of not less than five Directors as it may from time to time determine. The Committee shall have and may exercise such powers and authority of the Board of Directors in the management of the business and affairs of the corporation as the Board of Directors may from time to time prescribe and may authorize the seal of the corporation to be affixed to all papers which may require it, but the Committee shall have no power or authority to amend the Certificate of Incorporation (except that the Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion 10 15 into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, amend the By-Laws of the corporation, elect officers or fill vacancies on the Board of Directors or any Committee of the Board, declare a dividend or authorize the issuance of stock. (Amended October 22, 1997) SECTION 2. FINANCE COMMITTEE. The Board of Directors may, in its discretion, designate annually a Finance Committee, consisting of such number of Directors as the Board of Directors may from time to time determine. The Committee shall monitor, review, appraise and recommend to the Board of Directors appropriate action with respect to the corporation's capital structure, its source of funds and its financial position; review and recommend appropriate delegations of authority to management on expenditures and other financial commitments; review terms and conditions of financing plans; develop and recommend dividend policies and recommend to the Board specific dividend payments; review the performance of the trustee of the corporation's pension trust fund, and any proposed change in the investment policy of the trustee with respect to such fund; and such other duties, functions and powers as the Board may from time to time prescribe. SECTION 3. AUDIT COMMITTEE. The Board of Directors shall designate annually an Audit Committee consisting of not less than three Directors as it may from time to time determine, none of whom shall be officers of the corporation. The Committee shall recommend to the Board the selection, retention or termination of the corporation's independent accountants; review the scope of other professional services provided by the independent accountants and consider the possible effect of the performance of such services on the independence of the accountants; review with management and the independent accountants the proposed overall scope of the annual audit, the adequacy of the corporation's system of internal accounting controls and the corporation's financial statements, basic accounting and financial policies and practices, standard and special tests used in verifying the corporation's statements of account and in determining the soundness of the corporation's financial condition and report to the Board the results of such reviews; review the policies and practices pertaining to publication of quarterly and annual statements to assure consistency with audited results and the implementing of policies and practices recommended by the independent accountants; ensure that suitable independent audits are made of the operations and results of subsidiary corporations and affiliates; review with management and the independent accountants the corporation's policies prohibiting unethical or illegal activities by the corporation's employees and monitoring compliance with the corporation's code of business conduct; and such other duties, functions and powers as the Board may from time to time prescribe. (Amended January 13, 1999) 11 16 SECTION 4. COMPENSATION AND NOMINATING COMMITTEE. The Board of Directors shall designate annually a Compensation and Nominating Committee consisting of such number of Directors as the Board of Directors may from time to time determine. The Committee shall review, report and make recommendations to the Board of Directors on the following matters: (a) The compensation of the Chief Executive Officer and all senior officers of the corporation and its principal operating subsidiaries reporting directly to the Chief Executive Officer following an annual review of management's recommendations for the individuals involved. If circumstances involving individuals require a salary adjustment between such reviews, a recommendation may be made directly to the Board of Directors by the Chief Executive Officer without the necessity of a meeting of the Compensation and Nominating Committee. (b) The size and composition of the Board and nominees for Directors; evaluate the performance of the officers of the corporation and together with management, select and recommend to the Board appropriate individuals for election, appointment and promotion as officers of the corporation and ensure the continuity of able capable management. (c) Any proposed stock option plans, stock purchase plans, retirement plans, and any other plans, systems and practices of the corporation relating to the compensation of any employees of the corporation and any proposed plans of any subsidiary company involving the issuance or purchase of capital stock of the corporation. (d) Such other matters as the Board may from time to time prescribe. The Committee shall carry out the duties assigned to the Committee under any existing stock option plans or other existing compensation or benefit plans; and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. (Amended July 7, 1992 and December 6, 1995) SECTION 5. COMMITTEE CHAIRMAN, BOOKS AND RECORDS. Each Committee shall elect a Chairman to serve for such term as it may determine, shall fix its own rules of procedure and shall meet at such times and places and upon such call or notice as shall be provided by such rules. It shall keep a record of its acts and proceedings, and all action of the Committee shall be reported to the Board of Directors at the next meeting of the Board. 12 17 SECTION 6. ALTERNATES. Alternate members of the Committees prescribed by this Article IV may be designated by the Board of Directors from among the Directors to serve as occasion may require. Whenever a quorum cannot be secured for any meeting of any such Committee from among the regular members thereof and designated alternates, the member or members of such Committee present at such meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of such absent or disqualified member. Alternative members of such Committees shall receive a reimbursement for expenses and compensation at the same rate as regular members of such Committees. SECTION 7. OTHER COMMITTEES. The Board of Directors may designate such other Committees, each to consist of two or more Directors, as it may from time to time determine, and each such Committee shall serve for such term and shall have and may exercise, during intervals between meetings of the Board of Directors, such duties, functions and powers as the Board of Directors may from time to time prescribe. SECTION 8. QUORUM AND MANNER OF ACTING. At each meeting of any Committee the presence of a majority of the members of such Committee, whether regular or alternate, shall be necessary to constitute a quorum for the transaction of business, and if a quorum is present the concurrence of a majority of those present shall be necessary for the taking of any action; provided, however, that no action may be taken by the Executive Committee or the Finance Committee when two or more officers of the corporation are present as members at a meeting of either such Committee unless such action shall be concurred in by the vote of two or more members of such Committee who are not officers of the corporation. ARTICLE V OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a Chairman of the Board, a President, a Chief Executive Officer, one or more Vice Chairmen of the Board, a Chief Financial Officer, a Secretary, a Treasurer, and such other officers as may be elected or appointed by the Board of 13 18 Directors. Any number of offices may be held by the same person. (Amended July 7, 1992, December 6, 1995, October 22, 1997 and July 8, 1998) SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of the corporation shall be elected annually by the Board of Directors. Each officer elected by the Board of Directors shall hold office until his or her successor shall have been duly elected and qualified, or until he or she shall have died, resigned or been removed in the manner hereinafter provided. SECTION 3. RESIGNATIONS. Any officer may resign at any time upon written notice to the Secretary of the corporation. Such resignation shall take effect at the date of its receipt, or at any later date specified therein; and the acceptance of such resignation, unless required by the terms thereof, shall not be necessary to make it effective. SECTION 4. REMOVALS. Any officer elected or appointed by the Board of Directors may be removed, with or without cause, by the Board of Directors at a regular meeting or special meeting of the Board. Any officer or agent appointed by any officer or committee may be removed, either with or without cause, by such appointing officer or committee. SECTION 5. VACANCIES. Any vacancy occurring in any office of the corporation shall be filled for the unexpired portion of the term in the same manner as prescribed in these By-Laws for regular election or appointment to such office. SECTION 6. COMPENSATION OF OFFICERS. The compensation of all officers elected by the Board of Directors shall be approved or authorized by the Board of Directors or by the Chief Executive Officer when so authorized by the Board of Directors or these By-Laws. (Amended July 7, 1992, December 6, 1995 and July 8, 1998) SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, when present, preside at all meetings of the stockholders and of the Board of Directors; have authority to call special meetings of the stockholders and of the Board of Directors; have authority to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments except when the signing thereof shall be expressly delegated to some other officer or agent by the Board of Directors or required by law to be otherwise signed or executed and, unless 14 19 otherwise provided by law or by the Board of Directors, may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his or her place and stead all such documents and instruments. He or she shall consult with the President regarding the strategic direction and business and affairs of the corporation and shall have such other powers and perform such other duties as from time to time may be assigned to him or her by the Board of Directors or the Executive Committee. (Amended July 7, 1992, December 6, 1995 and July 8, 1998) SECTION 8. VICE CHAIRMAN OF THE BOARD The Vice Chairman of the Board shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board. He or she shall have such other powers and perform such other duties as from time to time may be assigned to him or her by the Board of Directors, the Chairman of the Board, or the President. (Amended October 22, 1997 and July 8, 1998) SECTION 9. PRESIDENT. The President shall, in the absence of the Chairman of the Board and the Chief Executive Officer, preside at all meetings of the stockholders and of the Board and have authority to call special meetings of the stockholders and of the Board and have authority to call special meetings of the stockholders and of the Board. The President shall have authority to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments, except when the signing thereof shall be expressly delegated to some other officer or agent by the Board, the Chairman of the Board or the Chief Executive Officer, or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board, may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his place and stead all such documents and instruments. He shall have such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors, the Executive Committee, the Chairman of the Board or the Chief Executive Officer. The President shall have such power and authority as is usual, customary and desirable to perform the duties of the office. (Amended July 8, 1998) SECTION 10. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have general authority over the property, business and affairs of the corporation, and over all other officers, agents and employees of the corporation, subject to the control and direction of the Board of Directors and the Executive Committee, including the power to sign and acknowledge in the name and on behalf of the corporation all stock certificates, contracts or other documents and instruments except when the signing thereof shall be expressly delegated to some other officer or agent by the Board of Directors or required by law to be otherwise signed or executed and, unless otherwise provided by law or by the Board of Directors, may authorize any officer, employee or agent of the corporation to sign, execute and acknowledge in his or her place and stead all such documents and instruments; he or she shall fix the compensation of officers of the corporation other than his or her own compensation 15 20 and that of the senior officers of the corporation and its principal operating subsidiaries reporting directly to him or her; and he or she shall approve proposed employee compensation and benefit plans of subsidiary companies not involving the issuance or purchase of capital stock of the corporation. The Chief Executive Officer is hereby authorized, without further approval of the Finance Committee or the Board of Directors: (a) To approve any expenditure by the corporation of up to $20 million for those expenditure categories presented to the Board of Directors in the annual budget and up to $10 million for any expenditure categories not presented, including investments, leases, options to purchase or lease assets, business acquisitions and land purchases. (b) To approve individual cost overruns of up to 10% of any amounts approved by or presented to the Board of Directors. (c) To approve disposition of assets and interests in securities of subsidiaries or related commitments, provided that the aggregate market value of the assets being disposed of in any one such transaction does not exceed $10 million. (d) To enter into leases or extensions thereof and other agreements with respect to the assets of the corporation, including interests in minerals and real estate, for a term of not more than 10 years or for an unlimited term if the aggregate initial rentals, over the term of the lease, including renewal options, do not exceed $3 million. (e) To approve increases in the capital budgets of the corporation's operating subsidiaries provided such increases in the aggregate do not exceed 10% of the corporation's capital budget for the fiscal year. (f) To approve in emergency situations commitments in excess of the above-described limits provided they are in the interests of the corporation. The above delegation of authority does not authorize the corporation or its subsidiaries to make a significant change in its business or to issue the corporation's capital stock without the specific approval of the Board of Directors. Notwithstanding these limitations, the Chief Executive Officer shall have such power and authority as is usual, customary and desirable to perform all the duties of the office. (Amended July 7, 1992, December 6, 1995, October 22, 1997 and July 8, 1998) SECTION 11. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have responsibility for development and administration of the corporation's financial plans and all financial arrangements, its insurance programs, its 16 21 cash deposits and short term investments, its accounting policies, and its federal and state tax returns. Such officer shall also be responsible for the corporation's internal control procedures and for its relationship with the financial community. (Amended July 7, 1992, December 6, 1995 and July 8, 1998) SECTION 12. SECRETARY. The Secretary shall record the proceedings of the meetings of the stockholders and directors, in one or more books kept for that purpose; see that all notices are duly given in accordance with the provisions of the By-Laws or as required by law; have charge of the corporate records and of the seal of the corporation; affix the seal of the corporation or a facsimile thereof, or cause it to be affixed, to all certificates for shares prior to the issue thereof and to all documents the execution of which on behalf of the corporation under its seal is duly authorized by the Board of Directors or otherwise in accordance with the provisions of the By-Laws; keep a register of the post office address of each stockholder, director or member, sign with the Chairman of the Board or the President, certificates for shares of stock of the corporation, the issuance of which shall have been duly authorized by resolution of the Board of Directors; have general charge of the stock transfer books of the corporation; and in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him or her by the Board of Directors, the Executive Committee, the Chairman of the Board, the President, or the corporation's legal counsel. (Amended July 7, 1992, December 6, 1995 and July 8, 1998) SECTION 13. TREASURER. The Treasurer shall have the responsibility for the custody and safekeeping of all funds of the corporation and shall have charge of their collection, receipt and disbursement; shall receive and have authority to sign receipts for all monies paid to the corporation and shall deposit the same in the name and to the credit of the corporation in such banks or depositories as the Board of Directors shall approve; shall endorse for collection on behalf of the corporation all checks, drafts, notes and other obligations payable to the corporation; shall sign or countersign all notes, endorsements, guaranties and acceptances made on behalf of the corporation when and as directed by the Board of Directors; shall give bond for the faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors may require; shall have the responsibility for the custody and safekeeping of all securities of the corporation; and in general shall have such other powers and perform such other duties as are incident to the office of Treasurer and as from time to time may be prescribed by the Board of Directors or be delegated to him or her by the Chairman of the Board, the President or the Chief Financial Officer. (Amended July 7, 1992, December 6, 1995 and July 8, 1998) SECTION 14. ABSENCE OR DISABILITY OF OFFICERS. In the absence or disability of the Chairman of the Board, any Vice Chairman of the Board or the President, the Board of Directors may designate, by resolution, individuals to 17 22 perform the duties of those absent or disabled. The Board of Directors may also delegate this power to a committee or to a senior corporate officer. (Amended July 7, 1992 and October 22, 1997) ARTICLE VI STOCK CERTIFICATES AND TRANSFER THEREOF SECTION 1. STOCK CERTIFICATES. Except as otherwise permitted by statute, the Certificate of Incorporation or resolution or resolutions of the Board of Directors, every holder of stock in the corporation shall be entitled to have a certificate, signed by or in the name of, the corporation by the Chairman of the Board, the President, or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the corporation, certifying the number of shares, and the class and series thereof, owned by him or her in the corporation. Any and all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. (Amended July 7, 1992) SECTION 2. TRANSFER OF STOCK. Transfer of shares of the capital stock of the corporation shall be made only on the books of the corporation by the holder thereof, or by his or her attorney duly authorized, and on surrender of the certificate or certificates for such shares. A person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof as regards the corporation, and the corporation shall not, except as expressly required by statute, be bound to recognize any equitable or other claim to, or interest in, such shares on the part of any other person whether or not it shall have express or other notice thereof. SECTION 3. TRANSFER AGENT AND REGISTRAR. The corporation shall at all times maintain a transfer office or agency in the Borough of Manhattan, The City of New York, in charge of a transfer agent designated by the Board of Directors (who shall have custody, subject to the direction of the Secretary, of the original stock ledger and stock records of the corporation), where the shares of the capital stock of the corporation of each class shall be transferable, and also a registry office in the Borough of Manhattan, The City of New York, other than its transfer office or agency in said city, in charge of a registrar designated by the Board of Directors, where its stock of each class shall be registered. The corporation may, in addition to the said offices, if and whenever the Board of Directors shall so determine, maintain in such place or places as the Board shall determine, one or more additional transfer offices or agencies, each in charge of a transfer agent designated by the Board, where the shares of capital stock of the corporation of any class or classes shall be transferable, and also one 18 23 or more additional registry offices, each in charge of a registrar designated by the Board of Directors, where such shares of stock of any class or classes shall be registered. Except as otherwise provided by resolution of the Board of Directors in respect of temporary certificates, no certificates for shares of capital stock of the corporation shall be valid unless countersigned by a transfer agent and registered by a registrant authorized as aforesaid. SECTION 4. ADDITIONAL REGULATIONS. The Board of Directors may make such additional rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the corporation. SECTION 5. LOST, DESTROYED OR MUTILATED CERTIFICATES. The Board of Directors may provide for the issuance of new certificates of stock to replace certificates of stock lost, stolen, mutilated or destroyed, or alleged to be lost, stolen, mutilated or destroyed, upon such terms and in accordance with such procedures as the Board of Directors shall deem proper and prescribe. ARTICLE VII DIVIDENDS, SURPLUS, ETC. Except as otherwise provided by statute or the Certificate of Incorporation, the Board of Directors may declare dividends upon the shares of its capital stock either (1) out of its surplus, or (2) in case there shall be no surplus, out of its net profits for the fiscal year, whenever, and in such amounts as, in its opinion, the condition of the affairs of the corporation shall render it advisable. Dividends may be paid in cash, in property, or in shares of the capital stock of the corporation. ARTICLE VIII SEAL The Board of Directors shall adopt a suitable corporate seal which shall be in the form imprinted hereon. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 19 24 ARTICLE IX FISCAL YEAR The fiscal year of the corporation shall begin on the first day of January of each year. ARTICLE X INDEMNIFICATION SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved (including, without limitation, as a witness) in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a Director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Director, officer, employee or agent or in any other capacity while serving as such a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the full extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), or by other applicable law as then in effect, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts to be paid in settlement) actually and reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators, provided, however, that except as provided in Section 2 of this Article with respect to proceedings seeking to enforce rights to indemnification, the corporation shall indemnify any such indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a Director or officer (and not in any other capacity in which service was or is rendered by such indemnitee while a Director or officer, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified under this Section 1, or otherwise. 20 25 SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1 of this Article is not paid in full by the corporation within sixty days after a written claim has been received by the corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the indemnitee shall be entitled to be paid also the expense of prosecuting such suit. The indemnitee shall be presumed to be entitled to indemnification under this Article upon submission of a written claim (and, in an action brought to enforce a claim for an advancement of expenses, where the required undertaking, if any is required, has been tendered to the corporation), and thereafter the corporation shall have the burden of proof to overcome the presumption that the indemnitee is not so entitled. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the indemnitee is not entitled to indemnification shall be a defense to the suit or create a presumption that the indemnitee is not so entitled. SECTION 3. NONEXCLUSIVITY OF RIGHTS. The rights to indemnification and to the advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-Law, agreement, vote of stockholders or disinterested Directors or otherwise. SECTION 4. INSURANCE, CONTRACTS AND FUNDING. The corporation may maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. The corporation may enter into contracts with any indemnitee in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article. 21 26 SECTION 5. DEFINITION OF DIRECTOR AND OFFICER. Any person who is or was serving as a Director or officer of a wholly owned subsidiary of the corporation shall be deemed, for purposes of this Article only, to be a Director or officer of the corporation entitled to indemnification under this Article. SECTION 6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The corporation may, by action of the Board of Directors from time to time, grant rights to indemnification and advancement of expenses to employees and agents of the corporation with the same scope and effect as the provisions of this Article with respect to the indemnification and advancement of expenses of Directors and officers of the corporation. ARTICLE XI CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. CHECKS, DRAFTS, ETC.; LOANS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall, from time to time, be determined by resolution of the Board of Directors. No loans shall be contracted on behalf of the corporation unless authorized by the Board of Directors. Such authority may be general or confined to specific circumstances. (Amended July 7, 1992) SECTION 2. DEPOSITS. All funds of the corporation shall be deposited, from time to time, to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select, or as may be selected by any officer or officers, agent or agents of the corporation to whom such power may, from time to time, be delegated by the Board of Directors; and for the purpose of such deposit, the Chairman of the Board, the President, any Vice President, the Treasurer or any Assistant Treasurer, the Secretary or any Assistant Secretary, or any other officer or agent to whom such power may be delegated by the Board of Directors, may endorse, assign and deliver checks, drafts and other order for the payment of money which are payable to the order of the corporation. 22 27 ARTICLE XII AMENDMENTS These By-Laws may be altered or repealed and new By-Laws may be made by the affirmative vote, at any meeting of the Board, of a majority of the whole Board of Directors, subject to the rights of the stockholders of the corporation to amend or repeal By-Laws made or amended by the Board of Directors by the affirmative vote of the holders of record of a majority in number of shares of the outstanding stock of the corporation present or represented at any meeting of the stockholders and entitled to vote thereon, provided that notice of the proposed action be included in the notice of such meeting. (Amended February 22, 1989, July 7, 1992, December 6, 1995, October 22, 1997, July 8, 1998 and January 13, 1999) 23 EX-10.22 4 SHORT-TERM REVOLVING CREDIT AGREEMENT 1 CONFORMED COPY - -------------------------------------------------------------------------------- BURLINGTON RESOURCES INC. ------------------------------------ $400,000,000 SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 As Amended and Restated as of February 23, 1999 ------------------------------------ CHASE BANK OF TEXAS, N.A., as Administrative Agent THE CHASE MANHATTAN BANK, as Auction Administrative Agent CITIBANK, N.A., as Syndication Agent BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Documentation Agent BANKBOSTON, N.A., as Documentation Agent 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms.............................................................1 SECTION 1.02. Computation of Time Periods......................................................18 SECTION 1.03. Accounting and Other Terms.......................................................18 SECTION 1.04. References.......................................................................18 ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. (a) Revolving A Advances.........................................................19 (b) Term A Advances..............................................................19 SECTION 2.02. Making the A Advances............................................................20 SECTION 2.03. Fees.............................................................................22 SECTION 2.04. Reduction of the Commitments.....................................................23 SECTION 2.05. Repayment of A Advances..........................................................23 SECTION 2.06. Interest on A Advances...........................................................23 SECTION 2.07. Additional Interest on Eurodollar Rate Advances.............................................................................25 SECTION 2.08. Interest Rate Determination......................................................25 SECTION 2.09. Voluntary Conversion of A Advances...............................................27 SECTION 2.10. Prepayments......................................................................28 SECTION 2.11. Increased Costs..................................................................28 SECTION 2.12. Increased Capital................................................................30 SECTION 2.13. Illegality.......................................................................31 SECTION 2.14. Payments and Computations........................................................31 SECTION 2.15. Taxes............................................................................33 SECTION 2.16. Sharing of Payments, Etc.........................................................37 SECTION 2.17. Evidence of Debt.................................................................37 SECTION 2.18. Use of Proceeds..................................................................38 SECTION 2.19. The B Advances...................................................................38 SECTION 2.20. Increase of Commitments..........................................................42 SECTION 2.21. Extension of Stated Termination Date.............................................45 SECTION 2.22. Replacement of Lenders...........................................................47
3 ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of the Amendment and Restatement of this Agreement.............................................................48 SECTION 3.02. Conditions Precedent to Each A Borrowing.................................................................................49 SECTION 3.03. Conditions Precedent to Each B Borrowing.................................................................................50 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower..............................................................................51 ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants............................................................54 SECTION 5.02. Negative Covenants...............................................................56 SECTION 5.03. Reporting Requirements...........................................................61 ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. Events of Default................................................................64 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action.........................................................68 SECTION 7.02. Administrative Agent's Reliance, Etc.......................................................................................69 SECTION 7.03. Chase and Affiliates.............................................................69 SECTION 7.04. Lender Credit Decision...........................................................70 SECTION 7.05. Indemnification..................................................................70 SECTION 7.06. Successor Administrative Agent...................................................71 SECTION 7.07 Auction Administrative Agent.......................................................71 ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc..................................................................72 SECTION 8.02. Notices, Etc.....................................................................72
4 SECTION 8.03. No Waiver; Remedies..............................................................73 SECTION 8.04. Costs and Expenses; Indemnity....................................................74 SECTION 8.05. Right of Set-off.................................................................75 SECTION 8.06. Binding Effect...................................................................75 SECTION 8.07. Assignments and Participations...................................................76 SECTION 8.08. Confidentiality..................................................................81 SECTION 8.09. Consent to Jurisdiction..........................................................82 SECTION 8.10. Governing Law....................................................................83 SECTION 8.11. Execution in Counterparts........................................................83 SECTION 8.12. WAIVER OF JURY TRIAL.............................................................83
Schedule I -- Material Subsidiaries Schedule II -- Pricing Grid Exhibit A Form of Note Exhibit B Form of Notice of A Borrowing Exhibit C Form of Notice of B Borrowing Exhibit D Form of Assignment and Acceptance Exhibit E Form of New Lender Agreement Exhibit F Form of Commitment Increase Agreement Exhibit G Form of Extension Request Exhibit H Form of Opinion of Senior Vice President, Law for Borrower Exhibit I Form of Opinion of Jones, Day, Reavis & Pogue, New York Counsel for Borrower Exhibit J Form of Designation Agreement 5 SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 As Amended and Restated as of February 23, 1999 BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Initial Lenders") listed on the signature pages hereof, Chase Bank of Texas, N.A., as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent"), The Chase Manhattan Bank, as auction administrative agent for the Lenders (in such capacity, the "Auction Administrative Agent"), Citibank, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent"), and Bank of America National Trust and Savings Association and BankBoston, N.A., as documentation agents for the Lenders (in such capacity, individually, a "Documentation Agent" and, collectively, the "Documentation Agents"), agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Lender to the Borrower as part of an A Borrowing, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "TYPE" of A Advance). "A BORROWING" means a borrowing consisting of A Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, in the case of Eurodollar Rate Advances, having Interest Periods of 6 the same duration, it being understood that there may be more than one A Borrowing on a particular day. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender. "ADVANCE" means an A Advance or a B Advance. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "CONTROLS" (including the terms "CONTROLLED BY" or "UNDER COMMON CONTROL WITH") means, with respect to any Person, the possession, direct or indirect, of the power to vote 10% or more (or in the case of an "AFFILIATE" of any Lender, 5% or more) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. Neither a director nor an officer of the Borrower, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. "AGREEMENT" means this Short-Term Revolving Credit Agreement, together with all exhibits and schedules hereto, as may be amended or otherwise modified from time to time pursuant to the terms hereof. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) in the case of an A Advance, such Lender's Domestic Lending Office in respect of Base Rate Advances and such Lender's Eurodollar Lending Office in respect of Eurodollar Rate Advances and (ii) in the case of a B Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such B Advance. 2 7 "ARRANGER" means Chase Securities Inc. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender (other than a Designated Bidder) and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "B ADVANCE" means an advance by a Lender to the Borrower as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.19. "B BORROWING" means a borrowing consisting of simultaneous B Advances to the Borrower from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Borrower under the auction bidding procedure described in Section 2.19, it being understood that there may be more than one B Borrowing on a particular day. "B REDUCTION" has the meaning specified in Section 2.01(a). "BASE RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) The rate of interest announced publicly by the Administrative Agent in the United States with respect to loans made in the United States, from time to time, as the Administrative Agent's base or prime rate as in effect for such day; and (ii) 0.50% per annum above the Effective Federal Funds Rate for such day. "BASE RATE ADVANCE" means an A Advance which bears interest as provided in Section 2.06(a)(i). "BORROWING" means an A Borrowing or a B Borrowing. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. 3 8 "BUSINESS ENTITY" means a partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. "CAPITALIZATION" means the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries, plus (ii) the aggregate amount of Guaranties by the Borrower or its consolidated Subsidiaries, plus (iii) the sum of the preferred stock and common stockholders' equity of the Borrower, plus (iv) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997 (but excluding any such amount with respect to assets of Project Finance Subsidiaries), minus (v) to the extent otherwise included in determining the amounts computed under clause (iii) above, the aggregate investment (net of any Project Financing) of the Borrower and its consolidated Subsidiaries in Project Finance Subsidiaries. "CHASE" means Chase Bank of Texas, N.A., and its successors. "CLAM" means CLAM Petroleum B.V., a Netherlands company, and CLAM's successors. "CLAM CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of July 25, 1985, among MaraLou Netherlands Partnership, CLAM, the banks parties thereto and Morgan, as agent for such banks, as amended and restated as of August 15, 1997, or any successor credit agreement entered into for the purpose of refinancing such Amended and Restated Credit Agreement, in each case, as amended, restated, extended or otherwise modified from time to time. "COMMITMENT" has the meaning specified in Section 2.01(a). 4 9 "COMMITMENT EXPIRATION DATE" has the meaning specified in Section 2.21(a). "COMMITMENT INCREASE NOTICE" has the meaning specified in Section 2.20(a). "COMMITMENT INCREASE AGREEMENT" has the meaning specified in Section 2.20(c). "COMMITMENT PERCENTAGE" means as to any Lender at any time, the percentage that such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "CONSOLIDATED TANGIBLE NET WORTH" means, on a consolidated basis, the excess of (i) the sum of (x) the preferred stock and common stockholders' equity of the Borrower and (y) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997, over (ii) the intangible assets of the Borrower and its consolidated Subsidiaries. "CONTINGENT GUARANTY" has the meaning specified in the definition of the term "Guaranty" contained in this Section 1.01. "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of A Advances of one Type into A Advances of another Type pursuant to Section 2.08, 2.09 or 2.13. "DEBT" of any Person means, without duplication (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion) to pay the deferred 5 10 purchase price of property or services, (iii) obligations of such Person as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (iv) Overdue Reimbursement Obligations; provided, however, that where any such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties, which are not the Borrower or any of its consolidated Subsidiaries, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof, and provided, further, that the following shall not at any time constitute Debt: (1) obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not Overdue Reimbursement Obligations, (2) Project Financing, (3) the Morgan Gold Loans unless, at such time, for any reason whatsoever, (A) no royalty income shall have accrued under the Royalty Agreement dated as of December 5, 1984 between Copper Range Company, a Michigan corporation, and LL&E during the three consecutive fiscal quarters of LL&E most recently ended prior to such time or (B) any payment required to have been made to LL&E under such agreement prior to such time shall not have been paid on, or within 30 days after, the date such payment is due and (4) amounts borrowed by the Borrower and its Subsidiaries under life insurance policies issued to one or more of the foregoing and covering employees or former employees of one or more of the foregoing not in excess of the cash surrender value of such policies. "DESIGNATED BIDDER" means (i) an Affiliate of a Lender or (ii) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" by Moody's or "A-1" by S&P or a comparable rating from the successor of either of them, that, in the case of either clause (i) or (ii) above, (1) is organized under the laws of 6 11 the United States or any state thereof, (2) shall have become a party hereto pursuant to subsections (e), (f) and (g) of Section 8.07, and (3) is not otherwise a Lender. Notwithstanding the foregoing, each Designated Bidder shall be subject to the written consent of the Borrower and the Administrative Agent, such consent not to be unreasonably withheld. "DESIGNATION AGREEMENT" means a designation agreement entered into by the Borrower, a Lender (other than a Designated Bidder) and a Designated Bidder, and accepted by the Administrative Agent, in substantially the form of Exhibit K hereto. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" in its Administrative Questionnaire, or in the Assignment and Acceptance or New Lender Agreement pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EFFECTIVE DATE" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied (or compliance therewith shall have been waived by the Lenders), which date the Administrative Agent will promptly confirm to the Borrower and the Lenders in writing, and which date shall be no earlier than February 23, 1999. "EFFECTIVE FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. 7 12 "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 8.07, any bank or other financial institution approved in writing by the Borrower expressly with respect to such assignment and, except as to such an assignment by Chase so long as Chase is the Administrative Agent hereunder, the Administrative Agent as an Eligible Assignee for purposes of this Agreement, provided that neither the Administrative Agent's nor the Borrower's approval shall be unreasonably withheld, and provided further that no such approval shall be necessary if (i) the assignee is an Affiliate of the assigning Lender and such assignment constitutes 100% of the assigning Lender's Commitment, the A Advances owing to it and the Note or Notes held by it, (ii) the assignee was a Lender immediately prior to such assignment or (iii) if an Event of Default shall then be continuing. "EQUITY INTERESTS" means any capital stock, partnership, joint venture, member or limited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. "ERISA AFFILIATE" means any Person who is a member of the Borrower's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" in its Administrative Questionnaire or in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender (or, if no such office is specified, 8 13 its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such A Borrowing and for a period equal to such Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "EURODOLLAR RATE ADVANCE" means an A Advance which bears interest determined by reference to the Eurodollar Rate, as provided in Section 2.06(a)(ii). "EURODOLLAR RATE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labeled "LIBOR Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "EURODOLLAR RESERVE PERCENTAGE" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so 9 14 applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXTENSION REQUEST" means each request by the Borrower made pursuant to Section 2.21 for the Lenders to extend the Stated Termination Date, which shall contain the information in respect of such extension specified in Exhibit G and shall be delivered to the Administrative Agent in writing. "FACILITY FEE PERCENTAGE" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Facility Fee" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "FINAL MATURITY DATE" means the first anniversary of the Stated Termination Date or, if such day is not a Business Day, the next preceding Business Day. "GUARANTY", "GUARANTEED" and "GUARANTEEING" each means any act by which a Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Borrower or any of its consolidated Subsidiaries (excluding (i) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) any liability in connection with obligations of the Borrower or any of its consolidated Subsidiaries, including obligations 10 15 under any conditional sales agreement, equipment trust financing or equipment lease, (iii) any liability or other act of the Borrower or any of its Subsidiaries under arrangements entered into in connection with the CLAM Credit Agreement, and (iv) any such act in connection with a Project Financing that either (A) guarantees to the provider of such Project Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is a direct guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (B) below) or (B) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence or existence of any event or condition other than or in addition to (1) the passage of time, (2) any Project Financing becoming due, (3) the commencement of bankruptcy, insolvency or similar proceedings by the obligor on any Project Financing or (4) the failure of the obligor on any Project Financing to satisfy a financial ratio, covenant or other similar financial measurement test, but only during such period as such act is not by its terms presently enforceable, or if so enforceable, there is not a reasonable probability that the guarantor will be called upon to perform thereunder (or to make capital contributions in lieu of performance thereunder) (any such act referred to in this clause (iv) being a "CONTINGENT GUARANTY")); provided, however, that for the purposes of this definition the liability of the Borrower or any of its Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. 11 16 "INDEMNIFIED PARTY" means any or all of the Lenders, the Arranger and the Administrative Agent. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same A Borrowing, the period beginning on the date of such Advance or the date of the Conversion of any Advance into such Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period for a Eurodollar Rate Advance shall be (i) one, two, three or six months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period, or (ii) subject to availability to each Lender, nine or twelve months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the fourth Business Day prior to the first day of such Interest Period, in each case as the Borrower may select; provided, however, that: (A) the duration of any Interest Period which commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date and the duration of any Interest Period which would otherwise end after the Final Maturity Date shall end on the Final Maturity Date; (B) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; 12 17 (C) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and (D) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (A) above, end on the last Business Day of a calendar month. "LENDERS" means the Initial Lenders, each bank or other financial institution that shall become a party hereto pursuant to Section 2.20, each Eligible Assignee that shall become a party hereto pursuant to Section 8.07(a), (b) and (d) and, except when used in reference to an A Advance, an A Borrowing, a Commitment or a term related to any of the foregoing, each Designated Bidder. "LIEN" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Debt or any Guaranty of any Person; provided that (i) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest", farmouts, joint operating or unitization agreements, or other similar transactions in the ordinary course of business and (ii) borrowings under life insurance policies as described in clause (4) of the proviso to the definition of "Debt" shall not be deemed to create a Lien. "LL&E" means The Louisiana Land and Exploration Company, a Maryland corporation and a wholly-owned Subsidiary of the Borrower. "LONG-TERM REVOLVING CREDIT AGREEMENT" means the Long-Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of February 23, 1999 among the Borrower, the financial institutions party thereto, Chase, as administrative agent for such financial institutions, The Chase Manhattan Bank, as auction administrative agent for such financial institutions, Citibank, N.A., as 13 18 syndication agent for such financial institutions, and Bank of America National Trust and Savings Association and BankBoston, N.A., as documentation agents for such financial institutions. "MAJORITY LENDERS" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the Notes held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "MARGIN STOCK" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition or operations of the Borrower and its consolidated Subsidiaries on a consolidated basis. "MATERIAL PLAN" means any Plan the assets of which exceed $50,000,000 or the liabilities of which for unfunded vested benefits determined on a plan termination basis (in accordance with Title IV of ERISA) exceed $10,000,000. "MATERIAL SUBSIDIARY" means, from time to time, any Subsidiary of the Borrower (other than a Project Financing Subsidiary) then owning assets (determined on a consolidated basis) that equal or exceed 10% of the book value of the consolidated assets of the Borrower and its consolidated Subsidiaries at such time. "MOODY'S" means Moody's Investors Service. "MORGAN" means Morgan Guaranty Trust Company of New York, and its successors. "MORGAN GOLD LOANS" means the obligations of LL&E under the respective Credit Agreements dated as of December 23, 1994 and March 31, 1995 between LL&E and Morgan, or under any additional credit agreements on substantially similar terms, in each case, as amended, restated, extended or otherwise modified from time to time, provided that the aggregate outstanding amount 14 19 borrowed thereunder shall at no time exceed 35,000 ounces of gold. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NEW LENDER" has the meaning specified in Section 2.20(b). "NEW LENDER AGREEMENT" has the meaning specified in Section 2.20(b). "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "NOTICE OF A BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF B BORROWING" has the meaning specified in Section 2.19(a). "OBJECTING LENDERS" has the meaning specified in Section 2.21(a). "OFFERED INCREASE AMOUNT" has the meaning specified in Section 2.20(a). 15 20 "ORIGINAL EFFECTIVE DATE" means February 25, 1998. "OVERDUE REIMBURSEMENT OBLIGATIONS" means with respect to any Person non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not paid on or prior to the fifth Business Day after the due date therefor. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED ASSETS" means (i) hydrocarbon or other reserves (including proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) Equity Interests in any and all Business Entities that are or become Subsidiaries of the Borrower owning assets referred to in any of the foregoing clauses. "PERMITTED LIENS" means (i) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Borrower or any Subsidiary of the Borrower; (ii) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (iii) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (iv) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions which do 16 21 not materially interfere with the operation, value or use of the properties affected thereby; (v) conventional provisions contained in any contracts or agreements affecting properties under which the Borrower or a Subsidiary of the Borrower is required immediately before the expiration, termination or abandonment of a particular property to reassign to the Borrower's or a Subsidiary's predecessor in title all or a portion of the Borrower's or such Subsidiary's rights, titles and interests in and to all or a portion of such property; (vi) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Borrower or any of its Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Borrower or such Subsidiary in such grant or conveyance; (vii) any Lien consisting of (A) statutory landlord's liens under leases to which the Borrower or any Subsidiary of the Borrower is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Borrower or any of its Subsidiaries or to use such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Borrower or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (viii) Liens on Equity Interests in, or Debt or other obligations of, CLAM owned by the Borrower or any of its Subsidiaries, which Liens secure Debt of CLAM; and (ix) any Lien on any assets (including Equity Interests and other obligations) securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, 17 22 designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 360 days after the acquisition or completion of development, construction or installation thereof or improvement thereto. "PERSON" means an individual, a Business Entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PROJECT FINANCING" means any Debt incurred to finance or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Debt or Guaranty permitting or providing for recourse against the Borrower or any of its Subsidiaries other than (i) recourse to the Equity Interests in, Debt or other obligations of, or assets of, one or more Project Financing Subsidiaries, and (ii) such recourse as exists under any Contingent Guaranty. "PROJECT FINANCING SUBSIDIARY" means any Subsidiary of the Borrower whose principal purpose is to incur Project Financing, or to become a direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or Debt or other obligations of, one or more other such Subsidiaries or Business Entities. "RE-ALLOCATION DATE" has the meaning specified in Section 2.20(e). 18 23 "REFERENCE BANKS" means The Chase Manhattan Bank, Citibank, N.A. and Bank of America National Trust and Savings Association. "REGISTER" has the meaning specified in Section 8.07(c). "REQUIRED LENDERS" means Lenders (i) that are not Objecting Lenders with respect to any previous Extension Request and (ii) that have Commitment Percentages aggregating at least 51% of the aggregate Commitment Percentages of such non-Objecting Lenders. "REVOLVING A ADVANCE" means an A Advance made or to be made by a Lender pursuant to Section 2.01(a). "S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc. on the Original Effective Date. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "STATED TERMINATION DATE" means February 21, 2000, or such later date as shall be determined pursuant to the provisions of Section 2.21 with respect to non-Objecting Lenders, provided that if such date is not a Business Day, the Stated Termination Date shall be the next preceding Business Day. "SUBSIDIARY" means, as to any Person, any Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless 19 24 otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "TERMINATION DATE" means the earlier of (i) the Stated Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of the Borrower or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or (vii) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TERM A ADVANCE" means an A Advance made or to be made by a Lender pursuant to Section 2.01(b). "TYPE" has the meaning specified in the definition of "A Advance". 20 25 "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.3. Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles either (i) consistent with those principles applied in the preparation of the annual financial statements referred to in Section 4.01(e), or (ii) not so materially inconsistent with such principles that a covenant contained in Section 5.01 or 5.02 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (i) of this Section 1.03. "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. SECTION 1.4. References. The words "HEREOF", "HEREIN" and "HEREUNDER" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. 21 26 ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.1. (a Revolving A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the Effective Date to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender's name on the signature pages hereof under the caption "COMMITMENTS", or, if such Lender has entered into any Assignment and Acceptance or Commitment Increase Agreement or a New Lender Agreement, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "COMMITMENT"), provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the B Advances then outstanding and such deemed use of the aggregate amount of such Commitments shall be applied to all the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B REDUCTION"). Each A Borrowing consisting of Revolving A Advances shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof (or, in the case of an A Borrowing of Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may make more than one Borrowing on any Business Day and may borrow, prepay pursuant to Section 2.10, and reborrow under this Section 2.01(a). (b) Term A Advances. Each Lender severally agrees, at the option of the Borrower and on the terms and conditions set forth in this Agreement, to make an A Advance to the Borrower on the Stated Termination Date in an aggregate amount up to but not exceeding the amount of its Commitment. Each A Borrowing consisting 22 27 of Term A Advances shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof and shall consist of A Advances of the same Type made on the Stated Termination Date by the Lenders ratably according to their respective Commitments. SECTION 2.2. Making the A Advances. (a Each A Borrowing shall be made on notice by the Borrower to the Administrative Agent (a "NOTICE OF A BORROWING") received by the Administrative Agent, (i) in the case of a proposed A Borrowing comprised of Base Rate Advances, not later than 10:00 A.M. (New York City time) on the Business Day of such proposed A Borrowing, and (ii) in the case of a proposed A Borrowing comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed A Borrowing. Each Notice of A Borrowing shall be by telecopy, telefax or other teletransmission or by telephone (and if by telephone, confirmed promptly by telecopier, telefax or other teletransmission), in substantially the form of Exhibit B hereto, specifying therein the requested (w) date of such A Borrowing, (x) Type of A Advances comprising such A Borrowing and, additionally, whether such A Borrowing consists of Revolving A Advances or Term A Advances, (y) aggregate amount of such A Borrowing, and (z) in the case of an A Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such A Advance. Each Lender shall, before 1:00 p.m. (New York City time) on the date of such A Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent in care of The Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice from the Administrative Agent to the Lenders pursuant to Section 8.02, in same day funds, such Lender's ratable portion of such 23 28 A Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at The Chase Manhattan Bank, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, or at any account of the Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b Each Notice of A Borrowing shall be irrevocable and binding on the Borrower. In the case of any A Borrowing which the related Notice of A Borrowing specified is to be comprised of Eurodollar Rate Advances, if such A Advances are not made as a result of any failure to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article 3, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of such failure, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing. (c If any Lender makes a Term A Advance to the Borrower hereunder on a day on which the Borrower is to repay all or any part of an outstanding Revolving A Advance from such Lender, such Lender shall apply the proceeds of its Term A Advance to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Lender to the Administrative Agent as provided in subsection 2.02(a), or remitted by the Borrower to the Administrative Agent as provided in Section 2.14, as the case may be. (d Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such 24 29 A Borrowing in accordance with subsections (a) and (c) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance to the Borrower as part of such A Borrowing for purposes of this Agreement. (e The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. SECTION 2.3. Fees. (a FACILITY FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Designated Bidder) a facility fee on the average daily amount of such Lender's Commitment, whether or not used or deemed used, from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender in the case of each other Lender, in each case until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment and on the Termination Date, at a rate per annum equal to the Facility Fee Percentage in effect from time to time. (b UTILIZATION FEE. The Borrower agrees to pay to the Administrative Agent for the account of each 25 30 Lender a utilization fee of 0.25% per annum on the average daily amount of such Lender's Advances during any period (each such period, a "Utilization Fee Period") during the term of this Agreement commencing on the Effective Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Termination Date, if during such Utilization Fee Period the average daily outstanding amount of all Advances was greater than 25% of the average daily amount of all Commitments. If a utilization fee is owing in respect of any Utilization Fee Period, such fee shall be payable on the last day of such Utilization Fee Period. (c AGENCY FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, such agency fees as may be separately agreed to in writing by the Borrower and the Administrative Agent, such fees to be in the amounts and payable on the dates as may be so agreed to. (d ARRANGEMENT FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, an arrangement fee in the amount and payable on the date separately agreed to in writing by the Administrative Agent and the Borrower. SECTION 2.4. Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the Commitments of the Lenders (being the amount by which such Commitments exceed the aggregate outstanding principal amount of all Advances), provided that each partial reduction shall be in the aggregate amount of $20,000,000 or any whole multiple of $1,000,000 in excess thereof. SECTION 2.5. Repayment of A Advances. (a) The Borrower shall repay to each Lender on the Termination Date the aggregate principal amount of the Revolving A Advances, together with accrued interest thereon, then owing to such Lender. (b) The Borrower shall repay to each Lender on the Final Maturity Date the aggregate principal amount of 26 31 the Term A Advances, together with accrued interest thereon, then owing to such Lender. SECTION 2.6. Interest on A Advances. (a ORDINARY INTEREST. The Borrower shall pay interest on the unpaid principal amount of each A Advance owing to each Lender from the date of such A Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i BASE RATE ADVANCES. During such periods as such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time plus, in the case of any Term A Advance, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). (ii EURODOLLAR RATE ADVANCES. During such periods as such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such A Advance to the sum of the Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time plus, in the case of any Term A Advance, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such A Advance is Converted into a Base Rate Advance on any date other than the last day of any Interest Period for such A Advance, on the date of such Conversion or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the 27 32 applicable Lender of the amount of unpaid interest accrued on such A Advance to the date of such Conversion. (iii ADDITIONAL INTEREST ON TERM A ADVANCES. In addition to amounts payable under clause (i) or (ii) above in respect of any Term A Advance, the Borrower shall pay to each Lender hereunder as additional interest an amount in lieu of the utilization fee equal to 0.25% per annum on the average daily amount of such Lender's Term A Advances during any period (each such period, an "Additional Interest Period") during the term of this Agreement commencing on the Termination Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Final Maturity Date, if during such Additional Interest Period the average daily outstanding amount of all Term A Advances was greater than 25% of the aggregate amount of all the Commitments on the Termination Date. If additional interest is owing in respect of any Additional Interest Period, such amount shall be payable on the last day of such Additional Interest Period. (b DEFAULT INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such A Advance immediately prior to the date on which such amount became due and (ii) from and after the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, and at all times in the case of each Base Rate Advance or B Advance, to 1% per annum above the Base Rate in effect from time to time. 28 33 SECTION 2.7. Additional Interest on Eurodollar Rate Advances. If any Lender shall determine in good faith that reserves under regulations of the Board of Governors of the Federal Reserve System are required to be maintained by it in respect of, or a portion of its costs of maintaining reserves under such regulations is properly attributable to, one or more of its Eurodollar Rate Advances, the Borrower shall pay to such Lender additional interest on the unpaid principal amount of each such Eurodollar Rate Advance payable on the same day or days on which interest is payable on such A Advance, at an interest rate per annum up to but not exceeding at all times during each Interest Period for such A Advance the excess of (i) the rate obtained by dividing the Eurodollar Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such Interest Period over (ii) the Eurodollar Rate for such Interest Period. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Eurodollar Rate Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least five Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Business Days prior to each date on which interest is payable on the Eurodollar Rate Advances an officer's certificate setting forth the amount to which such Lender is then entitled under this Section, which certificate shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.8. Interest Rate Determination. (a Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate 29 34 on the basis of timely information furnished by the remaining Reference Banks. (b The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i) or (ii), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(a)(ii). (c If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any applicable A Advances, (i the Administrative Agent shall give the Borrower and each Lender prompt notice by telephone (confirmed in writing) that the interest rate cannot be determined for such applicable A Advances, (ii each such A Advance that is a Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such A Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii the obligations of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (d If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that as a result of conditions in or generally affecting the relevant market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon, 30 35 (i each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Eurodollar Rate Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (f On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such A Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such A Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be, or be elected to be Converted to, Eurodollar Rate Advances having the same Interest Period as Eurodollar Rate Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall, or upon such Conversion will, equal or exceed $20,000,000, the Borrower shall have the right to continue all such Eurodollar Rate Advances as, or to Convert all such A Advances into, Eurodollar Rate Advances having such Interest Period. SECTION 2.9. Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion, and 31 36 subject to the provisions of Section 2.08, 2.11 and 2.13, Convert all A Advances of one Type comprising the same A Borrowing into A Advances of the other Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 8.04(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the A Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the Interest Period for each such Eurodollar Rate Advance. SECTION 2.10. Prepayments. The Borrower may, upon (i) in the case of Eurodollar Rate Advances, at least three Business Days notice or (ii) in the case of Base Rate Advances, telephonic notice not later than 12:00 noon (New York City time) on the date of prepayment, to the Administrative Agent which specifies the proposed date and aggregate principal amount of the prepayment and the Type of A Advances to be prepaid, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the A Advances comprising the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 8.04(b); provided, further, however, that the Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. SECTION 2.11. Increased Costs. 32 37 (a If, due to either (i) the introduction after the Original Effective Date of or any change after the Original Effective Date (including any change by way of imposition or increase of reserve requirements or assessments other than those referred to in the definition of "Eurodollar Reserve Percentage" contained in Section 1.01) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request issued or made after the Original Effective Date from or by any central bank or other governmental authority (whether or not having the force of law), in each case above other than those referred to in Section 2.12, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining, Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.11(a) (except as otherwise expressly provided above in this Section 2.11(a)). A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Borrower of any increased costs pursuant to this Section 2.11, the Borrower may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of a Eurodollar Rate Advance by the 33 38 Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to the A Advances of such Lender or Lenders during such Interest Period or portion thereof, and, in lieu thereof, such A Advances shall during such Interest Period or portion thereof be Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an Affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrower under this Section 2.11, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (b In the event that any Lender shall change its Eurodollar Lending Office and such change results (at the time of such change) in increased costs to such Lender, the Borrower shall not be liable to such Lender for such increased costs incurred by such Lender to the extent, but only to the extent, that such increased costs shall exceed the increased costs which such Lender would have incurred if the Eurodollar Lending Office of such Lender had not been so changed, but, subject to subsection (a) of this Section 2.11 and to Section 2.13, nothing herein shall require any Lender to change its Eurodollar Lending Office for any reason. SECTION 2.12. Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender (including any determination after the Original Effective Date by any such central bank, governmental authority or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less) and such Lender determines that the amount of such capital is increased by or based upon 34 39 the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Borrower of the certificate referred to in the last sentence of this Section 2.12 by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.12 (except as otherwise expressly provided above in this Section 2.12). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Borrower and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.13. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Applicable Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Borrower and the Administrative Agent, suspend the right of the Borrower to elect Eurodollar 35 40 Rate Advances from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Convert all such Eurodollar Rate Advances of such Lender to Base Rate Advances at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Conversion shall continue until such Lender notifies the Borrower and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances has been suspended under this Section 2.13, all Notices of A Borrowing specifying A Advances of such Type shall be deemed, as to such Lender, to be requests for Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an affiliate) to avoid any such illegality, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.14. Payments and Computations. 36 41 (a The Borrower shall make each payment hereunder (including under Section 2.03, 2.05, 2.06 or 2.19) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 1:00 P.M. (New York City time) without setoff, counterclaim, or any other deduction whatsoever, on the day when due in U.S. dollars to the Administrative Agent in care of The Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice to the Borrower from the Administrative Agent and agreed to by the Borrower, in same day funds. Each such payment made by the Borrower for the account of any Lender hereunder, when so made to the Administrative Agent, shall be deemed duly made for all purposes of this Agreement and the Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the bankruptcy, insolvency or reorganization of the Borrower or otherwise, such payment shall be deemed not to have been so made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. 37 42 (b All computations of interest based on the Base Rate and of facility fees and utilization fees (or amounts in lieu thereof) shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, or the Effective Federal Funds Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by each Lender with respect to its own Eurodollar Rate Advances, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b), by each Lender with respect to its own Advances) of an interest rate or an increased cost, loss or expense or increased capital or of illegality or taxes hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. (c Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fees, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to 38 43 the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Effective Federal Funds Rate for such day. SECTION 2.15. Taxes. (a Any and all payments by the Borrower hereunder or under the Notes shall be made in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding in the case of each Indemnified Party, (i) all taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, imposed on or determined by reference to its income or profits, and all franchise taxes, and (ii) all other taxes, levies, imposts, deductions, charges, or withholdings in effect at the time that such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, and liabilities with respect thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under 39 44 this Section 2.15) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower (or the Administrative Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Borrower (or the Administrative Agent, as applicable) shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Borrower shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this subsection (a) (or pursuant to Section 2.15(c), except to the extent Section 2.15(c) relates to Other Taxes) to any Indemnified Party that either (x) on the date such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, both (A) was not entitled to submit a U.S. Internal Revenue Service form 1001 (relating to such Indemnified Party, and entitling it to a complete exemption from withholding on all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement or the Advances) or a U.S. Internal Revenue Service form 4224 (relating to all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement and the Advances) and (B) is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code), or (y) has failed to submit any form or certificate that it was required to file or provide pursuant to subsection (d) of this Section 2.15 and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Borrower from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrower as a result of the failure of the Borrower to 40 45 comply with its obligations under clauses (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.15. If any Indemnified Party receives a net credit or refund in respect of such Taxes or amounts so paid by the Borrower, it shall promptly notify the Borrower of such net credit or refund and shall promptly pay such net credit or refund to the Borrower, provided that the Borrower agrees to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable, is required to repay it. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (c) The Borrower will indemnify each Indemnified Party for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to provide to the Borrower any form or certificate that it was required to provide pursuant to subsection (d) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (d) On or prior to the date on which each Indemnified Party that is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) executes this Agreement or otherwise becomes an "Indemnified Party" hereunder, such Indemnified Party shall provide the Borrower and 41 46 the Administrative Agent with U.S. Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Borrower indicating that all payments to be made to such Indemnified Party hereunder are fully exempt from such taxes. Thereafter and from time to time, each such Indemnified Party shall submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by the Borrower to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes, including fees. Upon the request of the Borrower from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Borrower a certificate to the effect that it is such a United States person. If any Indemnified Party determines, as a result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Borrower any form or certificate that such Indemnified Party is obligated to submit pursuant to this subsection (d), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Party shall promptly notify the Borrower and the Administrative Agent of such fact. (e) Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.15 shall use its best reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the 42 47 need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and each Indemnified Party contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder and under the Notes. SECTION 2.16. Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15 or 8.04(b)) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the amount of the participation purchased from such Lender as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (A) the amount of such Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully 43 48 as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.17. Evidence of Debt. The indebtedness of the Borrower to each Lender in respect of principal of and interest on the Advances shall be evidenced by a Note payable to the order of such Lender and delivered hereunder by the Borrower. Notwithstanding the provisions of the Notes for notations to be made on the grid attached thereto, any Lender may maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances and payments made from time to time hereunder and under the Note payable to its order. In any legal action or proceeding in respect of this Agreement or such Note, the entries made in such account or accounts shall be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded, absent manifest error. SECTION 2.18. Use of Proceeds. Proceeds of the Advances may be used for general corporate purposes of the Borrower and its Subsidiaries, including for acquisitions and for payment of commercial paper issued by the Borrower. SECTION 2.19. The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.19 from time to time on any Business Day during the period from the Effective Date until the earlier of (I) the Termination Date or (II) the date falling 30 days prior to the Stated Termination Date, in the manner set forth below; provided that (x) each B Borrowing shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof and (y) following the making of each B Borrowing, the aggregate number of outstanding B Borrowings shall not exceed seven and the aggregate amount of all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction). 44 49 (i) The Borrower may request a B Borrowing under this Section 2.19 by delivering to the Administrative Agent, by telecopy, telefax or other teletransmission, a notice of a B Borrowing (a "NOTICE OF B BORROWING"), in substantially the form of Exhibit C hereto, specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the earlier of (x) 180 days after the date of such B Borrowing or (y) the Stated Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of B Borrowing. (ii) Each Lender may, if in its sole and absolute discretion it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause 45 50 (A) of paragraph (i) above, and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amount may, subject to clause (y) of the proviso to the first sentence of this Section 2.19(a), exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such B Advance; provided that if the Administrative Agent or an Affiliate thereof in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer before 9:45 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing. (iii) The Borrower shall, in turn, before 11:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either (A) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or 46 51 (B) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in order of the lowest to highest rates of interest or margins (or, if two or more Lenders bid at the same rates of interest, and the amount of accepted offers is less than the aggregate amount of such offers, the amount to be borrowed from such Lenders as part of such B Borrowing shall be allocated among such Lenders pro rata on the basis of the maximum amount offered by such Lenders at such rates or margin in connection with such B Borrowing), in any aggregate amount up to the aggregate amount initially requested by the Borrower in the relevant Notice of B Borrowing, by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect. (iv) If the Borrower notifies the Administrative Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(B) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the 47 52 Borrower, (B) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing, and (C) each Lender that is to make a B Advance as part of such B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article 3. Each Lender that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article 3 and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. Promptly after each B Borrowing the Administrative Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. (b) Within the limits and on the conditions set forth in this Section 2.19, the Borrower may from time to time borrow under this Section 2.19, repay or prepay pursuant to subsection (c) below, and reborrow under this Section 2.19. (c) The Borrower shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a Note, on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment in the related Notice of B Borrowing and provided in the Note evidencing such B Advance), the then unpaid 48 53 principal amount of such B Advance. The Borrower shall have no right to prepay any B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to Section 2.19(a)(i) and set forth in the Note evidencing such B Advance or unless the holder of such B Advance otherwise consents in writing to such prepayment. (d) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice delivered pursuant to subsection (a)(ii) above on the interest date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing and set forth in the Note evidencing such B Advance, subject to Section 2.06(b). (e) Each time that the Borrower gives a Notice of B Borrowing, the Borrower shall pay to the Administrative Agent for its own account such fee as may be agreed between the Borrower and the Administrative Agent from time to time, whether or not any B Borrowing is in fact made. (f) Following the making of each B Borrowing, the Borrower agrees that it will be in compliance with the limitations set forth in clause (y) of the proviso to the first sentence of Section 2.19(a). (g) The failure of any Lender to make the B Advance to be made by it as part of any B Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its B Advance on the date of such B Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the B Advance to be made by such other Lender on the date of any B Borrowing. If any Designated Bidder fails to make the B Advance to be made by it as part of any B Borrowing, such Designated Bidder shall not thereafter have the right to offer to make any B Advance without the prior written consent of the Borrower and the Administrative Agent. SECTION 2.20. Increase of Commitments. (a) At any time after the Effective Date, provided that no Event 49 54 of Default shall have occurred and be continuing, the Borrower may request an increase of the aggregate Commitments by notice to the Administrative Agent in writing of the amount (the "OFFERED INCREASE AMOUNT") of such proposed increase (such notice, a "COMMITMENT INCREASE NOTICE"). Any such Commitment Increase Notice must offer each Lender the opportunity to subscribe for its pro rata share of the increased Commitments. If any portion of the increased Commitments is not subscribed for by the Lenders, the Borrower may, in its sole discretion, but with the consent of the Administrative Agent as to any Person that is not at such time a Lender (which consent shall not be unreasonably withheld), offer to any existing Lender or to one or more additional banks or financial institutions the opportunity to participate in all or a portion of such unsubscribed portion of the increased Commitments pursuant to paragraph (b) or (c) below, as applicable. (b) Any additional bank or financial institution that the Borrower selects to offer participation in the increased Commitments, and that elects to become a party to this Agreement and obtain a Commitment, shall execute a New Lender Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit E (a "NEW LENDER AGREEMENT"), whereupon such bank or financial institution (a "NEW LENDER") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and the signature pages hereof shall be deemed to be amended to add the name and Commitment of such New Lender, provided that the Commitment of any such New Lender shall be in an amount not less than $10,000,000. (c) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant to this Section 2.20 shall, in each case, execute a Commitment Increase Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F (a "COMMITMENT INCREASE AGREEMENT"), whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and the 50 55 signature pages hereof shall be deemed to be amended to so increase the Commitment of such Lender. (d) The effectiveness of any New Lender Agreement or Commitment Increase Agreement shall be contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrower and legal opinions of counsel to the Borrower as the Administrative Agent shall reasonably request with respect thereto, in each case, in form and substance satisfactory to the Administrative Agent. (e) If any bank or financial institution becomes a New Lender pursuant to Section 2.20(b) or any Lender's Commitment is increased pursuant to Section 2.20(c), additional A Advances made on or after the effectiveness thereof (the "RE-ALLOCATION DATE") shall be made pro rata based on the Commitment Percentages in effect on and after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Lender making an aggregate principal amount of A Advances in excess of its Commitment, in which case such excess amount will be allocated to, and made by, such New Lender and/or Lenders with such increased Commitments to the extent of, and pro rata based on, their respective Commitments), and continuations of Eurodollar Rate Advances outstanding on such Re-Allocation Date shall be effected by repayment of such Eurodollar Rate Advances on the last day of the Interest Period applicable thereto and the making of new Eurodollar Rate Advances pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Base Rate Advances, the Borrower shall make prepayments thereof and borrowings of Base Rate Advances so that, after giving effect thereto, the Base Rate Advances outstanding are held pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Eurodollar Rate Advances, such Eurodollar Rate Advances shall remain outstanding with the respective holders thereof until the expiration of their respective Interest Periods (unless the applicable Borrower elects to prepay any thereof in accordance with the applicable provisions of this 51 56 Agreement), and interest on and repayments of such Eurodollar Rate Advances will be paid thereon to the respective Lenders holding such Eurodollar Rate Advances pro rata based on the respective principal amounts thereof outstanding. (f) Notwithstanding anything to the contrary in this Section 2.20, (i) no increase pursuant to this Section 2.20 shall be effective without the consent of the Required Lenders, (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion and (iii) the aggregate amount by which the Commitments hereunder are increased pursuant to this Section 2.20 shall not exceed $120,000,000. (g) The Borrower shall execute and deliver a Note to each new bank or other financial institution becoming a Lender. SECTION 2.21. Extension of Stated Termination Date. (a) Not earlier than 65 days prior to and not later than 45 days prior to the Stated Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an extension of such Stated Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit G, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, by the later of (i) the date 30 days after its receipt from the Administrative Agent of the applicable Extension Request and (ii) the date 30 days prior to the Stated Termination Date, notify the Borrower and the Administrative Agent of its election to extend or not extend the Stated Termination Date as requested in such Extension Request. If the Required Lenders shall approve in writing the extension of the Stated Termination Date requested in such Extension Request, and unless the Borrower shall elect to give notice for a Term A Advance pursuant to Section 2.01(b), the Stated Termination Date shall automatically and without any further action by any Person be extended for an additional 364 days provided that the Commitment of any Lender that does not consent in writing within the period specified above (an 52 57 "OBJECTING LENDER") shall, unless earlier terminated in accordance with this Agreement, expire on the Stated Termination Date in effect on the date of such Extension Request (such Stated Termination Date, if any, referred to as the "COMMITMENT EXPIRATION DATE" with respect to such Objecting Lender). If, within the period specified above, the Required Lenders shall not approve in writing the extension of the Stated Termination Date requested in an Extension Request, the Stated Termination Date shall not be extended pursuant to such Extension Request. The Administrative Agent shall promptly notify (y) the Lenders and the Borrower of any extension of the Stated Termination Date pursuant to this Section 2.21 and (z) the Borrower of any Lender that becomes an Objecting Lender. (b) A Advances owing to any Objecting Lender on the Commitment Expiration Date, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable with respect to such Lender shall be repaid in full on or before such Commitment Expiration Date. (c) The Borrower shall have the right, so long as no Event of Default has occurred and is then continuing, upon giving notice to the Administrative Agent and the Objecting Lenders in accordance with Section 2.10, to prepay in full the A Advances of the Objecting Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable to the Objecting Lenders hereunder and, upon giving not less than three Business Days' notice to the Objecting Lenders and the Administrative Agent, to cancel the whole or part of the Commitments of the Objecting Lenders. (d) Notwithstanding the foregoing, if any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in the sole discretion and prior to the then Stated Termination Date, require such Lender (and each related Designated Bidder (as defined herein or in the Long-Term Revolving Credit Agreement)) to transfer 53 58 or assign, in whole or in part, without recourse (in accordance with Section 8.07), all or part of its interests, rights and obligations under this Agreement and the Long-Term Revolving Credit Agreement to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and the "Advances" made by it under, and as defined in, the Long-Term Revolving Credit Agreement and all other amounts owed to it hereunder and thereunder, including any amounts owing pursuant to Section 8.04(b) (or the comparable provision of the Long-Term Revolving Credit Agreement) and any amounts that would be owing under such Section (or comparable provision) if such Advances and "Advances" (as so defined) were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee that becomes a Lender as a result of such an assignment made pursuant to this paragraph (d) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. SECTION 2.22. Replacement of Lenders. If any Lender requests compensation under Sections 2.07, 2.11 or 2.12 or if the Borrower is required to pay any additional amount to any Lender or any taxing authority or other authority for the account of any Lender pursuant to Section 2.15, or if any Lender suspends the right of the Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.13, or if any Lender defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and 54 59 subject to the restrictions contained in Section 8.07), all its interests, rights and obligations under this Agreement (other than any outstanding B Advances held by it) and the Long-Term Revolving Credit Agreement (other than "B Advances" under, and as defined in, the Long-Term Revolving Credit Agreement) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than B Advances) hereunder and its "Advances" (other than "B Advances") (each as defined in the Long-Term Revolving Credit Agreement), accrued interest thereon, accrued fees, accrued costs in connection with compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, if any, and all other amounts payable to it hereunder and thereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.1. Conditions Precedent to Effectiveness of the Amendment and Restatement of this Agreement. The amendment and restatement of this Agreement as of 55 60 the Effective Date shall become effective when (i) it shall have been executed by the Borrower, the Administrative Agent and Morgan, in its capacity as Administrative Agent under this Agreement immediately prior to the effectiveness of the amendment and restatement of this Agreement, (ii) the Administrative Agent and the Borrower either shall have been notified by each Initial Lender that such Initial Lender has executed it or shall have received a counterpart of this Agreement executed by such Initial Lender, and (iii) the Administrative Agent shall have received the following, each dated the date of delivery thereof unless otherwise specified below (which date shall be selected by the Borrower and be the same for all documents and all Lenders), in form and substance satisfactory to the Administrative Agent and (except for the Notes) in sufficient copies for each Lender: (a) The Notes, to the order of the Lenders, respectively. (b) Certified copies of the resolutions of the Board of Directors of the Borrower approving the borrowings contemplated hereby and authorizing the execution of this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes. (c) A certificate of the Secretary or an Assistant Secretary of the Borrower (i) certifying names and true signatures of officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder and (ii) if the Effective Date is other than February 23, 1999, certifying that the representations and warranties contained in Section 4.01 are true and correct as of the Effective Date. (d) A favorable opinion of the Borrower's Senior Vice President, Law, in substantially the form of Exhibit H hereto. (e) A favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, in substantially the form of Exhibit I hereto. 56 61 (f) Evidence satisfactory to the Administrative Agent of payment of any loans outstanding under this Agreement immediately prior to the effectiveness of such amendment and restatement, together with all accrued interest and fees thereunder. The Borrower and the Initial Lenders agree that upon the effectiveness of such amendment and restatement the "Commitments" of the Initial Lenders shall be as set forth on the signature pages hereof under the caption "Commitments" and the Borrower and the Initial Lenders (for this purpose constituting the "Majority Lenders" under this Agreement immediately prior to such effectiveness) further agree that the Commitments of each Lender not continuing as an Initial Lender upon such effectiveness shall terminate automatically upon the Effective Date without further action by any party. SECTION 3.2. Conditions Precedent to Each A Borrowing. The obligation of each Lender to make an A Advance (including the initial A Advance) on the occasion of any A Borrowing shall be subject to the further conditions precedent that on or before the date of such A Borrowing this Agreement shall have become effective pursuant to Section 3.01 and that on the date of such A Borrowing, before and immediately after giving effect to such A Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of A Borrowing and the acceptance by the Borrower of the proceeds of such A Borrowing shall constitute its representation and warranty that on and as of the date of such A Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) Each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the 57 62 original specified date or with respect to the original specified period); (b) No event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) The aggregate amount of the borrowings under this Agreement (including such A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. SECTION 3.3. Conditions Precedent to Each B Borrowing. The obligation of each Lender which is to make a B Advance on the occasion of any B Borrowing (including the initial B Borrowing) shall be subject to the further conditions precedent that (i) at or before the time required by paragraph (iii) of Section 2.19(a), the Administrative Agent shall have received the written confirmatory notice of such B Borrowing contemplated by such paragraph, (ii) on or before the date of such B Borrowing this Agreement shall have become effective pursuant to Section 3.01, and (iii) on the date of such B Borrowing, before and immediately after giving effect to such B Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute its representation and warranty that on and as of the date of such B Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) Each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); 58 63 (b) No event has occurred and is continuing, or would result from such B Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) The aggregate amount of the borrowings under this Agreement (including such B Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.1. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. The Borrower and each Material Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. Each Subsidiary which is, on and as of the Effective Date, a Material Subsidiary is listed on Schedule I hereto. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due 59 64 execution, delivery and performance by the Borrower of this Agreement or the Notes which has not been duly made or obtained, except those (i) required in the ordinary course to comply with ongoing covenant obligations of the Borrower hereunder the performance of which is not yet due and (ii) that will, in the ordinary course of business in accordance with this Agreement, be duly made or obtained on or prior to the time or times the performance of such obligations shall be due. (d) This Agreement constitutes, and the Notes when delivered hereunder shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (e) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 1997 and the related consolidated statements of income and cash flow for the fiscal year then ended, reported on by PricewaterhouseCoopers LLC, independent public accountants, and the consolidated balance sheet of the Borrower and its consolidated subsidiaries as at September 30, 1998 and the related consolidated statements of income and cash flow for the nine-month period then ended, certified by the chief financial officer of the Borrower, copies of each of which have been furnished to the Administrative Agent and the Initial Lenders, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at December 31, 1997, and September 30, 1998, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 1998, statements to normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied. From September 30, 1998 to and including the Effective Date there has been no material adverse change in such condition or results of operations. (f) As at the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the 60 65 Borrower threatened, against or involving the Borrower or any Material Subsidiary in any court, or before any arbitrator of any kind, or before or by any governmental body, which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) would have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of this Agreement or the Notes. (g) The Borrower and each consolidated Subsidiary have duly filed all tax returns required to be filed, and duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to file or pay which, as applicable, would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Borrower or the appropriate Subsidiary. (h) Except to the extent permitted pursuant to Section 5.02(e), neither the Borrower nor any Material Subsidiary is subject to any contractual restrictions which limit the amount of dividends payable by any Subsidiary. (i) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 6.01(g). (j) Neither the Borrower nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan that, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), exceeds 5% of the Consolidated Tangible Net Worth of the Borrower. (k) Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no 61 66 Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization or termination would be the occurrence of an Event of Default under Section 6.01(i). (l) The Borrower is not an "investment company" or a "company" controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) The Borrower is not a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (n) Any reprogramming required to permit the proper functioning, in and following the year 2000, of (i) the computer systems of the Borrower and its Subsidiaries and (ii) equipment containing embedded microchips (including systems and equipment supplied by others or with which the Borrower's systems interface) and the testing of all such systems and equipment, as so reprogrammed, will be completed by June 30, 1999, except any such reprogramming or testing of systems or equipment where the failure to so complete would not reasonably be expected to have a Material Adverse Effect. The cost to the Borrower and its Subsidiaries of such reprogramming and testing and of the reasonably foreseeable consequences of year 2000 to the Borrower and its Subsidiaries (including reprogramming errors and the failure of others' systems or equipment) will not result in an Event of Default or constitute an Event of Default but for the requirement that notice be given or time elapse or both and would not reasonably be expected to have a Material Adverse Effect. Except for such of the reprogramming referred to in the preceding sentence as may be necessary, the computer and management information systems of the Borrower and its Subsidiaries are reasonably expected to be and, with ordinary course upgrading and maintenance, are reasonably expected to continue for the term of this Agreement to be, sufficient to permit the Borrower to conduct its businesses without Material Adverse Effect. 62 67 All representations and warranties made by the Borrower herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes. ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.1. Affirmative Covenants. So long as any Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each Material Subsidiary to preserve and maintain, its corporate existence, rights (charter and statutory) and material franchises, except as otherwise permitted by Section 5.02(c) or 5.02(d). (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (including all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) VISITATION RIGHTS. At such reasonable times and intervals as the Administrative Agent or any of the Lenders (other than Designated Bidders) may desire, permit the Administrative Agent or any of the Lenders (other than Designated Bidders) to visit the Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of the Borrower and any of its Subsidiaries with officers of the Borrower and independent certified public accountants of the Borrower and any of its Subsidiaries, provided that if an Event of Default, or an event which with the giving 63 68 of notice or the passage of time, or both, would become an Event of Default, has occurred and is continuing, the Administrative Agent or any Lender may, in addition to the other provisions of this subsection (c) and at such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, visit and inspect, under guidance of officers of the Borrower, any properties significant to the consolidated operations of the Borrower and its Subsidiaries, and to examine the books and records of account (other than with respect to any mineral reserve information that the Borrower determines to be confidential) of the Borrower and any of its Subsidiaries and to discuss the affairs, finances and accounts of any of the Borrower's Subsidiaries with any of the officers of such Subsidiary. (d) BOOKS AND RECORDS. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Subsidiary in accordance with generally accepted accounting principles either (i) consistently applied or (ii) applied in a changed manner that does not, under generally accepted accounting principles or public reporting requirements applicable to the Borrower, either require disclosure in the consolidated financial statements of the Borrower and its consolidated Subsidiaries or require the consent of the accountants which (as required by Section 5.03(b)) report on such financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.03(b)) report on the consolidated financial statements of the Borrower and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred, provided that if any change referred to in clause (ii) or (iii) above would not meet the standard set forth in clause (i) or (ii) of Section 1.03, the Administrative Agent, the Lenders and 64 69 the Borrower agree to amend the covenants contained in Section 5.01 and 5.02 so that the relative protection afforded thereby to the Lenders and the relative flexibility afforded thereby to the Borrower will in substance be retained after such amendment, provided, however, that until such amendment becomes effective hereunder, the covenants as set forth herein shall remain in full force and effect and those accounting principles applicable to the Borrower and its consolidated Subsidiaries which do meet the standards set forth in clause (i) or (ii) of Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants. (e) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause each Material Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) MAINTENANCE OF INSURANCE. Maintain, and cause each Material Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. SECTION 5.2. Negative Covenants. So long as any Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, unless the Majority Lenders shall otherwise consent in writing: (a) LIENS, ETC. (i) Create, assume or suffer to exist, or permit any Material Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the Equity Interests in any Material Subsidiary, whether now owned or hereafter acquired, or (ii) create or assume, or permit any Material Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of the Borrower and its consolidated Subsidiaries taken as a whole securing the 65 70 payment of Debt and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) exceeding the greater of (x) $250,000,000 and (y) 10% of Consolidated Tangible Net Worth as at the date of such creation or assumption; provided, however, that this subsection (a) shall not apply to: (A) Liens on assets acquired by the Borrower or any of its Subsidiaries after the Original Effective Date to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (B) Liens on Equity Interests acquired after the Original Effective Date in a Business Entity which has become or becomes a Subsidiary of the Borrower, or on assets of any such Business Entity, to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (C) Liens on Margin Stock; (D) Liens on the Equity Interests in, or Debt or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, Debt or other obligations of any Business Entity which are owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Debt or Guaranty secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Debt or Guaranty is not 66 71 increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) and such Debt or Guaranty is not secured by any additional assets that would not have been permitted by this Section to secure the Debt or Guaranty refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and property evidencing or embodying, or constituting rights or other general intangibles relating to, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.02. (b) DEBT, ETC. Create, assume or suffer to exist, or permit any of its consolidated Subsidiaries to create, assume or suffer to exist, any Debt or any Guaranty unless, immediately after giving effect to such Debt or Guaranty and the receipt and application of any proceeds thereof or value received in connection therewith, (1) the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries plus (ii) the aggregate amount (determined on a consolidated basis) of Guaranties by the Borrower and its consolidated Subsidiaries is less than 60% of Capitalization, provided that Debt for borrowed money either maturing within one year and evidenced by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement or the Long-Term Revolving Credit Agreement or any replacement therefor), shall not exceed the aggregate of the Borrower's unused bank lines of credit and unused credit available to the Borrower 67 72 under financing arrangements with banks or other financial institutions; and (2) with respect to any such Debt created or assumed by a consolidated Subsidiary that is either a Subsidiary of the Borrower as of the Original Effective Date or a Subsidiary of the Borrower acquired or created after the Original Effective Date and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, the aggregate amount of Debt of the consolidated Subsidiaries of the Borrower referred to above in this paragraph (2) owing to Persons other than the Borrower and its consolidated Subsidiaries is less than the greater of (i) $500,000,000 (exclusive of public Debt of LL&E existing at the time LL&E became a Subsidiary, the principal amount of which at such time was approximately $400,000,000, and any refinancing of such Debt, in a principal amount not to exceed the principal amount refinanced) and (ii) 30% of Consolidated Tangible Net Worth as at the date of incurrence or creation of such Debt. (c) SALE, ETC. OF ASSETS. Sell, lease or otherwise transfer, or permit any Material Subsidiary to sell, lease or otherwise transfer (in either case, whether in one transaction or in a series of transactions, and except, in either case, to the Borrower or an entity which after giving effect to such transfer will be or become a Material Subsidiary in which the Borrower's direct or indirect Equity Interests will be at least as great as its direct or indirect Equity Interests in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, notwithstanding the foregoing, the Borrower or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting all or 68 73 substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, so long as (A) such Permitted Assets are sold, leased or otherwise transferred in exchange for other Permitted Assets and/or (B) the proceeds from such sale, lease or other transfer, or an amount equal to the proceeds thereof, are (x) reinvested within one year in Permitted Assets and/or the development of Permitted Assets and/or (y) used to repay Debt the proceeds of which were or are being used for investment in, and/or the development of, Permitted Assets; provided further that, no such sale, lease or other transfer shall be permitted by the foregoing proviso unless either (1) after giving effect to such sale, lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) the Borrower or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. (d) MERGERS, ETC. Merge or consolidate with any Person, or permit any of its Material Subsidiaries to merge or consolidate with any Person, except that (i) such a Subsidiary may merge or consolidate with (or liquidate into) any other Subsidiary or may merge or consolidate with (or liquidate into) the Borrower, provided that (A) if such Material Subsidiary merges or consolidates with (or liquidates into) the Borrower, the Borrower shall be the continuing or surviving corporation, (B) if any such Material Subsidiary merges or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one of such Subsidiaries is the surviving corporation and, if either such Subsidiary is not wholly-owned by the Borrower, such merger or consolidation is on an arm's length basis and (C) as a result of such merger or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower or any Material Subsidiary may merge or consolidate with any other 69 74 corporation (that is, in addition to the Borrower or any Subsidiary of the Borrower), provided that (A) if the Borrower merges or consolidates with any such other corporation, the Borrower is the surviving corporation, (B) if any Material Subsidiary merges or consolidates with any such other corporation, the surviving corporation is a wholly-owned Material Subsidiary of the Borrower, and (C) if either the Borrower or any Material Subsidiary merges or consolidates with any such other corporation, after giving effect to such merger or consolidation no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. (e) DIVIDEND RESTRICTIONS. Create, or consent or agree to, or permit any of its Material Subsidiaries existing on the Original Effective Date or any of its Subsidiaries thereafter created or acquired and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, to create, or consent or agree to, any restrictions, contained in any agreement or instrument relating to or evidencing Debt, on any such Subsidiary's ability to pay dividends or to make advances to the Borrower or any Subsidiary of the Borrower; provided, however, that this subsection (e) shall not apply to any such restrictions (including any extensions of the term of any thereof (by amendment, or continuation thereof in any refinancing of the Debt to which such restriction relates, or otherwise)) applicable to the Equity Interests in any Subsidiary of the Borrower the Equity Interests in which are acquired by the Borrower after the Original Effective Date and which restrictions are existing at the time such Subsidiary first becomes a Subsidiary of the Borrower and are not placed thereon by or with the consent of the Borrower in contemplation of such acquisition by the Borrower. SECTION 5.3. Reporting Requirements. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: 70 75 (a) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of such quarter, and consolidated statements of income and cash flow of the Borrower and its consolidated Subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as to fairness and utilization of generally accepted accounting principles by the chief financial officer of the Borrower and accompanied by a certificate of such officer stating (i) that such statements of income and cash flow and such balance sheet have been prepared in accordance with generally accepted accounting principles, (ii) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (iii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of Section 5.02, and (iv) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (b) within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and its consolidated Subsidiaries containing financial statements for such year reported on by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with generally accepted accounting principles and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event 71 76 not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; (c) within 120 days after the close of each of the Borrower's fiscal years, a certificate of the chief financial officer of the Borrower stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of Section 5.02 and (iii) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (d) promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Borrower or any Material Subsidiary shall have sent to its public Equity Interest holders; (e) promptly upon their becoming publicly available, all regular and periodic financial reports and registration statements which the Borrower or any Material Subsidiary shall file with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registration statements of securities for selling security holders; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving the Borrower or any Material Subsidiary, except any litigation or proceeding which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Borrower obtains knowledge of the occurrence of any Event of Default which is continuing 72 77 or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of the Borrower of the steps being taken by the Borrower or the appropriate Subsidiary to cure the effect of such event; (h) as soon as practicable and in any event (i) within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Borrower or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA 73 78 Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to subsections (a) and (b) of this Section 5.03 shall contain comparative information which conforms to the presentation required in Form 10-Q and Form 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. ARTICLE 6 EVENTS OF DEFAULT SECTION 6.1. Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Note within two Business Days after the same shall be due, or any interest on any Note or any other amount payable hereunder within five Business Days after the same shall be due; or (b) Any representation or warranty made or deemed made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or (d) The Borrower or any Material Subsidiary shall fail to pay any Debt or Guaranty (excluding Debt 74 79 evidenced by the Notes) of the Borrower or such Subsidiary (as the case may be) in an aggregate principal amount in excess of the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate the maturity of such Debt; provided that, notwithstanding any provision contained in this subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt referred to in this subsection (d), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds thereof would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt extended pursuant thereto and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration, or the provisions hereof relating thereto, this Agreement or any Advance hereunder would otherwise be subject to the margin requirements or any other restriction under Regulation U issued by the Board of Governors of the Federal Reserve System, then such breach, default, event of default or acceleration shall not constitute a default or Event of Default under this subsection (d); or (e) (i) The Borrower or any Material Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by the Borrower or any such Subsidiary seeking to adjudicate 75 80 it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Borrower or any such Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions referred to above sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Borrower or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time shall be rendered against the Borrower or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or (g) Any Termination Event with respect to a Material Plan shall have occurred and, 30 days after notice thereof shall have been given to the Borrower by the Lender, (i) such Termination Event shall still 76 81 exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto), in each case in respect of which the Borrower or any ERISA Affiliate has liability, is equal to or greater than $50,000,000; or (h) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $50,000,000; or (i) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the Original Effective Date by an amount exceeding $50,000,000; or (j) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of the Borrower in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than the Borrower, a Subsidiary of the Borrower or any employee benefit plan maintained for employees of the Borrower and/or any of its Subsidiaries or the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess of 50% of the outstanding capital stock of the Borrower entitled 77 82 to vote in elections for directors of the Borrower and (ii) at any time before the later of (x) six months after the completion of such tender offer and (y) the next annual meeting of the shareholders of the Borrower following the completion of such tender offer more than half of the directors of the Borrower consists of individuals who (a) were not directors before the completion of such tender offer and (b) were not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) Any "Event of Default" as defined in the Long-Term Revolving Credit Agreement shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that if an Event of Default under subsection (e) of this Section 6.01 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 78 83 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.1. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including enforcement of this Agreement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.2. Administrative Agent's Reliance, Etc.. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good 79 84 faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.3. Chase and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Chase shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Chase in its individual capacity. Chase and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if Chase were not the Administrative Agent and without any duty to account therefor to the other Lenders. SECTION 7.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and 80 85 information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.5. Indemnification. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE NOTES THEN HELD BY EACH OF THEM (OR IF NO NOTES ARE AT THE TIME OUTSTANDING OR IF ANY NOTES ARE HELD BY PERSONS WHICH ARE NOT LENDERS, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS OR THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS IMMEDIATELY PRIOR TO TERMINATION IF THE COMMITMENTS HAVE BEEN TERMINATED), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, OR ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Administrative Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, 81 86 modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any of the Notes or any other instrument or document furnished pursuant hereto or in connection herewith to the extent that the Administrative Agent acts in its capacity as Administrative Agent and is not reimbursed for such expenses by the Borrower. SECTION 7.6. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then such retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized, or authorized to conduct a banking business, under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 82 87 SECTION 7.7. Auction Administrative Agent. The Administrative Agent shall until such time as it so notifies the Borrower and the Lenders discharge its duties under Section 2.19 through the Auction Administrative Agent and all references to the "Administrative Agent" or to Chase relating to such duties or made in this Article 7 shall be deemed to also refer to the Auction Administrative Agent and any Affiliate of Chase serving in such capacity. All payments to be made to or by the Auction Administrative Agent shall be made through the Administrative Agent. ARTICLE 8 MISCELLANEOUS SECTION 8.1. Amendments, Etc. An amendment or waiver of any provision of this Agreement or the Notes, or a consent to any departure by the Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but only if, it shall be in writing and signed by the Majority Lenders or, where so specified, the Required Lenders (except any amendment to give effect to increased Commitments and New Lenders, as contemplated by Section 2.20), and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Bidders), be effective to: (a) waive any of the conditions specified in Article 3, (b) except as contemplated by Section 2.20, increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Notes or any facility fees or utilization fees hereunder, (d) except as contemplated by Section 2.21, postpone any date fixed for any payment of principal of, or interest on, the Notes or any facility fees or utilization fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, which shall be required for the Lenders or any 83 88 of them to take any action under this Agreement, or (f) amend this Section 8.01; and, provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note. SECTION 8.2. Notices, Etc. Except as otherwise provided in Section 2.02(a) or 2.10(ii), all notices and other communications provided for hereunder shall be in writing and mailed by certified mail, return receipt requested and postage prepaid, or telecopied, telefaxed or otherwise teletransmitted, or delivered, if to the Borrower, at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Telefax: (713) 624-9627; if to any Initial Lender, at its Domestic Lending Office set forth in such Initial Lender's Administrative Questionnaire; if to any other Lender at its Domestic Lending Office specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender or at the address for notices specified in the Designation Agreement pursuant to which it became a party hereto; if to the Administrative Agent, in care of The Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Telefax: (212) 552-7940, with a copy to Chase Bank of Texas, N.A., at 600 Travis Street, 20th Floor, Houston, TX 77002, Attention: Russell Johnson, Telefax: (713) 216-8870; and if to the Auction Administrative Agent, at The Chase Manhattan Bank, Agency Services, at One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Christopher Consomer, Telefax: (212) 552-5627; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective, (a) in the case of any notice or communication given by certified mail, when receipted for, (b) in the case of any notice or communication given by telecopy, telefax or other teletransmission, when confirmed by appropriate answerback, in each case addressed as aforesaid, and (c) in the case of any notice or 84 89 communication delivered by hand or courier, when so delivered, except that notices and communications to the Administrative Agent pursuant to Article 2 or 7 shall not be effective until received by the Administrative Agent. A notice received by the Administrative Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the Borrower and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. SECTION 8.3. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.4. Costs and Expenses; Indemnity. (a) The Borrower agrees to pay on demand (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate and (iii) all out-of-pocket costs and expenses, if any, of the 85 90 Administrative Agent and the Lenders (including reasonable counsel fees and expenses and the allocated costs of in-house counsel), in connection with the enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder and thereunder. (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.10 or a Conversion pursuant to Section 2.08(f) or Section 2.09 or due to acceleration of the maturity of the Notes pursuant to Section 6.01 or due to any other reason attributable to the Borrower, or if the Borrower shall fail to borrow, convert, continue or prepay any Eurodollar Rate Advance on the date specified in any notice delivered pursuant hereto, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) THE BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO ANY ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE EQUITY INTERESTS IN, OR SUBSTANTIALLY ALL THE 86 91 ASSETS OF, ANY PERSON OR ANY USE OR PROPOSED USE OF THE ADVANCES BY THE BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS, OR BY REASON OF ANY USE OR DISCLOSURE OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR USE OR PROPOSED USE OF THE PROCEEDS BY THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS). SECTION 8.5. Right of Set-off. Upon the declaration of the Notes as due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 8.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. SECTION 8.6. Binding Effect. This Agreement shall become effective in accordance with the provisions of Section 3.01, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of all of the Lenders. 87 92 SECTION 8.7. Assignments and Participations. (a) Each Lender (other than a Designated Bidder) may assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, the A Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all such Lender's rights and obligations under this Agreement (other than any right to make B Advances, any B Advances or any Notes) and the same constant percentage of all such Lender's rights and obligations under the Long-Term Revolving Credit Agreement, if any, unless the Long-Term Revolving Credit Agreement has been terminated, shall be contemporaneously assigned by such assigning Lender to the same assignee pursuant to Section 8.07(a) of the Long-Term Revolving Credit Agreement, (ii) the sum of (x) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) plus (y) the amount of the "Commitment" of the assigning Lender under the Long-Term Revolving Credit Agreement contemporaneously assigned by such assigning Lender to such assignee as contemplated by clause (i) of this sentence must be equal to or greater than $25,000,000, or if less, the entire amount of such assigning Lender's "Commitment" (unless the Borrower and the Administrative Agent shall otherwise consent, which consent may be withheld for any reason) and must be an integral multiple of $1,000,000, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,000, and shall send to the Borrower an executed counterpart of such Assignment and Acceptance. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder 88 93 shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04). (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, 89 94 independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance, each Designation Agreement, each New Lender Agreement and each Commitment Increase Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and, with respect to Lenders other than Designated Bidders, the Commitment of, and principal amount of the A Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept 90 95 such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender. Such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (e) Each Lender (other than a Designated Bidder) may designate one or more banks or other entities to have a right to make B Advances as a Lender pursuant to Section 2.19; provided that (i) such Lender shall have obtained the written consent of the Administrative Agent and the Borrower, such consent not to be unreasonably withheld, (ii) no such Lender shall be entitled to make more than two such designations, (iii) each such Lender making one or more of such designations shall retain the right to make B Advances as a Lender pursuant to Section 2.19, (iv) each such designation shall be to a Designated Bidder and (v) the parties to each such designation shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Designation Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Designation Agreement, the designee thereunder shall be a party hereto with a right to make B Advances as a Lender pursuant to Section 2.19 and the obligations related thereto. (f) By executing and delivering a Designation Agreement, the Lender making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection 91 96 with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Designation Agreement; (iv) such designee will, independently and without reliance upon the Administrative Agent, such designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi) such designee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (g) Upon its receipt of a Designation Agreement executed by a designating Lender and a designee representing that it is a Designated Bidder, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit K hereto, (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (h) Each Lender may sell participations to one or more banks or other entities in or to all or a portion 92 97 of its rights and obligations under this Agreement (including all or a portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such Lender's Note or any facility fees or utilization fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Note, or (D) consent to the assignment or the transfer by the Borrower of any of its rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (i) Any Lender may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree in 93 98 writing for the benefit of the Borrower to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender in a manner consistent with Section 8.08. (j) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it) and the Notes issued to it hereunder in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. SECTION 8.8. Confidentiality. Each Lender and the Administrative Agent (each, a "PARTY") agrees that it will use its best reasonable efforts not to disclose, without the prior consent of the Borrower (other than to its, or its Affiliates, employees, auditors, accountants, counsel or other representatives, whether existing at the Original Effective Date or any subsequent time), any information with respect to the Borrower which is furnished pursuant to this Agreement, provided that any party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such party or to the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee, designee or participant in connection with any contemplated assignment of any rights or obligations hereunder, any designation or any sale of any participation therein, by such party pursuant to Section 8.07, if such prospective assignee, designee or participant, as the case may be, executes an agreement with the Borrower 94 99 containing provisions substantially similar to those contained in this Section 8.08; provided, however, that the Borrower acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. SECTION 8.9. Consent to Jurisdiction. (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by the Administrative Agent, the Arranger, any Lender or the holder of any Note in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Agreement or the Notes (such claims and causes of action, collectively, being "PERMITTED CLAIMS"), and the Borrower hereby irrevocably agrees that all Permitted Claims may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Service of the summons and complaint and any other process which may be served by the Administrative Agent, the Arranger, any Lender or the holder of any Note on the Borrower in any such action or proceeding in any aforementioned court in respect of Permitted Claims may be made by delivering separate copies of such process to the Borrower by courier and by certified mail (return receipt requested), fees and postage prepaid at the Borrower's address specified pursuant to Section 8.02, to the attention of each of the Treasurer and the Executive Vice President, Law. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 8.09 (i) shall affect the right of the Arranger, the Borrower, any Lender, the holder of any Note or the Administrative Agent to 95 100 serve legal process in any other manner permitted by law or affect any right otherwise existing of the Borrower, any Lender, the Arranger, the holder of any Note or the Administrative Agent to bring any action or proceeding in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. SECTION 8.10. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. SECTION 8.12. WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. 96 101 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES INC. By: /s/ Suzanne V. Baer -------------------------------------- Name: Suzanne V. Baer Title: Vice President & Treasurer CHASE BANK OF TEXAS, N.A., as Administrative Agent By: /s/ Russell A. Johnson -------------------------------------- Name: Russell A. Johnson Title: Vice President THE CHASE MANHATTAN BANK, as Auction Administrative Agent By: /s/ Christopher Consomer -------------------------------------- Name: Christopher Consomer Title: AVP CITIBANK, N.A., as Syndication Agent By: /s/ David B. Gorte -------------------------------------- Name: David B. Gorte Title: Attorney-In-Fact 102 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Documentation Agent By: /s/ Paul Squires -------------------------------------- Name: Paul Squires Title: Senior Vice President BANKBOSTON, N.A., as Documentation Agent By: /s/ Terrence Ronan -------------------------------------- Name: Terrence Ronan Title: Director MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Original Administrative Agent By: /s/ Stacey L. Haimes -------------------------------------- Name: Stacey L. Haimes Title: Vice President 103 Commitments The Initial Lenders - ----------- ------------------- $45,000,000 CHASE BANK OF TEXAS, N.A. By: /s/ Russell A. Johnson -------------------------------------- Name: Russell A. Johnson Title: Vice President $45,000,000 CITIBANK, N.A. By: /s/ David B. Gorte -------------------------------------- Name: David B. Gorte Title: Attorney-In-Fact $45,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Paul A. Squires -------------------------------------- Name: Paul A. Squires Title: Senior Vice President $45,000,000 BANKBOSTON, N.A. By: /s/ Terrence Ronan -------------------------------------- Name: Terrence Ronan Title: Director 104 $30,000,000 MELLON BANK, N.A. By: /s/ Roger E. Howard -------------------------------------- Name: Roger E. Howard Title: Vice President $30,000,000 WELLS FARGO BANK By: /s/ Ann M. Rhoads -------------------------------------- Name: Ann M. Rhoads Title: Vice President $20,000,000 THE BANK OF NEW YORK By: /s/ Peter W. Keller -------------------------------------- Name: Peter W. Keller Title: Vice President $20,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ Michael G. Meiss -------------------------------------- Name: Michael G. Meiss Title: Vice President $20,000,000 THE NORTHERN TRUST COMPANY By: /s/ John E. Burda -------------------------------------- Name: John E. Burda Title: Vice President 105 $20,000,000 WACHOVIA BANK, N.A. By: /s/ Steven M. Takei -------------------------------------- Name: Steven M. Takei Title: Senior Vice President $20,000,000 BANK OF MONTREAL By: /s/ J.B. Whitmore -------------------------------------- Name: J.B. Whitmore Title: Director $20,000,000 BANKERS TRUST COMPANY By: /s/ Calli S. Hayes -------------------------------------- Name: Calli S. Hayes Title: Managing Director $20,000,000 BARCLAYS BANK PLC By: /s/ J. Onischuk -------------------------------------- Name: J. Onischuk Title: Associate Director 106 $20,000,000 PARIBAS By: /s/ Marian Livingston -------------------------------------- Name: Marian Livingston Title: Vice President By: /s/ John H. Roberts -------------------------------------- Name: John H. Roberts Title: Vice President Total Commitments ================= $ 400,000,000 107 SCHEDULE I MATERIAL SUBSIDIARIES Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company 108 SCHEDULE II PRICING GRID
- -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ------------------ LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ------------------ Basis for Pricing If the If the If the If the If the If Levels I-V do Borrower's Borrower's Borrower's Borrower's Borrower's not apply. senior unsecured senior senior unsecured senior unsecured senior long term debt unsecured long long term debt long term debt unsecured long is rated at term debt is is rated at is rated at term debt is least A by S&P rated at least least BBB+ by least BBB by S&P rated at least or A2 by Moody's. A- by S&P or A3 S&P or Baa1 by or Baa2 by BBB- by S&P or by Moody's. Moody's. Moody's. Baa3 by Moody's. - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ------------------ Facility Fee .050% .060% .080% .100% .125% .200% Percentage - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ------------------ LIBOR Applicable .175% .190% .220% .250% .325% .550% Margin - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ------------------
The applicable pricing level shall change on the date of any relevant change in the rating by S&P or Moody's of any public long term senior unsecured debt securities of the Borrower. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable pricing level is the higher of the two (e.g., A-/Baa1 results in Level II pricing), provided that in the event the split is more than one full category, the average (or the higher of two intermediate ratings) shall be used (e.g., A-/Baa2 results in Level III pricing, as does A-/Baa3). 109 EXHIBIT A FORM OF NOTE New York, New York February 23, 1999 For value received, Burlington Resources Inc., a Delaware corporation (the "BORROWER"), promises to pay to the order of ______________________ (the "LENDER"), for the account of its Applicable Lending Office, the unpaid principal amount of each Advance made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Advance on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna. All Advances made by the Lender, the respective types thereof and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make (or any error in making) any such recordation or endorsement shall not affect the Borrower's obligations hereunder or under the Credit Agreement. 110 This note is one of the Notes referred to in the Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 among Burlington Resources Inc., the Lenders party thereto, Chase Bank of Texas, N.A., as Administrative Agent for the Lenders thereunder, The Chase Manhattan Bank, as Auction Administrative Agent for the Lenders, Citibank, N.A., as Syndication Agent for the Lenders, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents for the Lenders (as the same may be amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. BURLINGTON RESOURCES INC. By: -------------------------------------- Name: Title: 111 ADVANCES AND PAYMENTS OF PRINCIPAL
- ------------------- ----------------- ---------------- ------------------- ----------------------------------------- AMOUNT OF AMOUNT OF DATE ADVANCE TYPE OF ADVANCE PRINCIPAL REPAID NOTATION MADE BY - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- ----------------------------------------- - ------------------- ----------------- ---------------- ------------------- -----------------------------------------
112 EXHIBIT B FORM OF NOTICE OF A BORROWING Date ___________ The Chase Manhattan Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Muniram Appanna Tel: (212) 552-7943 Fax: (212) 552-7940 copy to: Chase Bank of Texas, N.A., as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Short-Term Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, Chase Bank of Texas, N.A., as Administrative Agent, The Chase Manhattan Bank as Auction Administrative Agent, Citibank, N.A., as Syndication Agent, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents. Pursuant to Section 2.02(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an A Borrowing under the Credit Agreement (the "PROPOSED A BORROWING"), and in that connection sets forth below the information relating to such A Borrowing: 113 1. The Business Day of the Proposed A Borrowing is _________ __, _____. 2. The Type of A Advances comprising the Proposed A Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. 3. The aggregate amount of the Proposed A Borrowing is $_______. 4.(1) The Interest Period for each Eurodollar Rate Advance made as part of the Proposed A Borrowing is [__] month[s]. 5. The Proposed A Borrowing shall consist of [Revolving A Advances] [Term A Advances]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. - ----------------------------- (1) To be used for Eurodollar Rate Advances only. 114 BURLINGTON RESOURCES INC. By: -------------------------------------- Name: Title: 115 EXHIBIT C FORM OF NOTICE OF B BORROWING Date ___________ The Chase Manhattan Bank Agency Services One Chase Manhattan Plaza, 8th floor New York, NY 10081 Attention: Christopher Consomer Tel: (212) 552-7259 Fax: (212) 552-5627 copy to: Chase Bank of Texas, N.A., as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th floor Houston, Texas 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Short-Term Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, Chase Bank of Texas, N.A., as Administrative Agent, The Chase Manhattan Bank, as Auction Administrative Agent, Citibank, N.A., as Syndication Agent, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents. Pursuant to Section 2.19 of the Credit Agreement, the Borrower hereby gives you notice of and requests a B Borrowing under the Credit Agreement (the "PROPOSED B BORROWING"), and in 116 that connection sets forth the terms on which such B Borrowing is requested to be made: 1. Date of B Borrowing ____________________ 2. Proposed Amount of B Borrowing ____________________ 3. Maturity Date ____________________ 4. Interest Rate Basis ____________________ 5. Interest Payment Date(s) ____________________ 7. [Other Terms] ____________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By --------------------------------------- Name: Title: 117 EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE Dated: _________, 19__ Reference is made to the Short-Term Revolving Credit Agreement dated as of February 25, 1998, amended and restated as of February 23, 1999 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), Chase Bank of Texas, N.A., as Administrative Agent for the Lenders (the "ADMINISTRATIVE AGENT"), The Chase Manhattan Bank, as Auction Administrative Agent for the Lenders, Citibank, N.A., as Syndication Agent for the Lenders, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents. Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows: SECTION (A). The Assignor hereby sells and assigns to the Assignee, without recourse, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of B Advances) which represents the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances), including such interest in the Assignor's Commitment, the A Advances owing to the Assignor, and the Note[s] held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the A Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1 hereof. SECTION (B). The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear 118 of any adverse claim; (ii) represents and warrants that it has made or is contemporaneously making herewith, to the Assignee as contemplated by Section 8.07 of the Credit Agreement, an assignment under the Long-Term Revolving Credit Agreement, unless the Long-Term Revolving Credit Agreement has been terminated; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; [and (v) requests that the Administrative Agent arrange for the issuance of a new Note or Notes payable to the order of the Assignee]. SECTION (C). The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) confirms that it has entered into or is contemporaneously herewith entering into, with the Assignor as contemplated by Section 8.07 of the Credit Agreement, an assignment under the Long-Term Revolving Credit Agreement, unless the Long-Term Revolving Credit Agreement has been terminated; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it 119 as a Lender; [and] (vii) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [;and (viii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement and the Notes or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty](1). SECTION (D). Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance shall be at least five Business Days after the execution and delivery thereof to the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "EFFECTIVE DATE"). SECTION (E). Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04 of the Credit Agreement. SECTION (F). Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in - ---------------------- (1) If the Assignee is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code). 120 payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. SECTION (G). This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized as of the date specified thereon. 121 Schedule 1 to Assignment and Acceptance Dated __________ Section 1. Percentage Interest assigned: ________% Section 2. Assignee's Commitment: Aggregate Outstanding Principal $_________ Amount of [A Advances] owing to the Assignee: $_________ Section 3. Effective Date(2): [NAME OF ASSIGNOR] By --------------------------------------- Title: [NAME OF ASSIGNEE] By --------------------------------------- Title: Domestic Lending Office: - ----------------------- (2) This date should be no earlier than at least five Business Days after the execution and delivery thereof to the Administrative Agent. 122 [Address] Eurocurrency Lending Office: [Address] Accepted and Consented to this __ day of __________, ____: CHASE BANK OF TEXAS, N.A., as Administrative Agent By --------------------------------- Name: Title: Consented to this __ day of __________, ____: BURLINGTON RESOURCES INC. By --------------------------------- Name: Title: 123 EXHIBIT E FORM OF NEW LENDER AGREEMENT This New Lender Agreement dated as of ___________, ____ (this "AGREEMENT") is by and among (i) Burlington Resources Inc., a Delaware corporation (the "BORROWER"), (ii) Chase Bank of Texas, N.A., in its capacity as administrative agent (the "ADMINISTRATIVE AGENT") under the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 (as may be amended or otherwise modified from time to time, the "CREDIT AGREEMENT", capitalized terms that are defined in the Credit Agreement and not defined herein are used herein as therein defined) among the Borrower, the lenders party thereto, the Administrative Agent, The Chase Manhattan Bank, as auction administrative agent, Citibank, N.A., as syndication agent, and Bank of America National Trust and Savings Association and BankBoston, N.A., as documentation agents, and (iii) _________ ("NEW LENDER"). Preliminary Statements A. Pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the total Commitments under the Credit Agreement by adding to the Credit Agreement one or more banks or other financial institutions. B. The Borrower has given notice to the Administrative Agent of its intention to increase the total Commitments pursuant to such Section 2.20 by adding the New Lender to the Credit Agreement as a Lender with a Commitment of $___________, and the Administrative Agent is willing to consent thereto. Accordingly, the parties hereto agree as follows: SECTION 1. Addition of New Lender. Pursuant to Section 2.20 of the Credit Agreement, the New Lender is hereby added to the Credit Agreement as a Lender with a Commitment of $________________. The New Lender specifies as its Domestic Lending Office and Eurodollar Lending Office the following: 124 Domestic Lending Address: Office: Attention: Telephone: Telecopy: Eurodollar Lending Address: Office: Attention: Telephone: Telecopy: SECTION 2. New Note. The Borrower agrees to promptly execute and deliver to the New Lender a Note ("NEW NOTE"). SECTION 3. Consent. The Administrative Agent and the Borrower hereby consent to the increase in the Commitments and addition of the New Lender effectuated hereby. SECTION 4. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 5. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 6. Lender Credit Decision. The New Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to agree to the various matters set forth herein. The New Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit 125 decisions in taking or not taking action under the Credit Agreement. SECTION 7. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The execution, delivery and performance by the Borrower of this Agreement and the New Note are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (b) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the New Note which has not been duly made or obtained. (c) This Agreement constitutes, and the New Note when delivered hereunder shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (d) The aggregate amount by which the Commitments under the Credit Agreement have been increased does not exceed $120,000,000. (e) No event has occurred and is continuing which constitutes an Event of Default. (f) Unless the Long-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the New Lender to become a party to the Long-Term Revolving Credit Agreement pursuant to Section 2.20 thereof with a "Commitment" (under and as defined in the Long-Term Revolving Credit Agreement) that constitutes the same percentage of all "Commitments" thereunder as the percentage that the New Lender's Commitment under the Credit Agreement constitutes of all Commitments under the Credit Agreement. (g) Prior to the increase in Commitment pursuant to this Agreement, the Borrower has offered the Lenders the right to participate in such increase by increasing their respective Commitments. (h) Attached hereto are resolutions duly adopted by the Board of Directors of the Borrower sufficient to authorize this 126 Agreement and the New Note, and such resolutions are in full force and effect. SECTION 8. Default. Without limiting any other event that may constitute an Event of Default, in the event any representation or warranty set forth herein shall prove to have been incorrect in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement. SECTION 9. Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and the New Note, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. SECTION 10. Effectiveness. When, and only when, the Administrative Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Administrative Agent and the New Lender, this Agreement shall become effective as of the date first written above. 127 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: BURLINGTON RESOURCES INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- ADMINISTRATIVE AGENT: CHASE BANK OF TEXAS, N.A., as Administrative Agent By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- NEW LENDER: ----------------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 128 EXHIBIT F FORM OF COMMITMENT INCREASE AGREEMENT This Commitment Increase Agreement dated as of ___________, ____ (this "AGREEMENT") is by and among (i) Burlington Resources Inc., a Delaware corporation (the "BORROWER"), (ii) Chase Bank of Texas, N.A., in its capacity as administrative agent (the "ADMINISTRATIVE AGENT") under the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 (as the same may be amended or otherwise modified from time to time, the "CREDIT AGREEMENT", capitalized terms that are defined in the Credit Agreement and not defined herein are used herein as therein defined) among the Borrower, the lenders party thereto, the Administrative Agent, The Chase Manhattan Bank, as Auction Administrative Agent, Citibank, N.A., as syndication agent, and Bank of America National Trust and Savings Association and BankBoston, N.A., as documentation agents, and (iii) _________ ("INCREASING LENDER"). Preliminary Statements A. Pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the total Commitments under the Credit Agreement by agreeing with a Lender to increase that Lender's Commitment. B. The Borrower has given notice to the Administrative Agent of its intention to increase the total Commitments pursuant to such Section 2.20 by increasing the Commitment of the Increasing Lender from $_______ to $________, and the Administrative Agent is willing to consent thereto. Accordingly, the parties hereto agree as follows: SECTION 1. Increase of Commitment. Pursuant to Section 2.20 of the Credit Agreement, the Commitment of the Increasing Lender is hereby increased from $________ to $__________. 129 SECTION 2. Consent. The Administrative Agent hereby consents to the increase in the Commitment of the Increasing Lender effectuated hereby. SECTION 3. Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of New York. SECTION 4. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 5. Lender Credit Decision. The Increasing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to agree to the various matters set forth herein. The Increasing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement. SECTION 6. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporation action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (b) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement which has not been duly made or obtained. (c) This Agreement constitutes legal, valid and binding obligations of the Borrower enforceable against the Borrower in 130 accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (d) The aggregate amount by which the Commitments under the Credit Agreement have been increased does not exceed $120,000,000. (e) No event has occurred and is continuing which constitutes an Event of Default. (f) Unless the Long-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the Increasing Lender's "Commitment" (as defined in the Long-Term Revolving Credit Agreement) to be increased pursuant to Section 2.20 thereof by the same percentage as the Increasing Lender's Commitment under the Credit Agreement is being increased pursuant to Section 2.20 of the Credit Agreement. (g) Attached hereto are resolutions duly adopted by the Board of Directors of the Borrower sufficient to authorize this Agreement, and such resolutions are in full force and effect. SECTION 7. Default. Without limiting any other event that may constitute an Event of Default, in the event any representation or warranty set forth herein shall prove to have been incorrect in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement. SECTION 8. Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. SECTION 9. Effectiveness. When, and only when, the Administrative Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Administrative Agent and the Increasing Lender, this Agreement shall become effective as of the date first written above. 131 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: BURLINGTON RESOURCES INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- ADMINISTRATIVE AGENT: CHASE BANK OF TEXAS, N.A., as Administrative Agent By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- INCREASING LENDER: ----------------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 132 EXHIBIT G FORM OF EXTENSION REQUEST The Chase Manhattan Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Muniram Appanna Tel: (212) 552-7943 Fax: (212) 552-7940 copy to: Chase Bank of Texas, N.A., as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Short-Term Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, Chase Bank of Texas, N.A., as Administrative Agent, The Chase Manhattan Bank, as Auction Administrative Agent, Citibank, N.A., as Syndication Agent, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents. Pursuant to Section 2.21(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an extension of the Stated Termination Date under the Credit Agreement, and in that connection sets forth below the information relating to such extension: 133 The requested Stated Termination Date is _______________ __, ____.(1) The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date the Stated Termination Date is extended: (a) this Extension Request is being made not earlier than 65 days prior to and not later than 45 days prior to the Stated Termination Date now in effect; (b) no event has occurred and is continuing which constitutes an Event of Default. BURLINGTON RESOURCES INC. By: -------------------------------------- Name: Title: - -------------------------- (1) Such requested Stated Termination Date shall be 364 days from the presently effective Stated Termination Date. 134 EXHIBIT H FORM OF OPINION OF SENIOR VICE PRESIDENT, LAW FOR BORROWER February 23, 1999 To each of the Lenders and the Agents Referred to Below c/o Chase Bank of Texas, N.A. 600 Travis Street, 20th Floor Houston, TX 77002 Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.01(d) of the Short-Term Revolving Credit Agreement, dated as of February 25, 1998, as amended and restated as of February 23, 1999 (the "Credit Agreement"), among Burlington Resources Inc., a Delaware corporation (the "Borrower"), the financial institutions party thereto (each a "Lender," and together the "Lenders"), Chase Bank of Texas, N.A., as Administrative Agent for the Lenders, The Chase Manhattan Bank, as Auction Administrative Agent, Citibank, N.A., as Syndication Agent, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. I am Senior Vice President, Law of the Borrower, and I, or attorneys over whom I exercise supervision, have acted as counsel for the Borrower in connection with the preparation, execution and delivery of the Credit Agreement. In that connection, I or such attorneys have examined: (1) The Credit Agreement, executed by the parties thereto; 135 (2) The Notes executed by the Borrower; and (3) The other documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement. I, or attorneys over whom I exercise supervision, have also examined the originals, or copies certified to our satisfaction, of the agreements, instruments and other documents, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the Borrower's ability to perform the Borrower's obligations under the Credit Agreement or the Notes (collectively referred to herein as the "Documents"). In addition, I, or attorneys over whom I exercise supervision, have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions hereinafter expressed. In all such examinations, I, or attorneys over whom I exercise supervision, have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified, conformed or reproduction copies of documents of all parties (other than, with respect to the Documents, the Borrower), the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to such attorneys or me as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, I have relied upon, and assume the accuracy of, representations and warranties contained in the Credit Agreement and certificates and oral or written statements and other information of or from public officials, officers and/or representatives of the Borrower and others. To the extent it may be relevant to the opinions expressed herein, I have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such documents and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. The opinions expressed below are limited to the federal laws of the United States and, to the extent relevant hereto, the General Corporation Law of the State of Delaware, as currently in effect. I assume no obligation to supplement this opinion if any 136 applicable laws change after the date hereof or if I become aware of any facts that might change the opinions expressed herein after the date hereof. Based upon the foregoing and upon such investigation as I have deemed necessary, and subject to the limitations, qualifications and assumptions set forth herein, I am of the following opinion: 1. The Borrower (i) is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware, and (ii) possesses all the corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. 2. The execution, delivery and performance by the Borrower of the Documents are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action in respect of or by the Borrower (except to the extent that the Borrower seeks to exercise its right under Section 2.20 of the Credit Agreement to effect an increase of Commitments), and do not contravene (i) the Borrower's Certificate of Incorporation or By-Laws, in each case as amended, (ii) any federal law, rule or regulation applicable to the Borrower (excluding provisions of federal law expressly referred to in and covered by the opinion of Jones, Day, Reavis & Pogue delivered to you in connection with the transactions contemplated hereby), or (iii) any contractual restriction binding on or affecting the Borrower. The Documents have been duly executed and delivered on behalf of the Borrower. 3. No authorization or approval or other action by, and no notice to or filing with, any federal governmental authority or regulatory body (including, without limitation, the Federal Energy Regulatory Commission) is required for the due execution, delivery and performance by the Borrower of the Documents, except those required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants and warranties contained in the Documents. 4. To the best of my knowledge, there is no action, suit or proceeding pending or overtly threatened against or involving 137 the Borrower or any of its Material Subsidiaries, which, in my reasonable judgment (taking into account the exhaustion of all appeals), would have a material adverse effect upon the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of any Document. These opinions are given as of the date hereof and are solely for your benefit in connection with the transactions contemplated by the Credit Agreement. These opinions may not be relied upon by you for any other purpose or relied upon by any other person for any purpose without my prior written consent. Very truly yours, L. David Hanower Senior Vice President, Law 138 EXHIBIT I FORM OF OPINION OF JONES, DAY, REAVIS & POGUE, NEW YORK COUNSEL FOR BORROWER February 23, 1999 To Each of the Lenders and the Administrative Agent Referred to Below c/o Chase Bank of Texas, N.A. 600 Travis Street, 20th Floor Houston, TX 77002 Re: Short-Term Revolving Credit Agreement, dated as of February 25, 1998, and amended and restated as of February 23, 1999 Ladies and Gentlemen: We have acted as special New York counsel for Burlington Resources Inc., a Delaware corporation (the "Company"), in connection with the Short-Term Revolving Credit Agreement, dated as of February 25, 1998, and amended and restated as of February 23, 1999 (as so amended and restated, the "Credit Agreement"), among the Company, the financial institutions party thereto (each a "Lender," and together the "Lenders"), Chase Bank of Texas, N.A., as Administrative Agent for the Lenders, Citibank, N.A., as Syndication Agent for the Lenders, Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents for the Lenders, and The Chase Manhattan Bank, as Auction Administrative Agent for the Lenders. This opinion is delivered to you pursuant to Section 3.01(e) of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement. The Uniform Commercial Code, as amended and in effect in the State of New York, is referred to herein as the "NY UCC." With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items upon which we have relied. 139 In connection with the opinions expressed herein, we have examined such documents, records and matters of law as we have deemed necessary or appropriate for the purposes of this opinion. We have examined, among other documents, the following: (a) A facsimile of an executed copy of the Credit Agreement; (b) A facsimile of an executed copy of each of the Notes; and (c) A facsimile of the Officer's Certificate of the Company delivered to us in connection with this opinion, a copy of which is attached hereto as Annex A. The documents referred to in items (a) and (b) above are referred to herein collectively as the "Documents." In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Documents and certificates and oral or written statements and other information of or from representatives of the Company and others and assume compliance on the part of all parties to the Documents with their covenants and agreements contained therein. With respect to the opinions expressed in paragraph (a) below, our opinions are limited (x) to our actual knowledge of the Company's specially regulated business activities and properties based solely upon an officer's certificate in respect of such matters and without any independent investigation or verification on our part and (y) to our review of only those laws and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Documents. To the extent it may be relevant to the opinions expressed herein, we have assumed that the parties to the Documents other 140 than the Company have the power to enter into and perform such documents and to consummate the transactions contemplated thereby and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: (a) The execution and delivery to the Administrative Agent and the Lenders by the Company of the Documents and the performance by the Company of its obligations thereunder (i) do not require under present law any filing or registration by the Company with, or approval or consent to the Company of, any governmental agency or authority of the State of New York, except those, if any, required in the ordinary course of business in connection with the performance by the Company of its obligations under certain covenants contained in the Documents and (ii) do not violate any present law, or present regulation of any governmental agency or authority, of the State of New York applicable to the Company or its property. (b) Each of the Documents constitutes an enforceable obligation of the Company in accordance with its terms. (c) The borrowings by the Borrower under the Credit Agreement and the applications of the proceeds thereof as provided in the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following qualifications: (A) We express no opinion as to: (i) the effect of any law of any jurisdiction other than the State of New York wherein the Administrative Agent or any Lender may be located or wherein enforcement of any document referred to above may be sought that limits the rates of interest legally chargeable or collectible; and 141 (ii) any filing, registration, approval or consent of the Federal Energy Regulatory Commission or any other United States federal agency or authority needed in connection with the execution, delivery and performance by the Company of the Documents, the consummation of the transactions contemplated thereby and compliance with the terms and conditions thereof. (B) Our opinions above are subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, voidable preference, moratorium or similar laws, and related judicial doctrines, from time to time in effect affecting creditors' rights and remedies generally, (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses and limits on the availability of equitable remedies), whether such principles are considered in a proceeding at law or in equity and (iii) the qualification that certain other provisions of the Documents may be unenforceable in whole or in part under the laws (including judicial decisions) of the State of New York or the United States of America, but the inclusion of such provisions does not affect the validity as against the Company of the Documents as a whole, and the Documents contain adequate provisions for enforcing payment of the obligations governed thereby, subject to the other qualifications contained in this letter. (C) We express no opinion as to the enforceability of any provision in the Documents: (i) permitting the Administrative Agent, any Lender or any other person or entity to enforce any right or remedy thereunder, except in compliance with the NY UCC and other applicable federal, state, local and foreign laws; or (ii) relating to indemnification, contribution or exculpation in connection with violations of any securities laws or statutory duties or public policy, or in connection with willful, reckless or unlawful acts or gross negligence of the indemnified or exculpated party or the party receiving contribution; or 142 (iii) relating to exculpation of any party in connection with its own negligence that a court would determine in the circumstances under applicable law to be unfair or insufficiently explicit; or (iv) providing that any Lender or other person or entity may exercise set-off rights other than in accordance with and pursuant to applicable law; or (v) relating to forum selection to the extent the forum is a federal court; or (vi) relating to forum selection to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of New York; or (vii) relating to choice of governing law to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of New York; or (viii) specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of such Documents; or (ix) giving any person or entity the power to accelerate obligations without any notice to the obligor. (D) Our opinions as to enforceability are subject to the effect of generally applicable rules of law that: (i) provide that forum selection clauses in contracts are not necessarily binding on the court(s) in the forum selected; and (ii) limit the availability of a remedy under certain circumstances when another remedy has been elected; and (iii) may, where less than all of a contract may be unenforceable, limit the enforceability of the balance of 143 the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange; and (iv) govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys' fees and other costs. (E) We express no opinion as to the enforceability of any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "Waiver") by the Company under any of the Documents to the extent limited by provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under applicable law (including judicial decisions). (F) For purposes of our opinions above, insofar as they relate to the Company, we have assumed that (i) the Company is a corporation validly existing in good standing in its jurisdiction of incorporation, has all requisite power and authority, and has obtained all requisite corporate, shareholder, third party and governmental authorizations, consents and approvals, and made all requisite filings and registrations, necessary to execute, deliver and perform the Documents (except to the extent noted in paragraph (a) above), and that such execution, delivery and performance will not violate or conflict with any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to it or its properties (except to the extent noted in paragraph (a) above, and (ii) the Documents have been duly executed and delivered by the Company. (G) For purposes of the opinions set forth in paragraph (c) above, we have assumed that (i) neither the Administrative Agent nor any of the Lenders has or will have the benefit of any agreement or arrangement (excluding the Documents) pursuant to which any Advances are directly or indirectly secured by Margin Stock, (ii) neither the Administrative Agent nor any of the Lenders nor any of their respective affiliates has extended or will extend any other credit to the Company directly or indirectly secured by Margin Stock and (iii) neither the 144 Administrative Agent nor any of the Lenders has relied or will rely upon any Margin Stock as collateral in extending or maintaining any Advances pursuant to the Credit Agreement. We express no opinion as to the effect of the compliance or noncompliance of each of the addressees with any state or federal laws or regulations applicable to each of them by reason of their status as or affiliation with a federally insured depository institution, except as expressly set forth in paragraph (c) above. The opinions expressed herein are limited to the federal laws of the United States of America (in the case of the matters covered in paragraph (c) above) and the laws of the State of New York (in the case of the matters covered in paragraphs (a) and (b) above), as currently in effect. Our opinions are limited to those expressly set forth herein, and we express no opinions by implication. The opinions expressed herein are solely for the benefit of the Administrative Agent and the Lenders and may not be relied on in any manner or for any purpose by any other person or entity. Very truly yours, JONES, DAY, REAVIS & POGUE 145 EXHIBIT J FORM OF DESIGNATION AGREEMENT Dated ___________ Reference is made to the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of February 23, 1999 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, being the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), Chase Bank of Texas, N.A., as Administrative Agent for the Lenders (the "ADMINISTRATIVE AGENT"), The Chase Manhattan Bank, as Auction Administrative Agent, Citibank, N.A., as Syndication Agent for the Lenders, and Bank of America National Trust and Savings Association and BankBoston, N.A., as Documentation Agents. Terms defined in the Credit Agreement are used herein with the same meaning. ______________ (the "DESIGNATOR"), ____________ (the "DESIGNEE"), and Burlington Resources Inc., a Delaware corporation (the "BORROWER"), agree as follows: 1. The Designator designates the Designee, and the Designee hereby accepts such designation, to have a right to make B Advances pursuant to Section 2.19 of the Credit Agreement. 2. The Designator makes no representations or warranties and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto and (ii) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other 146 documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Designator or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a Designated Bidder; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) specifies as its Applicable Lending Office with respect to B Advances (and address for notices) the offices set forth beneath its name on the signature pages hereof. 4. Following the execution of this Designation Agreement by the Designator, the Designee and the Borrower, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Designation Agreement shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on the signature page hereto (the "EFFECTIVE DATE"). 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make B Advances as a Lender pursuant to Section 2.19 of the Credit Agreement and the rights and obligations of a Lender related thereto. 6. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Designation Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. Effective Date:(2) _______________, 19___ - ------------------------- (2) This date should be no earlier than the date of acceptance by the Administrative Agent. 147 [NAME OF DESIGNATOR] By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- [NAME OF DESIGNEE] By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Applicable Lending Office (and addresses for notices) [Address BURLINGTON RESOURCES INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Accepted and Approved this ____ day of ___________, 19__ CHASE BANK OF TEXAS, N.A., as Administrative Agent By: -------------------------------- Name: Title: EX-10.23 5 LONG-TERM REVOLVING CREDIT AGREEMENT 1 CONFORMED COPY - ------------------------------------------------------------------------------- BURLINGTON RESOURCES INC. --------------------------------- $600,000,000 LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 --------------------------------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent CITIBANK, N.A., as Syndication Agent CHASE BANK OF TEXAS, N.A. as Co-Documentation Agent NATIONSBANK OF TEXAS, N.A., as Co-Documentation Agent 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms.............................................................1 SECTION 1.02. Computation of Time Periods......................................................16 SECTION 1.03. Accounting and Other Terms.......................................................16 SECTION 1.04. References.......................................................................16 ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances...................................................................17 SECTION 2.02. Making the A Advances............................................................17 SECTION 2.03. Fees.............................................................................19 SECTION 2.04. Reduction of the Commitments.....................................................19 SECTION 2.05. Repayment of A Advances..........................................................20 SECTION 2.06. Interest on A Advances...........................................................20 SECTION 2.07. Additional Interest on Eurodollar Rate Advances..................................21 SECTION 2.08. Interest Rate Determination......................................................21 SECTION 2.09. Voluntary Conversion of A Advances...............................................23 SECTION 2.10. Prepayments......................................................................23 SECTION 2.11. Increased Costs..................................................................24 SECTION 2.12. Increased Capital................................................................25 SECTION 2.13. Illegality.......................................................................26 SECTION 2.14. Payments and Computations........................................................26 SECTION 2.15. Taxes............................................................................28 SECTION 2.16. Sharing of Payments, Etc.........................................................30 SECTION 2.17. Evidence of Debt.................................................................31 SECTION 2.18. Use of Proceeds..................................................................31 SECTION 2.19. The B Advances...................................................................31 SECTION 2.20. Increase of Commitments..........................................................35 SECTION 2.21. Extension of Stated Termination Date.............................................37 SECTION 2.22. Replacement of Lenders...........................................................39 ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement..........................40 SECTION 3.02. Conditions Precedent to Each A Borrowing.........................................41 SECTION 3.03. Conditions Precedent to Each B Borrowing.........................................42
i 3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower...................................42 ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants............................................................45 SECTION 5.02. Negative Covenants...............................................................47 SECTION 5.03. Reporting Requirements...........................................................51 ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. Events of Default................................................................53 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action.........................................................57 SECTION 7.02. Administrative Agent's Reliance, Etc.............................................57 SECTION 7.03. Morgan and Affiliates............................................................58 SECTION 7.04. Lender Credit Decision...........................................................58 SECTION 7.05. Indemnification..................................................................58 SECTION 7.06. Successor Administrative Agent...................................................59 ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc..................................................................60 SECTION 8.02. Notices, Etc.....................................................................60 SECTION 8.03. No Waiver; Remedies..............................................................61 SECTION 8.04. Costs and Expenses; Indemnity....................................................61 SECTION 8.05. Right of Set-off.................................................................63 SECTION 8.06. Binding Effect...................................................................63 SECTION 8.07. Assignments and Participations...................................................63 SECTION 8.08. Confidentiality..................................................................68 SECTION 8.09. Consent to Jurisdiction..........................................................68 SECTION 8.10. Governing Law....................................................................69 SECTION 8.11. Execution in Counterparts........................................................69 SECTION 8.12. WAIVER OF JURY TRIAL.............................................................69
ii 4 Schedule I -- Material Subsidiaries Schedule II -- Pricing Grid Exhibit A Form of Note Exhibit B Form of Notice of A Borrowing Exhibit C Form of Notice of B Borrowing Exhibit D Form of Assignment and Acceptance Exhibit E Form of New Lender Agreement Exhibit F Form of Commitment Increase Agreement Exhibit G Form of Extension Request Exhibit H Form of Opinion of Senior Vice President, Law for Borrower Exhibit I Form of Opinion of Jones, Day, Reavis & Pogue, New York Counsel for Borrower Exhibit J Form of Opinion of Counsel for Administrative Agent Exhibit K Form of Designation Agreement iii 5 LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Initial Lenders") listed on the signature pages hereof, Morgan Guaranty Trust Company of New York, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders hereunder, Citibank, N.A., as syndication agent for the Lenders (in such capacity, the "Syndication Agent"), and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as co-documentation agents for the Lenders (in such capacity, individually, a "Co-Documentation Agent" and, collectively, the "Co-Documentation Agents"), agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Lender to the Borrower as part of an A Borrowing, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "TYPE" of A Advance). "A BORROWING" means a borrowing consisting of A Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, it being understood that there may be more than one A Borrowing on a particular day. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender. "ADVANCE" means an A Advance or a B Advance. 6 "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "CONTROLS" (including the terms "CONTROLLED BY" or "UNDER COMMON CONTROL WITH") means, with respect to any Person, the possession, direct or indirect, of the power to vote 10% or more (or in the case of an "AFFILIATE" of any Lender, 5% or more) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. Neither a director nor an officer of the Borrower, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. "AGREEMENT" means this Long-Term Revolving Credit Agreement, together with all exhibits and schedules hereto, as may be amended or otherwise modified from time to time pursuant to the terms hereof. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) in the case of an A Advance, such Lender's Domestic Lending Office in respect of Base Rate Advances and such Lender's Eurodollar Lending Office in respect of Eurodollar Rate Advances and (ii) in the case of a B Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such B Advance. "ARRANGER" means J.P. Morgan Securities Inc. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender (other than a Designated Bidder) and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "B ADVANCE" means an advance by a Lender to the Borrower as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.19. "B BORROWING" means a borrowing consisting of simultaneous B Advances to the Borrower from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Borrower under the auction bidding procedure described in Section 2.19, it being understood that there may be more than one B Borrowing on a particular day. "B REDUCTION" has the meaning specified in Section 2.01. 2 7 "BASE RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) The rate of interest announced publicly by the Administrative Agent in the United States with respect to loans made in the United States, from time to time, as the Administrative Agent's base or prime rate as in effect for such day; and (ii) 0.50% per annum above the Effective Federal Funds Rate for such day. "BASE RATE ADVANCE" means an A Advance which bears interest as provided in Section 2.06(a)(i). "BORROWING" means an A Borrowing or a B Borrowing. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "BUSINESS ENTITY" means a partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. "CAPITALIZATION" means the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries, plus (ii) the aggregate amount of Guaranties by the Borrower or its consolidated Subsidiaries, plus (iii) the sum of the preferred stock and common stockholders' equity of the Borrower, plus (iv) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997 (but excluding any such amount with respect to assets of Project Finance Subsidiaries), minus (v) to the extent otherwise included in determining the amounts computed under clause (iii) above, the aggregate investment (net of any Project Financing) of the Borrower and its consolidated Subsidiaries in Project Finance Subsidiaries. "CLAM" means CLAM Petroleum B.V., a Netherlands company, and CLAM's successors. "CLAM CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of July 25, 1985, among MaraLou Netherlands Partnership, CLAM, the banks parties thereto and Morgan, as agent for such banks, as 3 8 amended and restated as of August 15, 1997, or any successor credit agreement entered into for the purpose of refinancing such Amended and Restated Credit Agreement, in each case, as amended, restated, extended or otherwise modified from time to time. "COMMITMENT" has the meaning specified in Section 2.01. "COMMITMENT EXPIRATION DATE" has the meaning specified in Section 2.21(a). "COMMITMENT INCREASE NOTICE" has the meaning specified in Section 2.20(a). "COMMITMENT INCREASE AGREEMENT" has the meaning specified in Section 2.20(c). "COMMITMENT PERCENTAGE" means as to any Lender at any time, the percentage that such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "CONSOLIDATED TANGIBLE NET WORTH" means, on a consolidated basis, the excess of (i) the sum of (x) the preferred stock and common stockholders' equity of the Borrower and (y) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997, over (ii) the intangible assets of the Borrower and its consolidated Subsidiaries. "CONTINGENT GUARANTY" has the meaning specified in the definition of the term "Guaranty" contained in this Section 1.01. "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of A Advances of one Type into A Advances of another Type pursuant to Section 2.08, 2.09 or 2.13. "DEBT" of any Person means, without duplication (i) indebtedness of such Person for borrowed money, (ii) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion) to pay the deferred purchase price of property or services, (iii) obligations of such Person as lessee under leases which shall have 4 9 been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (iv) Overdue Reimbursement Obligations; provided, however, that where any such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties, which are not the Borrower or any of its consolidated Subsidiaries, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof, and provided, further, that the following shall not at any time constitute Debt: (1) obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not Overdue Reimbursement Obligations, (2) Project Financing, (3) the Morgan Gold Loans unless, at such time, for any reason whatsoever, (A) no royalty income shall have accrued under the Royalty Agreement dated as of December 5, 1984 between Copper Range Company, a Michigan corporation, and LL&E during the three consecutive fiscal quarters of LL&E most recently ended prior to such time or (B) any payment required to have been made to LL&E under such agreement prior to such time shall not have been paid on, or within 30 days after, the date such payment is due and (4) amounts borrowed by the Borrower and its Subsidiaries under life insurance policies issued to one or more of the foregoing and covering employees or former employees of one or more of the foregoing not in excess of the cash surrender value of such policies. "DESIGNATED BIDDER" means (i) an Affiliate of a Lender or (ii) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" by Moody's or "A-1" by S&P or a comparable rating from the successor of either of them, that, in the case of either clause (i) or (ii) above, (1) is organized under the laws of the United States or any state thereof, (2) shall have become a party hereto pursuant to subsections (e), (f) and (g) of Section 8.07, and (3) is not otherwise a Lender. Notwithstanding the foregoing, each Designated Bidder shall be subject to the written consent of the Borrower and the Administrative Agent, such consent not to be unreasonably withheld. "DESIGNATION AGREEMENT" means a designation agreement entered into by the Borrower, a Lender (other than a Designated Bidder) and a Designated Bidder, and accepted by the Administrative Agent, in substantially the form of Exhibit K hereto. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" in its Administrative Questionnaire, or in the Assignment and Acceptance or New Lender Agreement 5 10 pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EFFECTIVE DATE" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied (or compliance therewith shall have been waived by the Lenders), which date the Administrative Agent will promptly confirm to the Borrower and the Lenders in writing. "EFFECTIVE FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 8.07, any bank or other financial institution approved in writing by the Borrower expressly with respect to such assignment and, except as to such an assignment by Morgan so long as Morgan is the Administrative Agent hereunder, the Administrative Agent as an Eligible Assignee for purposes of this Agreement, provided that neither the Administrative Agent's nor the Borrower's approval shall be unreasonably withheld, and provided further that no such approval shall be necessary if (i) the assignee is an Affiliate of the assigning Lender and such assignment constitutes 100% of the assigning Lender's Commitment, the A Advances owing to it and the Note or Notes held by it, (ii) the assignee was a Lender immediately prior to such assignment or (iii) if an Event of Default shall then be continuing. "EQUITY INTERESTS" means any capital stock, partnership, joint venture, member or limited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. "ERISA AFFILIATE" means any Person who is a member of the Borrower's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. 6 11 "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" in its Administrative Questionnaire or in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such A Borrowing and for a period equal to such Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "EURODOLLAR RATE ADVANCE" means an A Advance which bears interest determined by reference to the Eurodollar Rate, as provided in Section 2.06(a)(ii). "EURODOLLAR RATE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labelled "LIBOR Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "EURODOLLAR RESERVE PERCENTAGE" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including any emergency, 7 12 supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXISTING AGREEMENT" means the Second and Amended Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 among the Borrower, the Lenders parties thereto and Citibank, N.A., as Agent, as amended. "EXTENSION REQUEST" means each request by the Borrower made pursuant to Section 2.21 for the Lenders to extend the Stated Termination Date, which shall contain the information in respect of such extension specified in Exhibit G and shall be delivered to the Administrative Agent in writing. "FACILITY FEE PERCENTAGE" means for any date the percentage per annum applicable on such date as set forth in the row labelled "Facility Fee" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "GUARANTY", "GUARANTEED" and "GUARANTEEING" each means any act by which a Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Borrower or any of its consolidated Subsidiaries (excluding (i) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) any liability in connection with obligations of the Borrower or any of its consolidated Subsidiaries, including obligations under any conditional sales agreement, equipment trust financing or equipment lease, (iii) any liability or other act of the Borrower or any of its Subsidiaries under arrangements entered into in connection with the CLAM Credit Agreement, and (iv) any such act in connection with a Project Financing that either (A) guarantees to the provider of such Project Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is a direct guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (B) below) or (B) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence or existence of any event or condition other than or in addition to (1) the passage of time, (2) any 8 13 Project Financing becoming due, (3) the commencement of bankruptcy, insolvency or similar proceedings by the obligor on any Project Financing or (4) the failure of the obligor on any Project Financing to satisfy a financial ratio, covenant or other similar financial measurement test, but only during such period as such act is not by its terms presently enforceable, or if so enforceable, there is not a reasonable probability that the guarantor will be called upon to perform thereunder (or to make capital contributions in lieu of performance thereunder) (any such act referred to in this clause (iv) being a "CONTINGENT GUARANTY")); provided, however, that for the purposes of this definition the liability of the Borrower or any of its Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. "INDEMNIFIED PARTY" means any or all of the Lenders, the Arranger and the Administrative Agent. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same A Borrowing, the period beginning on the date of such Advance or the date of the Conversion of any Advance into such Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period for a Eurodollar Rate Advance shall be (i) one, two, three or six months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period, or (ii) subject to availability to each Lender, nine or twelve months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the fourth Business Day prior to the first day of such Interest Period, in each case as the Borrower may select; provided, however, that: (A) the duration of any Interest Period which commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date; (B) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; 9 14 (C) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and (D) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (A) above, end on the last Business Day of a calendar month. "LENDERS" means the Initial Lenders, each bank or other financial institution that shall become a party hereto pursuant to Section 2.20, each Eligible Assignee that shall become a party hereto pursuant to Section 8.07(a), (b) and (d) and, except when used in reference to an A Advance, an A Borrowing, a Commitment or a term related to any of the foregoing, each Designated Bidder. "LIEN" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Debt or any Guaranty of any Person; provided that (i) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest", farmouts, joint operating or unitization agreements, or other similar transactions in the ordinary course of business and (ii) borrowings under life insurance policies as described in clause (4) of the proviso to the definition of "Debt" shall not be deemed to create a Lien. "LL&E" means The Louisiana Land and Exploration Company, a Maryland corporation and a wholly-owned Subsidiary of the Borrower. "MAJORITY LENDERS" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the Notes held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "MARGIN STOCK" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition or operations of the Borrower and its consolidated Subsidiaries on a consolidated basis. 10 15 "MATERIAL PLAN" means any Plan the assets of which exceed $50,000,000 or the liabilities of which for unfunded vested benefits determined on a plan termination basis (in accordance with Title IV of ERISA) exceed $10,000,000. "MATERIAL SUBSIDIARY" means, from time to time, any Subsidiary of the Borrower (other than a Project Financing Subsidiary) then owning assets (determined on a consolidated basis) that equal or exceed 10% of the book value of the consolidated assets of the Borrower and its consolidated Subsidiaries at such time. "MOODY'S" means Moody's Investors Service. "MORGAN" means Morgan Guaranty Trust Company of New York, and its successors. "MORGAN GOLD LOANS" means the obligations of LL&E under the respective Credit Agreements dated as of December 23, 1994 and March 31, 1995 between LL&E and Morgan, or under any amended or additional credit agreements on substantially similar terms, provided that the aggregate outstanding amount borrowed thereunder shall at no time exceed 35,000 ounces of gold. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NEW LENDER" has the meaning specified in Section 2.20(b). "NEW LENDER AGREEMENT" has the meaning specified in Section 2.20(b). "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. 11 16 "NOTICE OF A BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF B BORROWING" has the meaning specified in Section 2.19(a). "OBJECTING LENDERS" has the meaning specified in Section 2.21(a). "OFFERED INCREASE AMOUNT" has the meaning specified in Section 2.20(a). "ORIGINAL EFFECTIVE DATE" means February 25, 1998. "OVERDUE REIMBURSEMENT OBLIGATIONS" means with respect to any Person non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not paid on or prior to the fifth Business Day after the due date therefor. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED ASSETS" means (i) hydrocarbon or other reserves (including proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) Equity Interests in any and all Business Entities that are or become Subsidiaries of the Borrower owning assets referred to in any of the foregoing clauses. "PERMITTED LIENS" means (i) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Borrower or any Subsidiary of the Borrower; (ii) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (iii) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; 12 17 (iv) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions which do not materially interfere with the operation, value or use of the properties affected thereby; (v) conventional provisions contained in any contracts or agreements affecting properties under which the Borrower or a Subsidiary of the Borrower is required immediately before the expiration, termination or abandonment of a particular property to reassign to the Borrower's or a Subsidiary's predecessor in title all or a portion of the Borrower's or such Subsidiary's rights, titles and interests in and to all or a portion of such property; (vi) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Borrower or any of its Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Borrower or such Subsidiary in such grant or conveyance; (vii) any Lien consisting of (A) statutory landlord's liens under leases to which the Borrower or any Subsidiary of the Borrower is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Borrower or any of its Subsidiaries or to use such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Borrower or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (viii) Liens on Equity Interests in, or Debt or other obligations of, CLAM owned by the Borrower or any of its Subsidiaries, which Liens secure Debt of CLAM; and (ix) any Lien on any assets (including Equity Interests and other obligations) securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 360 days after the acquisition or completion of development, construction or installation thereof or improvement thereto. 13 18 "PERSON" means an individual, a Business Entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PROJECT FINANCING" means any Debt incurred to finance or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Debt or Guaranty permitting or providing for recourse against the Borrower or any of its Subsidiaries other than (i) recourse to the Equity Interests in, Debt or other obligations of, or assets of, one or more Project Financing Subsidiaries, and (ii) such recourse as exists under any Contingent Guaranty. "PROJECT FINANCING SUBSIDIARY" means any Subsidiary of the Borrower whose principal purpose is to incur Project Financing, or to become a direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or Debt or other obligations of, one or more other such Subsidiaries or Business Entities. "RE-ALLOCATION DATE" has the meaning specified in Section 2.20(e). "REFERENCE BANKS" means Chase Bank of Texas, N.A., Morgan and Citibank, N.A. "REGISTER" has the meaning specified in Section 8.07(c). "REQUIRED LENDERS" means Lenders (i) that are not Objecting Lenders with respect to any previous Extension Request and (ii) that have Commitment Percentages aggregating at least 51% of the aggregate Commitment Percentages of such non-Objecting Lenders. "S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill, Inc. on the date hereof. "SHORT-TERM REVOLVING CREDIT AGREEMENT" means the Short-Term Revolving Credit Agreement dated as of February 25, 1998 among the Borrower, the financial institutions party thereto, Morgan, as administrative agent for such financial institutions, Citibank, N.A., as syndication agent for such financial 14 19 institutions, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as co-documentation agents for such financial institutions. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "STATED TERMINATION DATE" means February 24, 2003, or such later date as shall be determined pursuant to the provisions of Section 2.21 with respect to non-Objecting Lenders provided that if such date is not a Business Day, the Stated Termination Date shall be the next preceding Business Day. "SUBSIDIARY" means, as to any Person, any Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "TERMINATION DATE" means the earlier of (i) the Stated Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of the Borrower or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or (vii) any other event or condition 15 20 which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TYPE" has the meaning specified in the definition of "A Advance". "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.3. Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles either (i) consistent with those principles applied in the preparation of the annual financial statements referred to in Section 4.01(e), or (ii) not so materially inconsistent with such principles that a covenant contained in Section 5.01 or 5.02 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (i) of this Section 1.03. "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. SECTION 1.4. References. The words "HEREOF", "HEREIN" and "HEREUNDER" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.1. The A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the date hereof to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender's name on the signature pages hereof under the caption "COMMITMENTS", or, if such Lender has entered into any Assignment and Acceptance or Commitment Increase Agreement 16 21 or a New Lender Agreement, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "COMMITMENT"), provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the B Advances then outstanding and such deemed use of the aggregate amount of such Commitments shall be applied to all the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B REDUCTION"). Each A Borrowing shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof (or, in the case of an A Borrowing of Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may make more than one Borrowing on any Business Day and may borrow, prepay pursuant to Section 2.10, and reborrow under this Section 2.01. SECTION 2.2. Making the A Advances. (a) Each A Borrowing shall be made on notice by the Borrower to the Administrative Agent (a "NOTICE OF A BORROWING") received by the Administrative Agent, (i) in the case of a proposed A Borrowing comprised of Base Rate Advances, not later than 10:00 A.M. (New York City time) on the Business Day of such proposed A Borrowing, and (ii) in the case of a proposed A Borrowing comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed A Borrowing. Each Notice of A Borrowing shall be by telecopy, telefax or other teletransmission or by telephone (and if by telephone, confirmed promptly by telecopier, telefax or other teletransmission), in substantially the form of Exhibit B hereto, specifying therein the requested (w) date of such A Borrowing, (x) Type of A Advances comprising such A Borrowing, (y) aggregate amount of such A Borrowing, and (z) in the case of an A Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such A Advance. Each Lender shall, before 1:00 p.m. (New York City time) on the date of such A Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at its address at Morgan, 60 Wall Street, 22nd Floor, New York, New York 10260, Reference: Burlington Resources Inc., or at such other location designated by notice from the Administrative Agent to the Lenders pursuant to Section 8.02, in same day funds, such Lender's ratable portion of such A Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the 17 22 applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at Morgan, 60 Wall Street, 22nd Floor, New York, New York 10260, or at any account of the Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b Each Notice of A Borrowing shall be irrevocable and binding on the Borrower. In the case of any A Borrowing which the related Notice of A Borrowing specified is to be comprised of Eurodollar Rate Advances, if such A Advances are not made as a result of any failure to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article 3, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of such failure, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing. (c Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such A Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance to the Borrower as part of such A Borrowing for purposes of this Agreement. (d The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. 18 23 SECTION 2.3. Fees. (a FACILITY FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Designated Bidder) a facility fee on the average daily amount of such Lender's Commitment, whether or not used or deemed used, from the date hereof in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender in the case of each other Lender, in each case until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment and on the Termination Date, at a rate per annum equal to the Facility Fee Percentage in effect from time to time. (b AGENCY FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, such agency fees as may be separately agreed to in writing by the Borrower and the Administrative Agent, such fees to be in the amounts and payable on the dates as may be so agreed to. (c ARRANGEMENT FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, an arrangement fee in the amount and payable on the date separately agreed to in writing by the Administrative Agent and the Borrower. SECTION 2.4. Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the Commitments of the Lenders (being the amount by which such Commitments exceed the aggregate outstanding principal amount of all Advances), provided that each partial reduction shall be in the aggregate amount of $20,000,000 or any whole multiple of $1,000,000 in excess thereof. SECTION 2.5. Repayment of A Advances. The Borrower shall repay to each Lender on the Termination Date the aggregate principal amount of the A Advances, together with accrued interest thereon, then owing to such Lender. SECTION 2.6. Interest on A Advances. (a ORDINARY INTEREST. The Borrower shall pay interest on the unpaid principal amount of each A Advance owing to each Lender from the date of such A Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i BASE RATE ADVANCES. During such periods as such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly in arrears on 19 24 the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). (ii Eurodollar Rate Advances. During such periods as such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such A Advance to the sum of the Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such A Advance is Converted into a Base Rate Advance on any date other than the last day of any Interest Period for such A Advance, on the date of such Conversion or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the applicable Lender of the amount of unpaid interest accrued on such A Advances to the date of such Conversion. (b DEFAULT INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such A Advance immediately prior to the date on which such amount became due and (ii) from and after the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, and at all times in the case of each Base Rate Advance or B Advance, to 1% per annum above the Base Rate in effect from time to time. SECTION 2.7. Additional Interest on Eurodollar Rate Advances. If any Lender shall determine in good faith that reserves under regulations of the Board of Governors of the Federal Reserve System are required to be maintained by it in respect of, or a portion of its costs of maintaining reserves under such regulations is properly attributable to, one or more of its Eurodollar Rate Advances, the Borrower shall pay to such Lender additional interest on the unpaid principal amount of each such Eurodollar Rate Advance payable on the same day or days on which interest is payable on such A Advance, at an interest rate per annum up to but not exceeding at all times during each Interest Period for such A Advance the excess of (i) the rate obtained by dividing the Eurodollar Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such Interest Period over (ii) the Eurodollar Rate for such Interest Period. Any Lender wishing to require payment of such additional 20 25 interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Eurodollar Rate Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least five Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Business Days prior to each date on which interest is payable on the Eurodollar Rate Advances an officer's certificate setting forth the amount to which such Lender is then entitled under this Section, which certificate shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.8. Interest Rate Determination. (a Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (b The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i) or (ii), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(a)(ii). (c If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any applicable A Advances, (i the Administrative Agent shall give the Borrower and each Lender prompt notice by telephone (confirmed in writing) that the interest rate cannot be determined for such applicable A Advances, (ii each such A Advance that is a Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such A Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii the obligations of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. 21 26 (d If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that as a result of conditions in or generally affecting the relevant market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon, (i each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Eurodollar Rate Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (f On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such A Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such A Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be, or be elected to be Converted to, Eurodollar Rate Advances having the same Interest Period as Eurodollar Rate Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall, or upon such Conversion will, equal or exceed $20,000,000, the Borrower shall have the right to continue all such Eurodollar Rate Advances as, or to Convert all such A Advances into, Eurodollar Rate Advances having such Interest Period. SECTION 2.9. Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion, and subject to the provisions of Section 2.08, 2.11 22 27 and 2.13, Convert all A Advances of one Type comprising the same A Borrowing into A Advances of the other Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 8.04(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the A Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the Interest Period for each such Eurodollar Rate Advance. SECTION 2.10. Prepayments. The Borrower may, upon (i) in the case of Eurodollar Rate Advances, at least three Business Days notice or (ii) in the case of Base Rate Advances, telephonic notice not later than 12:00 noon (New York City time) on the date of prepayment, to the Administrative Agent which specifies the proposed date and aggregate principal amount of the prepayment and the Type of A Advances to be prepaid, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the A Advances comprising the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 8.04(b); provided, further, however, that the Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. SECTION 2.11. Increased Costs. (a If, due to either (i) the introduction after the date of this Agreement of or any change after the date of this Agreement (including any change by way of imposition or increase of reserve requirements or assessments other than those referred to in the definition of "Eurodollar Reserve Percentage" contained in Section 1.01) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request issued or made after the date of this Agreement from or by any central bank or other governmental authority (whether or not having the force of law), in each case above other than those referred to in Section 2.12, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining, Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to 23 28 the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.11(a) (except as otherwise expressly provided above in this Section 2.11(a)). A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Borrower of any increased costs pursuant to this Section 2.11, the Borrower may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of a Eurodollar Rate Advance by the Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to the A Advances of such Lender or Lenders during such Interest Period or portion thereof, and, in lieu thereof, such A Advances shall during such Interest Period or portion thereof be Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an Affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrower under this Section 2.11, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (b In the event that any Lender shall change its Eurodollar Lending Office and such change results (at the time of such change) in increased costs to such Lender, the Borrower shall not be liable to such Lender for such increased costs incurred by such Lender to the extent, but only to the extent, that such increased costs shall exceed the increased costs which such Lender would have incurred if the Eurodollar Lending Office of such Lender had not been so changed, but, subject to subsection (a) of this Section 2.11 and to Section 2.13, nothing herein shall require any Lender to change its Eurodollar Lending Office for any reason. SECTION 2.12. Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and such Lender determines that the 24 29 amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Borrower of the certificate referred to in the last sentence of this Section 2.12 by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.12 (except as otherwise expressly provided above in this Section 2.12). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Borrower and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.13. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Applicable Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Borrower and the Administrative Agent, suspend the right of the Borrower to elect Eurodollar Rate Advances from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Convert all such Eurodollar Rate Advances of such Lender to Base Rate Advances at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Conversion shall continue until such Lender notifies the Borrower and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances has been suspended under this Section 2.13, all Notices of A Borrowing specifying A Advances of such Type shall be deemed, as to such Lender, to be requests for Base Rate Advances. Each Lender agrees to use its best 25 30 reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an affiliate) to avoid any such illegality, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.14. Payments and Computations. (a The Borrower shall make each payment hereunder (including under Section 2.03, 2.05 or 2.06) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 1:00 P.M. (New York City time) without setoff, counterclaim, or any other deduction whatsoever, on the day when due in U.S. dollars to the Administrative Agent at Morgan, 60 Wall Street, 22nd Floor, New York, New York 10260, Reference: Burlington Resources Inc., or at such other location designated by notice to the Borrower from the Administrative Agent and agreed to by the Borrower, in same day funds. Each such payment made by the Borrower for the account of any Lender hereunder, when so made to the Administrative Agent, shall be deemed duly made for all purposes of this Agreement and the Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the bankruptcy, insolvency or reorganization of the Borrower or otherwise, such payment shall be deemed not to have been so made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b All computations of interest based on the Base Rate and of facility fees shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, or the Effective Federal Funds Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by each Lender with respect to its own Eurodollar Rate Advances, 26 31 on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b), by each Lender with respect to its own Advances) of an interest rate or an increased cost, loss or expense or increased capital or of illegality or taxes hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. (c Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fees, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Effective Federal Funds Rate for such day. SECTION 2.15. Taxes. (a Any and all payments by the Borrower hereunder or under the Notes shall be made in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding in the case of each Indemnified Party, (i) all taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, imposed on or determined by reference to its income or profits, and all franchise taxes, and (ii) all other taxes, levies, imposts, deductions, charges, or withholdings in effect at the time that such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, and liabilities with respect thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, 27 32 domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower (or the Administrative Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Borrower (or the Administrative Agent, as applicable) shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Borrower shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this subsection (a) (or pursuant to Section 2.15(c), except to the extent Section 2.15(c) relates to Other Taxes) to any Indemnified Party that either (x) on the date such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, both (A) was not entitled to submit a U.S. Internal Revenue Service form 1001 (relating to such Indemnified Party, and entitling it to a complete exemption from withholding on all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement or the Advances) or a U.S. Internal Revenue Service form 4224 (relating to all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement and the Advances) and (B) is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code), or (y) has failed to submit any form or certificate that it was required to file or provide pursuant to subsection (d) of this Section 2.15 and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Borrower from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations under clauses (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.15. If any Indemnified Party receives a net credit or refund in respect of such Taxes or amounts so paid by the Borrower, it shall promptly notify the Borrower of such net credit or refund and shall promptly pay such net credit or refund to the 28 33 Borrower, provided that the Borrower agrees to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable, is required to repay it. (b In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (c The Borrower will indemnify each Indemnified Party for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to provide to the Borrower any form or certificate that it was required to provide pursuant to subsection (d) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (d On or prior to the date on which each Indemnified Party that is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) executes this Agreement or otherwise becomes an "Indemnified Party" hereunder, such Indemnified Party shall provide the Borrower and the Administrative Agent with U.S. Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Borrower indicating that all payments to be made to such Indemnified Party hereunder are fully exempt from such taxes. Thereafter and from time to time, each such Indemnified Party shall submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by the Borrower to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes, including fees. Upon the request of the Borrower from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Borrower a 29 34 certificate to the effect that it is such a United States person. If any Indemnified Party determines, as a result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Borrower any form or certificate that such Indemnified Party is obligated to submit pursuant to this subsection (d), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Party shall promptly notify the Borrower and the Administrative Agent of such fact. (e Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.15 shall use its best reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (f Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and each Indemnified Party contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder and under the Notes. SECTION 2.16. Sharing of Payments, Etc.. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15 or 8.04(b)) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the amount of the participation purchased from such Lender as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (A) the amount of such Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. 30 35 SECTION 2.17. Evidence of Debt. The indebtedness of the Borrower to each Lender in respect of principal of and interest on the Advances shall be evidenced by a Note payable to the order of such Lender and delivered hereunder by the Borrower. Notwithstanding the provisions of the Notes for notations to be made on the grid attached thereto, any Lender may maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances and payments made from time to time hereunder and under the Note payable to its order. In any legal action or proceeding in respect of this Agreement or such Note, the entries made in such account or accounts shall be conclusive evidence of the existence and amounts of the obligations of the Borrower therein recorded, absent manifest error. SECTION 2.18. Use of Proceeds. Proceeds of the Advances may be used for general corporate purposes of the Borrower and its Subsidiaries, including for acquisitions and for payment of commercial paper issued by the Borrower. SECTION 2.19. The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.19 from time to time on any Business Day during the period from the date hereof until the earlier of (I) the Termination Date or (II) the date falling 30 days prior to the Stated Termination Date, in the manner set forth below; provided that (x) each B Borrowing shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof and (y) following the making of each B Borrowing, the aggregate number of outstanding B Borrowings shall not exceed seven and the aggregate amount of all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction). (i) The Borrower may request a B Borrowing under this Section 2.19 by delivering to the Administrative Agent, by telecopy, telefax or other teletransmission, a notice of a B Borrowing (a "NOTICE OF B BORROWING"), in substantially the form of Exhibit C hereto, specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the earlier of (x) 180 days after the date of such B Borrowing or (y) the Stated Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the 31 36 Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of B Borrowing. (ii) Each Lender may, if in its sole and absolute discretion it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amount may, subject to clause (y) of the proviso to the first sentence of this Section 2.19(a), exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such B Advance; provided that if the Administrative Agent in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer before 9:45 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing. (iii) The Borrower shall, in turn, before 11:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (y) three Business Days before the date of such proposed 32 37 B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either (A) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or (B) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in order of the lowest to highest rates of interest or margins (or, if two or more Lenders bid at the same rates of interest, and the amount of accepted offers is less than the aggregate amount of such offers, the amount to be borrowed from such Lenders as part of such B Borrowing shall be allocated among such Lenders pro rata on the basis of the maximum amount offered by such Lenders at such rates or margin in connection with such B Borrowing), in any aggregate amount up to the aggregate amount initially requested by the Borrower in the relevant Notice of B Borrowing, by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect. (iv) If the Borrower notifies the Administrative Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(B) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing, and (C) each Lender that is to make a B Advance as part of such B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article 3. Each Lender that is to 33 38 make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article 3 and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. Promptly after each B Borrowing the Administrative Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. (b) Within the limits and on the conditions set forth in this Section 2.19, the Borrower may from time to time borrow under this Section 2.19, repay or prepay pursuant to subsection (c) below, and reborrow under this Section 2.19. (c) The Borrower shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a Note, on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment in the related Notice of B Borrowing and provided in the Note evidencing such B Advance), the then unpaid principal amount of such B Advance. The Borrower shall have no right to prepay any B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to Section 2.19(a)(i) and set forth in the Note evidencing such B Advance or unless the holder of such B Advance otherwise consents in writing to such prepayment. (d) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice delivered pursuant to subsection (a)(ii) above on the interest date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing and set forth in the Note evidencing such B Advance, subject to Section 2.06(b) (e) Each time that the Borrower gives a Notice of B Borrowing, the Borrower shall pay to the Administrative Agent for its own account such fee as may be agreed between the Borrower and the Administrative Agent from time to time, whether or not any B Borrowing is in fact made. 34 39 (f) Following the making of each B Borrowing, the Borrower agrees that it will be in compliance with the limitations set forth in clause (y) of the proviso to the first sentence of Section 2.19(a). (g) The failure of any Lender to make the B Advance to be made by it as part of any B Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its B Advance on the date of such B Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the B Advance to be made by such other Lender on the date of any B Borrowing. If any Designated Bidder fails to make the B Advance to be made by it as part of any B Borrowing, such Designated Bidder shall not thereafter have the right to offer to make any B Advance without the prior written consent of the Borrower and the Administrative Agent. SECTION 2.20. Increase of Commitments. (a) At any time after the Effective Date, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an increase of the aggregate Commitments by notice to the Administrative Agent in writing of the amount (the "OFFERED INCREASE AMOUNT") of such proposed increase (such notice, a "COMMITMENT INCREASE NOTICE"). Any such Commitment Increase Notice must offer each Lender the opportunity to subscribe for its pro rata share of the increased Commitments. If any portion of the increased Commitments is not subscribed for by the Lenders, the Borrower may, in its sole discretion, but with the consent of the Administrative Agent as to any Person that is not at such time a Lender (which consent shall not be unreasonably withheld), offer to any existing Lender or to one or more additional banks or financial institutions the opportunity to participate in all or a portion of such unsubscribed portion of the increased Commitments pursuant to paragraph (b) or (c) below, as applicable. (b) Any additional bank or financial institution that the Borrower selects to offer participation in the increased Commitments, and that elects to become a party to this Agreement and obtain a Commitment, shall execute a New Lender Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit E (a "NEW LENDER AGREEMENT"), whereupon such bank or financial institution (a "NEW LENDER") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and the signature pages hereof shall be deemed to be amended to add the name and Commitment of such New Lender, provided that the Commitment of any such New Lender shall be in an amount not less than $10,000,000. 35 40 (c) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant to this Section 2.20 shall, in each case, execute a Commitment Increase Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F (a "COMMITMENT INCREASE AGREEMENT"), whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and the signature pages hereof shall be deemed to be amended to so increase the Commitment of such Lender. (d) The effectiveness of any New Lender Agreement or Commitment Increase Agreement shall be contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrower and legal opinions of counsel to the Borrower as the Administrative Agent shall reasonably request with respect thereto, in each case, in form and substance satisfactory to the Administrative Agent. (e) If any bank or financial institution becomes a New Lender pursuant to Section 2.20(b) or any Lender's Commitment is increased pursuant to Section 2.20(c), additional A Advances made on or after the effectiveness thereof (the "RE-ALLOCATION DATE") shall be made pro rata based on the Commitment Percentages in effect on and after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Lender making an aggregate principal amount of A Advances in excess of its Commitment, in which case such excess amount will be allocated to, and made by, such New Lender and/or Lenders with such increased Commitments to the extent of, and pro rata based on, their respective Commitments), and continuations of Eurodollar Rate Advances outstanding on such Re-Allocation Date shall be effected by repayment of such Eurodollar Rate Advances on the last day of the Interest Period applicable thereto and the making of new Eurodollar Rate Advances pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Base Rate Advances, the Borrower shall make prepayments thereof and borrowings of Base Rate Advances so that, after giving effect thereto, the Base Rate Advances outstanding are held pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Eurodollar Rate Advances, such Eurodollar Rate Advances shall remain outstanding with the respective holders thereof until the expiration of their respective Interest Periods (unless the applicable Borrower elects to prepay any thereof in accordance with the applicable provisions of this Agreement), and interest on and repayments of such Eurodollar Rate Advances will be paid thereon to the respective Lenders holding such Eurodollar Rate Advances pro rata based on the respective principal amounts thereof outstanding. 36 41 (f) Notwithstanding anything to the contrary in this Section 2.20, (i) no increase pursuant to this Section 2.20 shall be effective without the consent of the Required Lenders, (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion and (iii) the aggregate amount by which the Commitments hereunder are increased pursuant to this Section 2.20 shall not exceed $180,000,000. (g) The Borrower shall execute and deliver a Note to each new bank or other financial institution becoming a Lender. SECTION 2.21. Extension of Stated Termination Date. (a) Not later than 45 days prior to the Stated Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an extension of such Stated Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit G, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, no later than 30 days after receiving from the Administrative Agent the applicable Extension Request, notify the Borrower and the Administrative Agent of its election to extend or not extend the Stated Termination Date as requested in such Extension Request. If the Required Lenders shall approve in writing the extension of the Stated Termination Date requested in such Extension Request, the Stated Termination Date shall automatically and without any further action by any Person be extended for the period specified in such Extension Request; provided that (i) each extension pursuant to this Section 2.21 shall be for a maximum of one year, (ii) the Commitment of any Lender that does not consent in writing within 30 days after receiving from the Administrative Agent the applicable Extension Request (an "OBJECTING LENDER") shall, unless earlier terminated in accordance with this Agreement, expire on the Stated Termination Date in effect on the date of such Extension Request (such Stated Termination Date, if any, referred to as the "COMMITMENT EXPIRATION DATE" with respect to such Objecting Lender) and (iii) the Borrower may exercise no more than two extensions pursuant to this Section 2.21, so that the Stated Termination Date shall not in any event extend beyond the second anniversary of the initial Stated Termination Date hereunder. If, within 30 days after receiving from the Administrative Agent the applicable Extension Request, the Required Lenders shall not approve in writing the extension of the Stated Termination Date requested in an Extension Request, the Stated Termination Date shall not be extended pursuant to such Extension Request. The Administrative Agent shall promptly notify (y) the Lenders and the Borrower of any extension of the Stated Termination Date pursuant to this Section 2.21 and (z) the Borrower of any Lender that becomes an Objecting Lender. 37 42 (b) A Advances owing to any Objecting Lender on the Commitment Expiration Date, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or other amounts payable with respect to such Lender shall be repaid in full on or before such Commitment Expiration Date. (c) The Borrower shall have the right, so long as no Event of Default has occurred and is then continuing, upon giving notice to the Administrative Agent and the Objecting Lenders in accordance with Section 2.10, to prepay in full the A Advances of the Objecting Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or other amounts payable to the Objecting Lenders hereunder and, upon giving not less than three Business Days' notice to the Objecting Lenders and the Administrative Agent, to cancel the whole or part of the Commitments of the Objecting Lenders. (d) Notwithstanding the foregoing, if any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in the sole discretion and prior to the then Stated Termination Date, require such Lender (and each related Designated Bidder (as defined herein or in the Short-Term Revolving Credit Agreement)) to transfer or assign, in whole or in part, without recourse (in accordance with Section 8.07), all or part of its interests, rights and obligations under this Agreement and the Short-Term Revolving Credit Agreement to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and the "Advances" made by it under, and as defined in, the Short-Term Revolving Credit Agreement and all other amounts owed to it hereunder and thereunder, including any amounts owing pursuant to Section 8.04(b) (or the comparable provision of the Short-Term Revolving Credit Agreement) and any amounts that would be owing under such Section (or comparable provision) if such Advances and "Advances" (as so defined) were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee that becomes a Lender as a result of such an assignment made pursuant to this paragraph (d) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. 38 43 SECTION 2.22. Replacement of Lenders. If any Lender requests compensation under Sections 2.07, 2.11 or 2.12 or if the Borrower is required to pay any additional amount to any Lender or any taxing authority or other authority for the account of any Lender pursuant to Section 2.15, or if any Lender suspends the right of the Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.13, or if any Lender defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 8.07), all its interests, rights and obligations under this Agreement (other than any outstanding B Advances held by it) and the Short-Term Revolving Credit Agreement (other than "B Advances" under, and as defined in, the Short-Term Revolving Credit Agreement) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than B Advances) hereunder and its "Advances" (other than "B Advances") (each as defined in the Short-Term Revolving Credit Agreement), accrued interest thereon, accrued fees, accrued costs in connection with compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, if any, and all other amounts payable to it hereunder and thereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.1. Conditions Precedent to Effectiveness of this Agreement. This Agreement shall become effective when (i) it shall have been executed by the Borrower and the Administrative Agent, (ii) the Administrative Agent and the Borrower either shall have been notified by each Initial Lender that such Initial Lender has executed it or shall have received a counterpart of this Agreement 39 44 executed by such Initial Lender, and (iii) the Administrative Agent shall have received the following, each dated the date of delivery thereof unless otherwise specified below (which date shall be selected by the Borrower and be the same for all documents and all Lenders), in form and substance satisfactory to the Administrative Agent and (except for the Notes) in sufficient copies for each Lender: (a) The Notes, to the order of the Lenders, respectively. (b) Certified copies of the resolutions of the Board of Directors of the Borrower approving the borrowings contemplated hereby and authorizing the execution of this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes. (c) A certificate of the Secretary or an Assistant Secretary of the Borrower (i) certifying names and true signatures of officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder and (ii) if the Effective Date is other than the date hereof, certifying that the representations and warranties contained in Section 4.01 are true and correct as of the Effective Date. (d) A favorable opinion of the Borrower's Senior Vice President, Law, in substantially the form of Exhibit H hereto. (e) A favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, in substantially the form of Exhibit I hereto. (f) A favorable opinion of Davis Polk & Wardwell, counsel for the Administrative Agent, in substantially the form of Exhibit J hereto. (g) Evidence satisfactory to the Administrative Agent of payment of any loans outstanding under the Existing Agreement, together with all accrued interest and fees thereunder. The Borrower and the Lenders (constituting the "Majority Lenders" as defined in the Existing Agreement) hereby agree that the "Commitments" under the Existing Agreement shall terminate automatically upon the Effective Date without further action by any party to the Existing Agreement. SECTION 3.2. Conditions Precedent to Each A Borrowing. The obligation of each Lender to make an A Advance (including the initial A Advance) on the occasion of any A Borrowing shall be subject to the further conditions precedent 40 45 that on or before the date of such A Borrowing this Agreement shall have become effective pursuant to Section 3.01 and that on the date of such A Borrowing, before and immediately after giving effect to such A Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of A Borrowing and the acceptance by the Borrower of the proceeds of such A Borrowing shall constitute its representation and warranty that on and as of the date of such A Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) Each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) No event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) The aggregate amount of the borrowings under this Agreement (including such A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. SECTION 3.3. Conditions Precedent to Each B Borrowing. The obligation of each Lender which is to make a B Advance on the occasion of any B Borrowing (including the initial B Borrowing) shall be subject to the further conditions precedent that (i) at or before the time required by paragraph (iii) of Section 2.19(a), the Administrative Agent shall have received the written confirmatory notice of such B Borrowing contemplated by such paragraph, (ii) on or before the date of such B Borrowing this Agreement shall have become effective pursuant to Section 3.01, and (iii) on the date of such B Borrowing, before and immediately after giving effect to such B Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute its representation and warranty that on and as of the date of such B Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: 41 46 (a) Each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) No event has occurred and is continuing, or would result from such B Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) The aggregate amount of the borrowings under this Agreement (including such B Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.1. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. The Borrower and each Material Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. Each Subsidiary which is, on and as of the date of this Agreement, a Material Subsidiary is listed on Schedule I hereto. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due 42 47 execution, delivery and performance by the Borrower of this Agreement or the Notes which has not been duly made or obtained, except those (i) required in the ordinary course to comply with ongoing covenant obligations of the Borrower hereunder the performance of which is not yet due and (ii) that will, in the ordinary course of business in accordance with this Agreement, be duly made or obtained on or prior to the time or times the performance of such obligations shall be due. (d) This Agreement constitutes, and the Notes when delivered hereunder shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (e) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 1997 and the related consolidated statements of income and cash flow for the fiscal year then ended, reported on by Coopers & Lybrand, independent public accountants, copies of which have been furnished to the Administrative Agent and the Initial Lenders prior to the date hereof, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at December 31, 1997 and the consolidated results of their operations for such fiscal period, all in accordance with generally accepted accounting principles consistently applied. From December 31, 1997 to and including the Effective Date there has been no material adverse change in such condition or results of operations. (f) As at the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or involving the Borrower or any Material Subsidiary in any court, or before any arbitrator of any kind, or before or by any governmental body, which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) would have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of this Agreement or the Notes. (g) The Borrower and each consolidated Subsidiary have duly filed all tax returns required to be filed, and duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to file or pay which, as applicable, would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Borrower or the appropriate Subsidiary. 43 48 (h) Except to the extent permitted pursuant to Section 5.02(e), neither the Borrower nor any Material Subsidiary is subject to any contractual restrictions which limit the amount of dividends payable by any Subsidiary. (i) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 6.01(g). (j) Neither the Borrower nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan that, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), exceeds 5% of the Consolidated Tangible Net Worth of the Borrower. (k) Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization or termination would be the occurrence of an Event of Default under Section 6.01(i). (l) The Borrower is not an "investment company" or a "company" controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) The Borrower is not a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. All representations and warranties made by the Borrower herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes. ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.1. Affirmative Covenants. So long as any Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender 44 49 shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each Material Subsidiary to preserve and maintain, its corporate existence, rights (charter and statutory) and material franchises, except as otherwise permitted by Section 5.02(c) or 5.02(d). (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (including all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) VISITATION RIGHTS. At such reasonable times and intervals as the Administrative Agent or any of the Lenders (other than Designated Bidders) may desire, permit the Administrative Agent or any of the Lenders (other than Designated Bidders) to visit the Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of the Borrower and any of its Subsidiaries with officers of the Borrower and independent certified public accountants of the Borrower and any of its Subsidiaries, provided that if an Event of Default, or an event which with the giving of notice or the passage of time, or both, would become an Event of Default, has occurred and is continuing, the Administrative Agent or any Lender may, in addition to the other provisions of this subsection (c) and at such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, visit and inspect, under guidance of officers of the Borrower, any properties significant to the consolidated operations of the Borrower and its Subsidiaries, and to examine the books and records of account (other than with respect to any mineral reserve information that the Borrower determines to be confidential) of the Borrower and any of its Subsidiaries and to discuss the affairs, finances and accounts of any of the Borrower's Subsidiaries with any of the officers of such Subsidiary. (d) BOOKS AND RECORDS. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Subsidiary in accordance with generally accepted accounting principles either (i) consistently applied or (ii) applied in a changed manner that does not, under generally accepted accounting principles or public reporting requirements applicable to the Borrower, either require disclosure in the consolidated financial statements of the Borrower and its consolidated Subsidiaries or require the consent of the accountants which (as required by Section 5.03(b)) report on such 45 50 financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.03(b)) report on the consolidated financial statements of the Borrower and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred, provided that if any change referred to in clause (ii) or (iii) above would not meet the standard set forth in clause (i) or (ii) of Section 1.03, the Administrative Agent, the Lenders and the Borrower agree to amend the covenants contained in Section 5.01 and 5.02 so that the relative protection afforded thereby to the Lenders and the relative flexibility afforded thereby to the Borrower will in substance be retained after such amendment, provided, however, that until such amendment becomes effective hereunder, the covenants as set forth herein shall remain in full force and effect and those accounting principles applicable to the Borrower and its consolidated Subsidiaries which do meet the standards set forth in clause (i) or (ii) of Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants. (e) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause each Material Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) MAINTENANCE OF INSURANCE. Maintain, and cause each Material Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. SECTION 5.2. Negative Covenants. So long as any Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, unless the Majority Lenders shall otherwise consent in writing: (a) LIENS, ETC. (i) Create, assume or suffer to exist, or permit any Material Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the Equity Interests in any Material Subsidiary, whether now owned or hereafter acquired, or (ii) create or assume, or permit any Material Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of the Borrower and its consolidated Subsidiaries taken as a whole securing the payment of Debt and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount 46 51 of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) exceeding the greater of (x) $250,000,000 and (y) 10% of Consolidated Tangible Net Worth as at the date of such creation or assumption; provided, however, that this subsection (a) shall not apply to: (A) Liens on assets acquired by the Borrower or any of its Subsidiaries after the Original Effective Date to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (B) Liens on Equity Interests acquired after the Original Effective Date in a Business Entity which has become or becomes a Subsidiary of the Borrower, or on assets of any such Business Entity, to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (C) Liens on Margin Stock; (D) Liens on the Equity Interests in, or Debt or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, Debt or other obligations of any Business Entity which are owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Debt or Guaranty secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Debt or Guaranty is not increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) and such Debt or Guaranty is not secured by any additional assets that would not have been permitted by this Section to secure the Debt or Guaranty refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and 47 52 property evidencing or embodying, or constituting rights or other general intangibles relating to, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.02. (b) DEBT, ETC. Create, assume or suffer to exist, or permit any of its consolidated Subsidiaries to create, assume or suffer to exist, any Debt or any Guaranty unless, immediately after giving effect to such Debt or Guaranty and the receipt and application of any proceeds thereof or value received in connection therewith, (1) the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries plus (ii) the aggregate amount (determined on a consolidated basis) of Guaranties by the Borrower and its consolidated Subsidiaries is less than 60% of Capitalization, provided that Debt for borrowed money either maturing within one year and evidenced by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement or the Short-Term Revolving Credit Agreement or any replacement therefor), shall not exceed the aggregate of the Borrower's unused bank lines of credit and unused credit available to the Borrower under financing arrangements with banks or other financial institutions; and (2) with respect to any such Debt created or assumed by a consolidated Subsidiary that is either a Subsidiary of the Borrower as of the Original Effective Date or a Subsidiary of the Borrower acquired or created after the Original Effective Date and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, the aggregate amount of Debt of the consolidated Subsidiaries of the Borrower referred to above in this paragraph (2) owing to Persons other than the Borrower and its consolidated Subsidiaries is less than the greater of (i) $500,000,000 (exclusive of public Debt of LL&E existing at the time LL&E became a Subsidiary, the principal amount of which at such time was approximately $400,000,000, and any refinancing of such Debt, in a principal amount not to exceed the principal amount refinanced) and (ii) 30% of Consolidated Tangible Net Worth as at the date of incurrence or creation of such Debt. 48 53 (c) SALE, ETC. OF ASSETS. Sell, lease or otherwise transfer, or permit any Material Subsidiary to sell, lease or otherwise transfer (in either case, whether in one transaction or in a series of transactions, and except, in either case, to the Borrower or an entity which after giving effect to such transfer will be or become a Material Subsidiary in which the Borrower's direct or indirect Equity Interests will be at least as great as its direct or indirect Equity Interests in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, notwithstanding the foregoing, the Borrower or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, so long as (A) such Permitted Assets are sold, leased or otherwise transferred in exchange for other Permitted Assets and/or (B) the proceeds from such sale, lease or other transfer, or an amount equal to the proceeds thereof, are (x) reinvested within one year in Permitted Assets and/or the development of Permitted Assets and/or (y) used to repay Debt the proceeds of which were or are being used for investment in, and/or the development of, Permitted Assets; provided further that, no such sale, lease or other transfer shall be permitted by the foregoing proviso unless either (1) after giving effect to such sale, lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) the Borrower or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. (d) MERGERS, ETC. Merge or consolidate with any Person, or permit any of its Material Subsidiaries to merge or consolidate with any Person, except that (i) such a Subsidiary may merge or consolidate with (or liquidate into) any other Subsidiary or may merge or consolidate with (or liquidate into) the Borrower, provided that (A) if such Material Subsidiary merges or consolidates with (or liquidates into) the Borrower, the Borrower shall be the continuing or surviving corporation, (B) if any such Material Subsidiary merges or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one of such Subsidiaries is the surviving corporation and, if either such Subsidiary is not wholly-owned by the Borrower, such merger or consolidation is on an arm's length basis and (C) as a result of such merger or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower or any Material Subsidiary may merge or consolidate with any other corporation (that is, in addition to the Borrower or any Subsidiary of the Borrower), provided that (A) if the Borrower merges or consolidates with any such other corporation, the Borrower is the surviving corporation, (B) if any Material Subsidiary merges or 49 54 consolidates with any such other corporation, the surviving corporation is a wholly-owned Material Subsidiary of the Borrower, and (C) if either the Borrower or any Material Subsidiary merges or consolidates with any such other corporation, after giving effect to such merger or consolidation no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. (e) DIVIDEND RESTRICTIONS. Create, or consent or agree to, or permit any of its Material Subsidiaries existing on the Original Effective Date or any of its Subsidiaries hereafter created or acquired and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, to create, or consent or agree to, any restrictions, contained in any agreement or instrument relating to or evidencing Debt, on any such Subsidiary's ability to pay dividends or to make advances to the Borrower or any Subsidiary of the Borrower; provided, however, that this subsection (e) shall not apply to any such restrictions (including any extensions of the term of any thereof (by amendment, or continuation thereof in any refinancing of the Debt to which such restriction relates, or otherwise)) applicable to the Equity Interests in any Subsidiary of the Borrower the Equity Interests in which shall be hereafter acquired by the Borrower and which restrictions are existing at the time such Subsidiary first becomes a Subsidiary of the Borrower and are not placed thereon by or with the consent of the Borrower in contemplation of such acquisition by the Borrower. SECTION 5.3. Reporting Requirements. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: (a) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of such quarter, and consolidated statements of income and cash flow of the Borrower and its consolidated Subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as to fairness and utilization of generally accepted accounting principles by the chief financial officer of the Borrower and accompanied by a certificate of such officer stating (i) that such statements of income and cash flow and such balance sheet have been prepared in accordance with generally accepted accounting principles, (ii) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts 50 55 with respect thereto, (iii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of Section 5.02, and (iv) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (b) within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and its consolidated Subsidiaries containing financial statements for such year reported on by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with generally accepted accounting principles and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; (c) within 120 days after the close of each of the Borrower's fiscal years, a certificate of the chief financial officer of the Borrower stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (g) of Section 5.01 and in subsection (b) of Section 5.02 and (iii) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (d) promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Borrower or any Material Subsidiary shall have sent to its public Equity Interest holders; (e) promptly upon their becoming publicly available, all regular and periodic financial reports and registration statements which the Borrower or any Material Subsidiary shall file with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registration statements of securities for selling security holders; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving the Borrower 51 56 or any Material Subsidiary, except any litigation or proceeding which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Borrower obtains knowledge of the occurrence of any Event of Default which is continuing or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of the Borrower of the steps being taken by the Borrower or the appropriate Subsidiary to cure the effect of such event; (h) as soon as practicable and in any event (i) within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Borrower or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and 52 57 (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to subsections (a) and (b) of this Section 5.03 shall contain comparative information which conforms to the presentation required in Form 10-Q and Form 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. ARTICLE 6 EVENTS OF DEFAULT SECTION 6.1. Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Note within two Business Days after the same shall be due, or any interest on any Note or any other amount payable hereunder within five Business Days after the same shall be due; or (b) Any representation or warranty made or deemed made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or (d) The Borrower or any Material Subsidiary shall fail to pay any Debt or Guaranty (excluding Debt evidenced by the Notes) of the Borrower or such Subsidiary (as the case may be) in an aggregate principal amount in excess of the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace 53 58 period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate the maturity of such Debt; provided that, notwithstanding any provision contained in this subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt referred to in this subsection (d), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds thereof would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt extended pursuant thereto and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration, or the provisions hereof relating thereto, this Agreement or any Advance hereunder would otherwise be subject to the margin requirements or any other restriction under Regulation U issued by the Board of Governors of the Federal Reserve System, then such breach, default, event of default or acceleration shall not constitute a default or Event of Default under this subsection (d); or (e) (i) The Borrower or any Material Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by the Borrower or any such Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Borrower or any such Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions referred to above sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Borrower or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time shall be rendered against the Borrower or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a 54 59 judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or (g) Any Termination Event with respect to a Material Plan shall have occurred and, 30 days after notice thereof shall have been given to the Borrower by the Lender, (i) such Termination Event shall still exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto), in each case in respect of which the Borrower or any ERISA Affiliate has liability, is equal to or greater than $50,000,000; or (h) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $50,000,000; or (i) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the date hereof by an amount exceeding $50,000,000; or (j) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of the Borrower in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than the Borrower, a Subsidiary of the Borrower or any employee benefit plan maintained for employees of the Borrower and/or any of its Subsidiaries or 55 60 the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess of 50% of the outstanding capital stock of the Borrower entitled to vote in elections for directors of the Borrower and (ii) at any time before the later of (x) six months after the completion of such tender offer and (y) the next annual meeting of the shareholders of the Borrower following the completion of such tender offer more than half of the directors of the Borrower consists of individuals who (a) were not directors before the completion of such tender offer and (b) were not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) Any "Event of Default" as defined in the Short-Term Revolving Credit Agreement shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that if an Event of Default under subsection (e) of this Section 6.01 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Notes, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.1. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including enforcement of this Agreement or collection of the 56 61 Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. SECTION 7.2. Administrative Agent's Reliance, Etc.. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.3. Morgan and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Morgan shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Morgan in its individual capacity. Morgan and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of 57 62 business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if Morgan were not the Administrative Agent and without any duty to account therefor to the other Lenders. SECTION 7.4. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.5. Indemnification. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE NOTES THEN HELD BY EACH OF THEM (OR IF NO NOTES ARE AT THE TIME OUTSTANDING OR IF ANY NOTES ARE HELD BY PERSONS WHICH ARE NOT LENDERS, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS OR THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS IMMEDIATELY PRIOR TO TERMINATION IF THE COMMITMENTS HAVE BEEN TERMINATED), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, OR ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. 58 63 Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Administrative Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any of the Notes or any other instrument or document furnished pursuant hereto or in connection herewith to the extent that the Administrative Agent acts in its capacity as Administrative Agent and is not reimbursed for such expenses by the Borrower. SECTION 7.6. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then such retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized, or authorized to conduct a banking business, under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. ARTICLE 8 MISCELLANEOUS SECTION 8.1. Amendments, Etc.. An amendment or waiver of any provision of this Agreement or the Notes, or a consent to any departure by the 59 64 Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but only if, it shall be in writing and signed by the Majority Lenders or the Required Lenders, as applicable (except any amendment to give effect to Increased Commitments and Additional Lenders, as contemplated by Section 2.20), and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Bidders), be effective to: (a) waive any of the conditions specified in Article 3, (b) except as contemplated by Section 2.20, increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Notes or any facility fees hereunder, (d) except as contemplated by Section 2.21, postpone any date fixed for any payment of principal of, or interest on, the Notes or any facility fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, which shall be required for the Lenders or any of them to take any action under this Agreement, or (f) amend this Section 8.01; and, provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note. SECTION 8.2. Notices, Etc.. Except as otherwise provided in Section 2.02(a) or 2.10(ii), all notices and other communications provided for hereunder shall be in writing and mailed by certified mail, return receipt requested and postage prepaid, or telecopied, telefaxed or otherwise teletransmitted, or delivered, if to the Borrower, at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Telefax: (713) 624-9621; if to any Initial Lender, at its Domestic Lending Office set forth in such Initial Lender's Administrative Questionnaire; if to any other Lender at its Domestic Lending Office specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender or at the address for notices specified in the Designation Agreement pursuant to which it became a party hereto; and if to the Administrative Agent, at Morgan Guaranty Trust Company of New York, at 60 Wall Street, 22nd Floor, New York, New York 10260, Attention: John Kowalczuk, Telefax: (212) 648-5348; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective, (a) in the case of any notice or communication given by certified mail, when receipted for, (b) in the case of any notice or communication given by telecopy, telefax or other teletransmission, when confirmed by appropriate answerback, in each case addressed as aforesaid, and (c) in the case of any notice or communication delivered by hand or courier, when so delivered, except that notices and communications to the Administrative Agent pursuant to Article 2 or 7 shall not be effective until received by the 60 65 Administrative Agent. A notice received by the Administrative Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the Borrower and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. SECTION 8.3. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.4. Costs and Expenses; Indemnity. (a) The Borrower agrees to pay on demand (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate and (iii) all out-of-pocket costs and expenses, if any, of the Administrative Agent and the Lenders (including reasonable counsel fees and expenses and the allocated costs of in-house counsel), in connection with the enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder and thereunder. (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.10 or a Conversion pursuant to Section 2.08(f) or Section 2.09 or due to acceleration of the maturity of the Notes pursuant to Section 6.01 or due to any other reason attributable to the Borrower, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional 61 66 losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) THE BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO ANY ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE EQUITY INTERESTS IN, OR SUBSTANTIALLY ALL THE ASSETS OF, ANY PERSON OR ANY USE OR PROPOSED USE OF THE ADVANCES BY THE BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS, OR BY REASON OF ANY USE OR DISCLOSURE OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR USE OR PROPOSED USE OF THE PROCEEDS BY THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS). SECTION 8.5. Right of Set-off. Upon the declaration of the Notes as due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 8.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. 62 67 SECTION 8.6. Binding Effect. This Agreement shall become effective in accordance with the provisions of Section 3.01, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of all of the Lenders. SECTION 8.7. Assignments and Participations. (a) Each Lender (other than a Designated Bidder) may assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, the A Advances owing to it and the Note or Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement (other than any right to make B Advances, any B Advances or any Notes), and the same constant percentage of all rights and obligations of such assigning Lender under the Short-Term Revolving Credit Agreement, unless the Short-Term Revolving Credit Agreement has been terminated, shall be contemporaneously assigned by such assigning Lender to the same assignee pursuant to Section 8.07(a) of the Short-Term Revolving Credit Agreement, (ii) the sum of (x) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) plus (y) the amount of the "Commitment" of the assigning Lender under the Short-Term Revolving Credit Agreement contemporaneously assigned by such assigning Lender to such assignee as contemplated by clause (i) of this sentence must be equal to or greater than $25,000,000 (unless the Borrower and the Administrative Agent shall otherwise consent, which consent may be withheld for any reason) and must be an integral multiple of $1,000,000, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and a processing and recordation fee of $3,000, and shall send to the Borrower an executed counterpart of such Assignment and Acceptance. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) the Lender assignor thereunder shall, to the extent that rights 63 68 and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04). (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance, each Designation Agreement, each New Lender Agreement and each Commitment Increase Agreement delivered to and accepted by it and a register for the recordation of the 64 69 names and addresses of the Lenders and, with respect to Lenders other than Designated Bidders, the Commitment of, and principal amount of the A Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes a new Note to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender. Such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (e) Each Lender (other than a Designated Bidder) may designate one or more banks or other entities to have a right to make B Advances as a Lender pursuant to Section 2.19; provided that (i) such Lender shall have obtained the written consent of the Administrative Agent and the Borrower, such consent not to be unreasonably withheld, (ii) no such Lender shall be entitled to make more than two such designations, (iii) each such Lender making one or more of such designations shall retain the right to make B Advances as a Lender pursuant to Section 2.19, (iv) each such designation shall be to a Designated Bidder and (v) the parties to each such designation shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Designation Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Designation Agreement, the designee thereunder shall be a party hereto with a right to make B Advances as a Lender pursuant to Section 2.19 and the obligations related thereto. (f) By executing and delivering a Designation Agreement, the Lender making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender makes no 65 70 representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Designation Agreement; (iv) such designee will, independently and without reliance upon the Administrative Agent, such designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi) such designee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (g) Upon its receipt of a Designation Agreement executed by a designating Lender and a designee representing that it is a Designated Bidder, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit K hereto, (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (h) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall 66 71 continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such Lender's Note or any facility fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Note, or (D) consent to the assignment or the transfer by the Borrower of any of its rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (i) Any Lender may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree in writing for the benefit of the Borrower to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender in a manner consistent with Section 8.08. (j) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it) and the Notes issued to it hereunder in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. SECTION 8.8. Confidentiality. Each Lender and the Administrative Agent (each, a "PARTY") agrees that it will use its best reasonable efforts not to disclose, without the prior consent of the Borrower (other than to its, or its Affiliates, employees, auditors, accountants, counsel or other representatives, whether existing at the date of this Agreement or any subsequent time), any information with respect to the Borrower which is furnished pursuant to this Agreement, provided that any party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such party or to the 67 72 Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee, designee or participant in connection with any contemplated assignment of any rights or obligations hereunder, any designation or any sale of any participation therein, by such party pursuant to Section 8.07, if such prospective assignee, designee or participant, as the case may be, executes an agreement with the Borrower containing provisions substantially similar to those contained in this Section 8.08; provided, however, that the Borrower acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. SECTION 8.9. Consent to Jurisdiction. (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by the Administrative Agent, the Arranger, any Lender or the holder of any Note in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Agreement or the Notes (such claims and causes of action, collectively, being "PERMITTED CLAIMS"), and the Borrower hereby irrevocably agrees that all Permitted Claims may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Service of the summons and complaint and any other process which may be served by the Administrative Agent, the Arranger, any Lender or the holder of any Note on the Borrower in any such action or proceeding in any aforementioned court in respect of Permitted Claims may be made by delivering separate copies of such process to the Borrower by courier and by certified mail (return receipt requested), fees and postage prepaid at the Borrower's address specified pursuant to Section 8.02, to the attention of each of the Treasurer and the Executive Vice President, Law. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 8.09 (i) shall affect the right of the Arranger, the Borrower, any Lender, the holder of any Note or the Administrative Agent to serve legal process in any other manner permitted by law or affect any right 68 73 otherwise existing of the Borrower, any Lender, the Arranger, the holder of any Note or the Administrative Agent to bring any action or proceeding in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. SECTION 8.10. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. SECTION 8.12. WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. 69 74 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES INC. By: /s/ Everett D. DuBois ---------------------------------- Title: Senior Vice President & Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: /s/ John Kowalczuk ---------------------------------- Title: Vice President CITIBANK, N.A., as Syndication Agent By: /s/ Mark Stanfield Packard ---------------------------------- Title: Vice President CHASE BANK OF TEXAS, N.A., as Co-Documentation Agent By: /s/ Sandra I. Aultman ---------------------------------- Title: Vice President NATIONSBANK OF TEXAS, N.A., as Co-Documentation Agent By: /s/ Paul A. Squires ---------------------------------- Title: Senior Vice President 75 Commitments The Initial Lenders - ----------- ------------------- $ 75,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ John Kowalczuk ---------------------------------- Title: Vice President $ 75,000,000 CITIBANK, N.A. By: /s/ Mark Stanfield Packard --------------------------------- Title: Vice President $ 75,000,000 CHASE BANK OF TEXAS, N.A. By: /s/ Sandra I. Aultman --------------------------------- Title: Vice President $ 75,000,000 NATIONSBANK OF TEXAS, N.A. By: /s/ Paul A. Squires --------------------------------- Title: Senior Vice President $45,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Ronald E. McKaig ---------------------------------- Title: Vice President $45,000,000 BANKBOSTON, N.A. By: /s/ Terrence Ronan ---------------------------------- Title: Vice President 76 $ 45,000,000 MELLON BANK, N.A. By: /s/ A. Gary Chace ---------------------------------- Title: Senior Vice President $ 45,000,000 WELLS FARGO BANK By: /s/ Theodore M. Nowak ---------------------------------- Title: Vice President $ 30,000,000 THE BANK OF NEW YORK By: /s/ Catherine G. Goff ---------------------------------- Title: Vice President $ 30,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ Michael G. Meiss ---------------------------------- Title: Vice President & Manager $ 30,000,000 THE NORTHERN TRUST COMPANY By: /s/ James F.T. Monhart ---------------------------------- Title: Vice President 77 $ 30,000,000 WACHOVIA BANK, N.A. By: /s/ R. S. Miles ---------------------------------- Title: Senior Vice President Total Commitments - -------------------- ==================== $ 600,000,000 78 SCHEDULE I MATERIAL SUBSIDIARIES Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company 79 SCHEDULE II PRICING GRID
- -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ----------------- LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ----------------- Basis for If the If the If the If the If the If Levels I-V do Pricing Borrower's Borrower's Borrower's Borrower's Borrower's not exist. senior unsecured senior senior unsecured senior unsecured senior long term debt unsecured long long term debt long term debt unsecured long is rated at term debt is is rated at is rated at term debt is least A by S&P rated at least least BBB+ by least BBB by S&P rated at least or A2 by Moody's. A- by S&P or A3 S&P or Baa1 by or Baa2 by BBB- by S&P or by Moody's. Moody's. Moody's. Baa3 by Moody's. - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ----------------- Facility Fee .070% .080% .090% .115% .150% .300% Percentage - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- ----------------- LIBOR .155% .170% .210% .235% .300% .450% Applicable Margin - -------------------- ------------------ ----------------- ------------------ ------------------ ----------------- -----------------
The applicable pricing level shall change on the date of any relevant change in the rating by S&P or Moody's of any public long term senior unsecured debt securities of the Borrower. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable pricing level is the higher of the two (e.g., A-/Baa1 results in Level II pricing), provided that in the event the split is more than one full category, the average (or the higher of two intermediate ratings) shall be used (e.g., A-/Baa2 results in Level III pricing, as does A-/Baa3). 80 EXHIBIT A FORM OF NOTE New York, New York February 25, 1998 For value received, Burlington Resources Inc., a Delaware corporation (the "BORROWER"), promises to pay to the order of ______________________ (the "LENDER"), for the account of its Applicable Lending Office, the unpaid principal amount of each Advance made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Advance on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Advances made by the Lender, the respective types thereof and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make (or any error in making) any such recordation or endorsement shall not affect the Borrower's obligations hereunder or under the Credit Agreement. 81 This note is one of the Notes referred to in the Credit Agreement dated as of February 25, 1998 among Burlington Resources Inc., the Lenders party thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent for the Lenders thereunder, Citibank, N.A., as Syndication Agent for the Lenders, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents for the Lenders (as the same may be amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. BURLINGTON RESOURCES INC. By: ---------------------------------- Name: Title: 82 ADVANCES AND PAYMENTS OF PRINCIPAL
- ------------------- ----------------- ---------------- ----------------- ---------------------------- AMOUNT OF AMOUNT OF DATE ADVANCE TYPE OF ADVANCE PRINCIPAL REPAID NOTATION MADE BY - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ---------------------------- - ------------------- ----------------- ---------------- ----------------- ----------------------------
83 EXHIBIT B FORM OF NOTICE OF A BORROWING Date ___________ Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 500 Stanton Christiana Road Newark, DE 19713-2107 Attention: Sandra Doherty tel: 302-623-8122 fax: 302-634-1094 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Long-Term Credit Agreement dated as of February 25, 1998 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent, Citibank, N.A., as Syndication Agent, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents. Pursuant to Section 2.02(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an A Borrowing under the Credit Agreement (the "PROPOSED A BORROWING"), and in that connection sets forth below the information relating to such A Borrowing: 1. The Business Day of the Proposed A Borrowing is _________ __, ____. 2. The Type of A Advances comprising the Proposed A Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. 3. The aggregate amount of the Proposed A Borrowing is $_______. 4.(1) The Interest Period for each Eurodollar Rate Advance made as part of the Proposed A Borrowing is [__] month[s]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: - ------------ (1)To be used for Eurodollar Rate Advances only. 84 (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By: ---------------------------------- Name: Title: 85 EXHIBIT C FORM OF NOTICE OF B BORROWING Date ___________ Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 500 Stanton Christiana Road Newark, DE 19713-2107 Attention: Sandra Doherty tel: 302-623-8122 fax: 302-634-1094 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Long-Term Credit Agreement dated as of February 25, 1998 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent, Citibank, N.A., as Syndication Agent, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents. Pursuant to Section 2.19 of the Credit Agreement, the Borrower hereby gives you notice of and requests a B Borrowing under the Credit Agreement (the "PROPOSED B BORROWING"), and in that connection sets forth the terms on which such B Borrowing is requested to be made: 1. Date of B Borrowing ____________________ 2. Proposed Amount of B Borrowing ____________________ 3. Maturity Date ____________________ 4. Interest Rate Basis ____________________ 5. Interest Payment Date(s) ____________________ 7. [Other Terms] ____________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); 86 (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By ---------------------------------- Name: Title: 87 EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE Dated: _________, 19__ Reference is made to the Long-Term Revolving Credit Agreement dated as of February 25, 1998 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), Morgan Guaranty Trust Company of New York, as Administrative Agent for the Lenders (the "ADMINISTRATIVE AGENT"), Citibank, N.A., as Syndication Agent for the Lenders, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents. Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows: SECTION (A). The Assignor hereby sells and assigns to the Assignee, without recourse, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of B Advances) which represents the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances), including such interest in the Assignor's Commitment, the A Advances owing to the Assignor, and the Note[s] held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the A Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1 hereof. SECTION (B). The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) represents and warrants that it has made or is contemporaneously making herewith, to the Assignee as contemplated by Section 8.07 of the Credit Agreement, an assignment under the Short-Term Revolving Credit Agreement, unless the Short-Term Revolving Credit Agreement has been terminated; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; [and (v) requests that the Administrative Agent arrange for the issuance of a new Note or Notes payable to the order of the Assignee]. 88 SECTION (C). The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) confirms that it has entered into or is contemporaneously herewith entering into, with the Assignor as contemplated by Section 8.07 of the Credit Agreement, an assignment under the Short-Term Revolving Credit Agreement, unless the Short-Term Revolving Credit Agreement has been terminated; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vii) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [;and (viii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement and the Notes or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty](1). SECTION (D). Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance shall be at least five Business Days after the execution and delivery thereof to the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "EFFECTIVE DATE"). SECTION (E). Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04 of the Credit Agreement. - --------------------------- (1) If the Assignee is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code). 89 SECTION (F). Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. SECTION (G). This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized as of the date specified thereon. 90 Schedule 1 to Assignment and Acceptance Dated __________ Section 1. Percentage Interest assigned: ________% Section 2. Assignee's Commitment: $_________ Aggregate Outstanding Principal Amount of [A Advances] owing to the Assignee: $_________ Section 3. Effective Date(2): [NAME OF ASSIGNOR] By --------------------------------------- Title: [NAME OF ASSIGNEE] By --------------------------------------- Title: Domestic Lending Office: [Address] Eurocurrency Lending Office: [Address] - --------------------------- (2) This date should be no earlier than at least five Business Days after the execution and delivery thereof to the Administrative Agent. 91 Accepted and Consented to this __ day of __________, ____: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By ------------------------------ Name: Title: Consented to this __ day of __________, ____: BURLINGTON RESOURCES INC. By ------------------------------ Name: Title: 92 EXHIBIT E FORM OF NEW LENDER AGREEMENT This New Lender Agreement dated as of ___________, ____ (this "AGREEMENT") is by and among (i) Burlington Resources Inc., a Delaware corporation (the "BORROWER"), (ii) Morgan Guaranty Trust Company of New York in its capacity as Administrative Agent (the "ADMINISTRATIVE AGENT") under the Long-Term Revolving Credit Agreement dated as of February 25, 1998 (as may be amended or otherwise modified from time to time, the "CREDIT AGREEMENT", capitalized terms that are defined in the Credit Agreement and not defined herein are used herein as therein defined) among the Borrower, the lenders party thereto, the Administrative Agent, Citibank, N.A., as syndication agent, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as co-documentation agents, and (iii) _________ ("NEW LENDER"). Preliminary Statements A. Pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the total Commitments under the Credit Agreement by adding to the Credit Agreement one or more banks or other financial institutions. B. The Borrower has given notice to the Administrative Agent of its intention to increase the total Commitments pursuant to such Section 2.20 by adding the New Lender to the Credit Agreement as a Lender with a Commitment of $___________, and the Administrative Agent is willing to consent thereto. Accordingly, the parties hereto agree as follows: SECTION 1. Addition of New Lender. Pursuant to Section 2.20 of the Credit Agreement, the New Lender is hereby added to the Credit Agreement as a Lender with a Commitment of $________________. The New Lender specifies as its Domestic Lending Office and Eurodollar Lending Office the following: Domestic Lending Address: Office: Attention: Telephone: Telecopy: Eurodollar Lending Address: Office: Attention: Telephone: Telecopy: 93 SECTION 2. New Note. The Borrower agrees to promptly execute and deliver to the New Lender a Note ("NEW NOTE"). SECTION 3. Consent. The Administrative Agent and the Borrower hereby consent to the increase in the Commitments and addition of the New Lender effectuated hereby. SECTION 4. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 5. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 6. Lender Credit Decision. The New Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to agree to the various matters set forth herein. The New Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement. SECTION 7. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The execution, delivery and performance by the Borrower of this Agreement and the New Note are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (b) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the New Note which has not been duly made or obtained. (c) This Agreement constitutes, and the New Note when delivered hereunder shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. 94 (d) The aggregate amount by which the Commitments under the Credit Agreement have been increased does not exceed $180,000,000. (e) No event has occurred and is continuing which constitutes an Event of Default. (f) Unless the Short-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the New Lender to become a party to the Short-Term Revolving Credit Agreement pursuant to Section 2.20 thereof with a "Commitment" (under and as defined in the Short-Term Revolving Credit Agreement) that constitutes the same percentage of all "Commitments" thereunder as the percentage that the New Lender's Commitment under the Credit Agreement constitutes of all Commitments under the Credit Agreement. (g) Prior to the increase in Commitment pursuant to this Agreement, the Borrower has offered the Lenders the right to participate in such increase by increasing their respective Commitments. (h) Attached hereto are resolutions duly adopted by the Board of Directors of the Borrower sufficient to authorize this Agreement and the New Note, and such resolutions are in full force and effect. SECTION 8. Default. Without limiting any other event that may constitute an Event of Default, in the event any representation or warranty set forth herein shall prove to have been incorrect in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement. SECTION 9. Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and the New Note, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. SECTION 10. Effectiveness. When, and only when, the Administrative Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Administrative Agent and the New Lender, this Agreement shall become effective as of the date first written above. 95 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: BURLINGTON RESOURCES INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- ADMINISTRATIVE AGENT: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- NEW LENDER: ------------------------------------- By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- 96 EXHIBIT F FORM OF COMMITMENT INCREASE AGREEMENT This Commitment Increase Agreement dated as of ___________, ____ (this "AGREEMENT") is by and among (i) Burlington Resources Inc., a Delaware corporation (the "BORROWER"), (ii) Morgan Guaranty Trust Company of New York in its capacity as Administrative Agent (the "ADMINISTRATIVE AGENT") under the Long-Term Revolving Credit Agreement dated as of February 25, 1998 (as may be amended or otherwise modified from time to time, the "CREDIT AGREEMENT", capitalized terms that are defined in the Credit Agreement and not defined herein are used herein as therein defined) among the Borrower, the lenders party thereto, the Administrative Agent, Citibank, N.A., as syndication agent, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as co-documentation agents, and (iii) _________ ("INCREASING LENDER"). Preliminary Statements A. Pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the total Commitments under the Credit Agreement by agreeing with a Lender to increase that Lender's Commitment. B. The Borrower has given notice to the Administrative Agent of its intention to increase the total Commitments pursuant to such Section 2.20 by increasing the Commitment of the Increasing Lender from $_______ to $________, and the Administrative Agent is willing to consent thereto. Accordingly, the parties hereto agree as follows: SECTION 1. Increase of Commitment. Pursuant to Section 2.20 of the Credit Agreement, the Commitment of the Increasing Lender is hereby increased from $________ to $__________. SECTION 2. Consent. The Administrative Agent hereby consents to the increase in the Commitment of the Increasing Lender effectuated hereby. SECTION 3. Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of New York. SECTION 4. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 97 SECTION 5. Lender Credit Decision. The Increasing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to agree to the various matters set forth herein. The Increasing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement. SECTION 6. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporation action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (b) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement which has not been duly made or obtained. (c) This Agreement constitutes legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (d) The aggregate amount by which the Commitments under the Credit Agreement have been increased does not exceed $180,000,000. (e) No event has occurred and is continuing which constitutes an Event of Default. (f) Unless the Short-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the Increasing Lender's "Commitment" (as defined in the Short-Term Revolving Credit Agreement) to be increased pursuant to Section 2.20 thereof by the same percentage as the Increasing Lender's Commitment under the Credit Agreement is being increased pursuant to Section 2.20 of the Credit Agreement. (g) Attached hereto are resolutions duly adopted by the Board of Directors of the Borrower sufficient to authorize this Agreement, and such resolutions are in full force and effect. SECTION 7. Default. Without limiting any other event that may constitute an Event of Default, in the event any representation or warranty set forth herein shall prove to have been incorrect 98 in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement. SECTION 8. Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. SECTION 9. Effectiveness. When, and only when, the Administrative Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Administrative Agent and the Increasing Lender, this Agreement shall become effective as of the date first written above. 99 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: BURLINGTON RESOURCES INC. By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- ADMINISTRATIVE AGENT: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- INCREASING LENDER: ------------------------------------- By: ---------------------------------- Name: ------------------------------- Title: ------------------------------- 100 EXHIBIT G FORM OF EXTENSION REQUEST Morgan Guaranty Trust Company of New York, as Administrative Agent under the Credit Agreement referred to below 500 Stanton Christiana Road Newark, DE 19713-2107 Attention: Sandra Doherty tel: 302-623-8122 fax: 302-634-1094 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Long-Term Credit Agreement dated as of February 25, 1998 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent, Citibank, N.A., as Syndication Agent, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents. Pursuant to Section 2.21(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an extension of the Stated Termination Date under the Credit Agreement, and in that connection sets forth below the information relating to such extension: 1. The requested Stated Termination Date is _______________ __, ____.(1) 2. This Extension Request constitutes the [first] [second] of the Borrower's right to extend the Stated Termination Date. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date the Stated Termination Date is extended: (a) this Extension Request is being made not later than 45 days prior to the Stated Termination Date now in effect; (b) no event has occurred and is continuing which constitutes an Event of Default. BURLINGTON RESOURCES INC. By: ---------------------------------- Name: Title: - --------------------------- (1) Such requested Stated Termination Date shall be no more than one year from the presently effective Stated Termination Date. 101 EXHIBIT H FORM OF OPINION OF SENIOR VICE PRESIDENT, LAW FOR BORROWER February ____, 1998 To each of the Lenders and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York 60 Wall Street, 22nd Floor New York, New York 10260 Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.01(d) of the Long-Term Revolving Credit Agreement, dated as of February 25, 1998 (the "Credit Agreement"), among Burlington Resources Inc., a Delaware corporation (the "Borrower"), the financial institutions party thereto (each a "Lender," and together the "Lenders"), Morgan Guaranty Trust Company of New York, as Administrative Agent for the Lenders, Citibank, N.A., as Syndication Agent, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. I am Senior Vice President, Law of the Borrower, and I, or attorneys over whom I exercise supervision, have acted as counsel for the Borrower in connection with the preparation, execution and delivery of the Credit Agreement. In that connection, I or such attorneys have examined: (1) The Credit Agreement, executed by the parties thereto; (2) The Notes executed by the Borrower; and (3) The other documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement. I, or attorneys over whom I exercise supervision, have also examined the originals, or copies certified to our satisfaction, of the agreements, instruments and other documents, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the 102 Borrower's ability to perform the Borrower's obligations under the Credit Agreement or the Notes (collectively referred to herein as the "Documents"). In addition, I, or attorneys over whom I exercise supervision, have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions hereinafter expressed. In all such examinations, I, or attorneys over whom I exercise supervision, have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified, conformed or reproduction copies of documents of all parties (other than, with respect to the Documents, the Borrower), the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to such attorneys or me as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, I have relied upon, and assume the accuracy of, representations and warranties contained in the Credit Agreement and certificates and oral or written statements and other information of or from public officials, officers and/or representatives of the Borrower and others. To the extent it may be relevant to the opinions expressed herein, I have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such documents and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. The opinions expressed below are limited to the federal laws of the United States and, to the extent relevant hereto, the General Corporation Law of the State of Delaware, as currently in effect. I assume no obligation to supplement this opinion if any applicable laws change after the date hereof or if I become aware of any facts that might change the opinions expressed herein after the date hereof. Based upon the foregoing and upon such investigation as I have deemed necessary, and subject to the limitations, qualifications and assumptions set forth herein, I am of the following opinion: 1. The Borrower (i) is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware, and (ii) possesses all the corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. 2. The execution, delivery and performance by the Borrower of the Documents are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action in respect of or by the Borrower (except to the extent that the Borrower seeks to exercise its right under Section 2.20 of the Credit Agreement to effect an increase of Commitments), and do not contravene (i) the Borrower's Certificate of Incorporation or By-Laws, in each case as amended, (ii) any federal law, rule or regulation applicable to the Borrower (excluding provisions of federal law expressly referred to in and covered by the opinion of Jones, Day, Reavis & Pogue delivered to you in connection with the transactions 103 contemplated hereby), or (iii) any contractual restriction binding on or affecting the Borrower. The Documents have been duly executed and delivered on behalf of the Borrower. 3. No authorization or approval or other action by, and no notice to or filing with, any federal governmental authority or regulatory body (including, without limitation, the Federal Energy Regulatory Commission) is required for the due execution, delivery and performance by the Borrower of the Documents, except those required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants and warranties contained in the Documents. 4. To the best of my knowledge, there is no action, suit or proceeding pending or overtly threatened against or involving the Borrower or any of its Material Subsidiaries, which, in my reasonable judgment (taking into account the exhaustion of all appeals), would have a material adverse effect upon the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of any Document. These opinions are given as of the date hereof and are solely for your benefit in connection with the transactions contemplated by the Credit Agreement. These opinions may not be relied upon by you for any other purpose or relied upon by any other person for any purpose without my prior written consent. Very truly yours, L. David Hanower Senior Vice President, Law ----------------, ----- 104 EXHIBIT I FORM OF OPINION OF JONES, DAY, REAVIS & POGUE, NEW YORK COUNSEL FOR BORROWER February __, 1998 To Each of the Lenders and the Administrative Agent Referred to Below c/o Morgan Guaranty Trust Company of New York 60 Wall Street, 22nd Floor New York, New York 10260 Re: Long-Term Revolving Credit Agreement, dated as of February 25, 1998 Ladies and Gentlemen: We have acted as special New York counsel for Burlington Resources Inc., a Delaware corporation (the "Borrower"), in connection with the Long-Term Revolving Credit Agreement, dated as of February __, 1998 (the "Credit Agreement"), among the Borrower, the financial institutions party thereto (each a "Lender," and together the "Lenders"), and Morgan Guaranty Trust Company of New York, as Administrative Agent for the Lenders, Citibank, N.A., as Syndication Agent for the Lenders, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents for the Lenders. This opinion is delivered to you pursuant to Section 3.01(e) of the Credit Agreement. All capitalized terms used herein that are defined in, or by reference in, the Credit Agreement have the meanings assigned to such terms therein, or by reference therein, unless otherwise defined herein. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such documents, and (iii) received such information from officers and representatives of the Borrower as we have deemed necessary or appropriate for the purposes of this opinion. We have examined, among other documents, the following: (a) A facsimile of an executed copy of the Credit Agreement; (b) A facsimile of an executed copy of each of the __ Notes; and (c) A facsimile of the Officer's Certificate of the Borrower delivered to us in connection with this opinion, a copy of which is attached hereto as Annex A. 105 The documents referred to in items (a) and (b) above are referred to herein collectively as the "Documents." In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Documents and certificates and oral or written statements and other information of or from representatives of the Borrower and others. With respect to the opinions expressed in paragraph (a) below, our opinions are limited (x) to our actual knowledge of the Borrower's specially regulated business activities and properties based solely upon an officer's certificate in respect of such matters and without any independent investigation or verification on our part and (y) to our review of only those laws and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Documents. To the extent it may be relevant to the opinions expressed herein, we have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such documents and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: (a) The execution and delivery to the Administrative Agent and the Lenders by the Borrower of the Documents and the performance by the Borrower of its obligations thereunder (i) do not require under present law any filing or registration by the Borrower with, or approval or consent to the Borrower of, any governmental agency or authority of the State of New York, except those, if any, required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants and warranties contained in the Documents and (ii) do not violate any present law, or present regulation of any governmental agency or authority, of the State of New York applicable to the Borrower or its property. (b) The Documents constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms. (c) The borrowings by the Borrower under the Credit Agreement and the applications of the proceeds thereof as provided in the Credit Agreement will not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following qualifications: (A) We express no opinion as to: 106 (i) the validity, binding effect or enforceability (a) of any provision of the Documents relating to indemnification, contribution or exculpation in connection with violations of any securities laws or statutory duties or public policy, or in connection with willful, reckless or criminal acts or gross negligence of the indemnified or exculpated party or the party receiving contribution; or (b) of any provision of any of the Documents relating to exculpation of any party in connection with its own negligence that a court would determine in the circumstances under applicable law to be unfair or insufficiently explicit; (ii) the validity, binding effect or enforceability of (a) any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "Waiver") by the Borrower under the Documents to the extent limited by provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under provisions of applicable law (including judicial decisions) or (b) any provision of any Document relating to choice of governing law to the extent that the validity, binding effect or enforceability of any such provision is to be determined by any court other than a court of the State of New York; (iii) the enforceability of any provision in the Documents specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of the Documents; (iv) the effect of any law of any jurisdiction other than the State of New York wherein the Administrative Agent or any Lender may be located or wherein enforcement of any document referred to above may be sought that limits the rates of interest legally chargeable or collectible; and (v) any approval, consent or authorization of the Federal Energy Regulatory Commission or any other United States federal agency or authority needed in connection with the execution, delivery and performance by the Borrower of the Documents, the consummation of the transactions contemplated thereby and compliance with the terms and conditions thereof. (B) Our opinions above are subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws from time to time in effect affecting creditors' rights generally, (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness), whether such principles are considered in a proceeding at law or in equity and (iii) the qualification that certain other provisions of the Documents may be unenforceable in whole or in part under the laws (including judicial decisions) of the State of New York or the United States of America, but the 107 inclusion of such provisions does not affect the validity as against the Borrower of the Documents as a whole, and the Documents contain adequate provisions for enforcing payment of the obligations governed thereby, subject to the other qualifications contained in this letter. (C) For purposes of the opinions set forth in paragraph (c) above, we have assumed that (i) neither the Administrative Agent nor any of the Lenders has or will have the benefit of any agreement or arrangement (excluding the Documents) pursuant to which any Advances are directly or indirectly secured by Margin Stock, (ii) neither the Administrative Agent nor any of the Lenders nor any of their respective affiliates has extended or will extend any other credit to the Borrower directly or indirectly secured by Margin Stock and (iii) neither the Administrative Agent nor any of the Lenders has relied or will rely upon any Margin Stock as collateral in extending or maintaining any Advances pursuant to the Credit Agreement. (D) For purposes of our opinions above, insofar as they relate to the Borrower, we have assumed that (i) the Borrower is a corporation validly existing in good standing in its jurisdiction of incorporation, has all requisite power and authority, and has obtained all requisite corporate, shareholder, third party and governmental authorizations, consents and approvals, and made all requisite filings and registrations, necessary to execute, deliver and perform the Documents (except to the extent noted in paragraph (a) above), and that such execution, delivery and performance will not violate or conflict with any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to the Borrower or its properties (except to the extent noted in paragraph (a) above), and (ii) the Documents have been duly executed and delivered by the Borrower. We express no opinion as to the effect of the compliance or noncompliance of each of the addressees with any state or federal laws or regulations applicable to each of them by reason of their status as or affiliation with a federally insured depository institution, except as expressly set forth in paragraph (c) above. The opinions expressed herein are limited to the federal laws of the United States of America (in the case of the matters covered in paragraph (c) above) and the laws of the State of New York (in the case of the matters covered in paragraphs (a) and (b) above), as currently in effect. The opinions expressed herein are solely for the benefit of the Administrative Agent and the Lenders and may not be relied on in any manner or for any purpose by any other person or entity. Very truly yours, Jones, Day, Reavis & Pogue 108 EXHIBIT J FORM OF OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT ----------------, ----- To the Lenders and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York, as Administrative Agent 60 Wall Street New York, New York 10260 Ladies and Gentlemen: We have participated in the preparation of the Long-Term Credit Agreement dated as of February 25, 1998 (the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent, Citibank, N.A., as Syndication Agent and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A. as Co-Documentation Agents and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01(f) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and each Note issued thereunder today constitutes a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. 109 We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Lender is located which limits the rate of interest that such Lender may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other Person without our prior written consent. Very truly yours, 110 EXHIBIT K FORM OF DESIGNATION AGREEMENT Dated __________, 19__ Reference is made to the Long-Term Revolving Credit Agreement dated as of February 25, 1998 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, being the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), Morgan Guaranty Trust Company of New York, as Administrative Agent for the Lenders (the "ADMINISTRATIVE AGENT"), Citibank, N.A., as Syndication Agent for the Lenders, and Chase Bank of Texas, N.A. and NationsBank of Texas, N.A., as Co-Documentation Agents. Terms defined in the Credit Agreement are used herein with the same meaning. ______________ (the "DESIGNATOR"), ____________ (the "DESIGNEE"), and Burlington Resources Inc., a Delaware corporation (the "BORROWER"), agree as follows: 1. The Designator designates the Designee, and the Designee hereby accepts such designation, to have a right to make B Advances pursuant to Section 2.19 of the Credit Agreement. 2. The Designator makes no representations or warranties and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto and (ii) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Designator or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a Designated Bidder; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are 111 reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) specifies as its Applicable Lending Office with respect to B Advances (and address for notices) the offices set forth beneath its name on the signature pages hereof. 4. Following the execution of this Designation Agreement by the Designator, the Designee and the Borrower, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Designation Agreement shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on the signature page hereto (the "EFFECTIVE DATE"). 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make B Advances as a Lender pursuant to Section 2.19 of the Credit Agreement and the rights and obligations of a Lender related thereto. 6. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Designation Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. Effective Date:(2) _______________, 19___ [NAME OF DESIGNATOR] By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- - --------------------------- (2) This date should be no earlier than the date of acceptance by the Administrative Agent. 112 [NAME OF DESIGNEE] By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- Applicable Lending Office (and addresses for notices) [Address BURLINGTON RESOURCES INC. By: ---------------------------------- Name: -------------------------------- Title: -------------------------------- Accepted and Approved this ____ day of ___________, 19__ MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: ------------------------------ Name: Title: 113 CONFORMED COPY AMENDMENT AND RESTATEMENT AGREEMENT dated as of February 23, 1999 (this "Amendment and Restatement") in respect of the LONG-TERM CREDIT AGREEMENT dated as of February 25, 1998 (the "Credit Agreement"), among BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Lenders") listed on the signature pages thereof, Morgan Guaranty Trust Company of New York, as administrative agent (in such capacity, the "Original Administrative Agent") for the Lenders hereunder, Citibank, N.A., as syndication agent for the Lenders, and Chase Bank of Texas, N.A. ("Chase" and, in its capacity as administrative agent for the Lenders, the "Administrative Agent") and NationsBank of Texas, N.A., as co-documentation agents for the Lenders. The Borrower has advised the Lenders that the Short-Term Revolving Credit Agreement is being amended and restated to, among other things, extend the Stated Termination Date thereof an additional 364 days (the "Short-Term Amendment and Restatement") and has requested in connection therewith that the Credit Agreement be amended and restated as set forth in Section 1 below and the parties hereto are willing so to amend the Credit Agreement. Each capitalized term used but not defined herein has the meaning assigned thereto in the Credit Agreement. In consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree, on the terms and subject to the conditions set forth herein, as follows: SECTION 1. Amendment and Restatement. Upon the effectiveness of this Amendment and Restatement as provided in Section 3 below, the Credit Agreement shall be amended and restated in the form resulting from the following revisions: (a) Change of Agents. Chase shall replace Morgan as Administrative Agent (and all references to "Morgan" or its Affiliates in connection with its capacity as Administrative Agent shall be deemed references instead to "Chase" and its Affiliates); Citibank, N.A., shall continue as Syndication Agent; Bank of America National Trust and Savings Association and BankBoston, N.A. shall be Documentation Agents; The Chase Manhattan Bank shall be Auction Administrative Agent; and no other Lender shall have any title. Payments to the Administrative Agent shall be made to it in care of The Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081; notices may be provided to the Administrative Agent at the same address, Attention: Muniram Appanna, Telefax: (212) 552-7940, with a copy to Chase Bank of Texas, N.A., 600 Travis Street, 20th Floor, Houston, TX 77002, Attention: Russell Johnson, Telefax: (713) 216-8870; and notices may be provided to the Auction Administrative Agent at The Chase Manhattan Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Christopher Consomer, Telefax: (212) 552-5627; in each case as may be subsequently changed in accordance with Section 8.02 of the Credit Agreement. The Administrative Agent shall 114 2 until such time as it so notifies the Borrower and the Lenders discharge its duties under Section 2.19 through the Auction Administrative Agent and all references to the "Administrative Agent" or to Chase relating to such duties or made in Article 7 shall be deemed to also refer to the Auction Administrative Agent or to any Affiliate of Chase serving in such capacity. All payments to be made to or by the Auction Administrative Agent shall be made through the Administrative Agent. (b) Change of Reference Bank. Bank of America National Trust and Savings Association shall replace Morgan as a Reference Bank. (c) Elimination of Pro Rata Requirement. Clause (i) of Section 8.07(a) of the Credit Agreement is hereby amended by (A) inserting the phrase "such Lender's" between the phrases "percentage of all" and "rights and obligations" in each of the two occasions such phrases appear, (B) deleting the phrase "of such assigning Lender" and (C) inserting the phrase "if any," immediately prior to the work "unless". (d) Effective Date. The "Effective Date" shall mean the date on which this Amendment and Restatement shall become effective in accordance with Section 3 below and all references to "the date hereof", "the date of this Agreement", "hereafter" or other words or phrases of similar import, shall be deemed references to the Original Effective Date. (e) Conforming References. All references in the Credit Agreement and the Exhibits to agents, to the Credit Agreement and to the Short-Term Revolving Credit Agreement shall be conformed to reflect this Amendment and Restatement and the Short-Term Amendment and Restatement. SECTION 2. Representations and Warranties. The Borrower represents and warrants as of the effective date of this Amendment and Restatement to each of the Lenders that: (a) Before and after giving effect to this Amendment and Restatement, the representations and warranties set forth in the Credit Agreement are true and correct in all material respects with the same effect as if made on the effective date hereof, except to the extent such representations and warranties expressly relate to an earlier date. (b) Immediately before and after giving effect to this Amendment and Restatement, no Event of Default or Default has occurred and is continuing. SECTION 3. Conditions to Effectiveness. This Amendment and Restatement shall become effective as of the date hereof when Chase shall have (a) received counterparts of this Amendment and Restatement that, when taken together, bear the signatures of the Borrower, the Original Administrative Agent, Chase and the Majority Lenders, and (b) been advised by the Borrower that the Short-Term Amendment and Restatement has become effective. SECTION 4. Agreement. Except as specifically stated herein, the provisions of the Credit Agreement are and shall remain in full force and effect. As used therein, the terms "Credit Agreement", "herein", "hereunder", "hereinafter", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as amended hereby. 115 3 SECTION 5. APPLICABLE LAW. THIS AMENDMENT AND RESTATEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 6. Counterparts. This Amendment and Restatement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. SECTION 7. Expenses. The Borrower agrees to reimburse the Administrative Agent for all out-of-pocket expenses incurred by it in connection with this Amendment and Restatement, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent. 116 4 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first written above. BURLINGTON RESOURCES INC. By: /s/ Suzanne V. Baer ------------------------------------ Name: Suzanne V. Baer Title: Vice President & Treasurer CHASE BANK OF TEXAS, N.A., as Administrative Agent By: /s/ Russell A. Johnson ------------------------------------ Name: Russell A. Johnson Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Original Administrative Agent By: /s/ Stacey L. Haimes ------------------------------------ Name: Stacey L. Haimes Title: Vice President CITIBANK, N.A., as Syndication Agent By: /s/ David B. Gorte ------------------------------------ Name: David B. Gorte Title: Attorney-In-Fact BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Documentation Agent By: /s/ Paul A. Squires ------------------------------------ Name: Paul A. Squires Title: Senior Vice President 117 5 BANKBOSTON, N.A., as Documentation Agent By: /s/ Terrence Ronan ------------------------------------ Name: Terrence Ronan Title: Director The Lenders CHASE BANK OF TEXAS, N.A. By: /s/ Russell A. Johnson --------------------------------------- Name: Russell A. Johnson Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Stacey L. Haimes --------------------------------------- Name: Stacey L. Haimes Title: Vice President CITIBANK, N.A. By: /s/ David B. Gorte --------------------------------------- Name: David B. Gorte Title: Attorney-In-Fact BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ Paul A. Squires --------------------------------------- Name: Paul A. Squires Title: Senior Vice President 118 6 BANKBOSTON, N.A. By: /s/ Terrence Ronan --------------------------------------- Name: Terrence Ronan Title: Director MELLON BANK, N.A. By: /s/ Roger E. Howard --------------------------------------- Name: Roger E. Howard Title: Vice President WELLS FARGO BANK By: /s/ Ann M. Rhoads --------------------------------------- Name: Ann M. Rhoads Title: Vice President THE BANK OF NEW YORK By: /s/ Peter W. Keller --------------------------------------- Name: Peter W. Keller Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ Michael G. Meiss --------------------------------------- Name: Michael G. Meiss Title: Vice President THE NORTHERN TRUST COMPANY By: /s/ John E. Burda --------------------------------------- Name: John E. Burda Title: Vice President 119 7 WACHOVIA BANK, N.A. By: /s/ Steven M. Takei --------------------------------------- Name: Steven M. Takei Title: Senior Vice President EX-10.26 6 FORM OF THE LOUISIANA LAND & EXPLORATION COMPANY 1 AMENDMENT TO THE LL&E DEFERRED COMPENSATION ARRANGEMENT FOR SELECTED KEY EMPLOYEES WHEREAS, The LL&E Deferred Compensation Arrangement for Selected Key Employees (the "Plan") was adopted by The Louisiana Land and Exploration Company (the "Company"); and WHEREAS, the Company reserved the right to amend the Plan; and WHEREAS, the Benefits Committee appointed by the Chief Executive Officer of Burlington Resources Inc. is authorized to administer the Plan; and WHEREAS, the Benefits Committee is authorized to act on behalf of the Company in amending the Plan; and WHEREAS, no deferrals will be allowed under the Plan with respect to any period after December 31, 1998; and WHEREAS, the Benefits Committee wishes to modify the terms of the deferral arrangement with respect to participants in the employ of the Company or any of its affiliates on January 1, 1999 and who did not become eligible to retire under the Plan prior to January 1, 1999; NOW, THEREFORE, the Plan is hereby amended effective as of January 1, 1999 (such amendment to apply to all deferrals under the Plan regardless of the year of the deferral): 1. Section 3.1 is amended by adding the following sentence at the end thereof: "Anything in this Plan to the contrary notwithstanding, no deferrals shall be allowed under this Plan with respect to compensation for any period after December 31, 1998." 2. A new Article V-A is added, to read in its entirety as follows: "ARTICLE V-A - REVISED DEFERRAL ARRANGEMENT "Anything in this Plan to the contrary notwithstanding, the benefits payable under this Plan in respect of any Participant in this Plan who (i) is in the employ of the Company or any of its affiliates January 1, 1999, and (ii) was not eligible for Retirement on December 31, 1998 (i.e., had not attained age 50 with 10 years of service on December 31, 1998) (such a Participant being hereinafter referred to as an 'Affected Participant,) shall be determined solely in accordance with the provisions set forth below and such Affected Participant and his or her Beneficiaries shall have no right to any benefit under this Plan except as determined pursuant to the provisions set forth below: 2 AMENDMENT LL&E DEFERRED COMPENSATION (1) The balance in the Participant's Compensation Deferral Account ('Account') on December 31, 1998 shall be determined under the provisions of the Plan as in effect prior to January 1, 1999 utilizing the interest rate that would have applied to the applicable deferral in the case of Retirement. (2) With respect to periods on and after January 1, 1999 up to the date of the Participant's termination of employment, the Participant's Account balance determined pursuant to (1) above shall, except as provided below, accrue interest at a rate determined from time to time by the Committee in its sole discretion (the 'Interest Account'). Such interest shall be credited to the Interest Account at the end of each calendar quarter or such other periods as may be determined by the Committee. In lieu of treating the Account as invested in the Interest Account, a Participant may request the Committee (or, with respect to a Participant who is subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the Compensation and Nominating Committee of the Board of Directors of Burlington Resources Inc.) to credit all or a specified percentage of such Account in phantom or notional shares of common stock of Burlington Resources Inc. hereinafter called `Phantom Stock' (the 'Company Stock Account'), in a notional sub-account credited with units in a Standard & Poor's 500 Composite Stock Price Index fund or in a mutual fund selected by the Committee, in its sole discretion, that tracks such index (the 'S&P Account'), or in any combination of the Interest Account, the Company Stock Account and/or S&P Account; however, the Committee (or Compensation Committee, as the case may be) shall not be obligated to honor any such Participant's request. If the Committee (or Compensation Committee, as the case may be) elects to honor any such request, it shall establish a separate notional sub-account(s) for such Participant under his or her Account, which shall be credited (i) with respect to the Company Stock Accounts, with whole and fractional shares of Phantom Stock as of January 1, 1999 (or such other date as the Committee (or the Compensation Committee) designates, and with phantom (notional) dividends with respect to the Phantom Stock, which shall be credited as being reinvested in additional shares of Phantom Stock and (ii) with respect to the S&P Account, with whole and fractional units in the S&P Account as of January 1, 1999 and with any notional distributions on such units, which PAGE 2 OF 5 3 AMENDMENT LL&E DEFERRED COMPENSATION shall be credited as being reinvested in additional units. All credits and debits to the Company Stock Account shall be made based on the Fair Market value per share of the common stock of Burlington Resources Inc. on the applicable date, unless otherwise authorized by the Committee (or the Compensation Committee, as the case may be). For this purpose, 'Fair Market Value' means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which common stock of Burlington Resources Inc. was sold on such date as reported in the NYSE-Corporate Transactions by The Wall Street Journal on such date or, if no such common stock was traded on such date, on the next preceding date on which such common stock was so traded. If the Committee (or Compensation Committee, as the case may be) chooses to not honor any Participant's request to invest his or her Account in the Company Stock Account or S&P Account, the Participant's Account automatically shall be held in the interest Account. Each Participant who has an Account under the Plan may request that all or a specified percentage of his or her Account balances as of any date be reinvested in the Interest Account, Company Stock Account and/or S&P Account; however, the Committee shall not be obligated to honor any such request. This election shall be in such form as the committee (or Compensation Committee, as the case may be) shall establish and shall comply with all requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended, to the extent applicable. A Participant shall not possess any rights of a stockholder of Burlington Resources Inc. with respect to a share of Phantom Stock. (3) If a Participant had elected Option A with respect to any deferrals to which such option was available, payments will continue to be made in accordance with such Option A election (unless the employment of the Participant terminates prior to the date that payment would otherwise be made, in which event subsection (4) below shall be applicable); provided, however, that such payments pursuant to Option A shall be made only to the extent that the Participant's Account, as determined in accordance with the foregoing provisions of this Article V-A, is sufficient to make such payment. The Participant's Account balance shall be reduced by any amounts so paid out pursuant to Option A. (4) Upon the termination of the Participant's employment for any reason, the Participant's Account balance calculated in PAGE 3 OF 5 4 AMENDMENT LL&E DEFERRED COMPENSATION accordance with this Article V-A as of such date of termination of employment shall be paid out in a lump sum in cash as soon as administratively practicable following such date of termination of employment, unless the Participant has elected in accordance with election procedures established by the Committee to instead receive distribution in the form of a 5-year or 10-year annuity. If the Participant elects to receive distribution in the form of a 5-year or 10-year annuity, the Participant will receive his or her Account balance in 5 or 10 (as the case may be) equal annual cash installments, with the first installment being paid in January of the calendar year following the calendar year of the Participant's termination of employment and with the succeeding installments being paid in January of each of the 4 or 9 (as the case may be) succeeding calendar years. The amount of each such installment shall be determined based on the assumption that his or her Account balance calculated in accordance with the foregoing provisions of this Article V-A as of the date of such termination of employment earns interest after such date on the balance from time to time (taking into account reductions in such balance by reason of distributions) at a fixed rate equal to the average of Moody's Corporate Bond Average rates for the prior 3 years (unless the Committee designates a different rate in its sole discretion) and shall be computed in such manner as to cause (to the maximum extent possible) each such installment to be equal. Such installments shall be paid to the Participant or, in the event of his or her death before receiving all such installments, the remaining installments shall be paid to the Participant's Beneficiary. -------------------- This Article V-A shall not apply to a Participant who is not an Affected Participant." PAGE 4 OF 5 5 IN WITNESS WHEREOF, the Benefits Committee has caused this instrument to be executed by its duly authorized officers on this 21st day of December 1998. BENEFITS COMMITTEE BY: /s/ WILLIAM B. USHER ------------------------------------ Vice President, Human Resources & Administration ATTEST: /s/ FREDERICK J. PLAEGER, II - ---------------------------------- Vice President, General Counsel & Assistant Secretary PAGE 5 OF 5 EX-13.1 7 BURLINGTON RESOURCES INC. 1998 ANNUAL REPORT 1 1998 ANNUAL REPORT BURLINGTON RESOURCES [Photo Montage] "We are a global super independent determined to build long-term shareholder value through value-added growth and effective cost management." 2 CONTENTS Operational Highlights ............. 1 Shareholder Letter ................. 2 Review of Operations ............... 5 Financial Review ................... 20 BURLINGTON RESOURCES [Photo of Oil Field Equipment] Burlington Resources is engaged in the exploration, development, production and marketing of oil and gas. The Company conducts activities in several strategic areas, domestically and internationally, and ranks first among U.S. independent oil and gas companies in terms of proved U.S. reserves. BR combines the diverse global opportunities, critical mass and financial strength of a major oil company with the entrepreneurial spirit, flexibility and responsiveness of an independent operator. Our history dates to the 1800's and represents a heritage of growth and success. TERMS USED IN THIS REPORT Bbls Barrels BCF Billion Cubic Feet BCFE Billion Cubic Feet of Gas Equivalent MBbls Thousands of Barrels MMBbls Millions of Barrels MCF Thousand Cubic Feet MMCF Million Cubic Feet MCFE Thousand Cubic Feet of Gas Equivalent MMCFE Million Cubic Feet of Gas Equivalent MMBTU Million British Thermal Units TCF Trillion Cubic Feet TCFE Trillion Cubic Feet of Gas Equivalent 2-D Two Dimensional 3-D Three Dimensional NGLs Natural Gas Liquids DD&A Depreciation, Depletion and Amortization BR Burlington Resources Inc. LL&E The Louisiana Land and Exploration Company Shelf Shallow Waters of the Outer Continental Shelf in the Gulf of Mexico Deep water Water Depths of 600 Feet or Greater in the Gulf of Mexico Proved reserves represent estimated quantities of oil and gas which geological and engineering data demonstrate, with reasonable certainty, can be recovered in future years from known reservoirs under existing economic and operating conditions. Reservoirs are considered proved if shown to be economically producible by either actual production or conclusive formation tests. Proved developed reserves are the portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are the portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for completion. Net acreage and net oil and gas wells are obtained by multiplying gross acreage and gross oil and gas wells by the Company's working interest percentage in the properties. Oil is converted into cubic feet of gas equivalent based on 6 MCF of gas to one barrel of oil. 3 TABLES AND GRAPHS NATURAL GAS RESERVES December 31, (TCF) [Bar Graph] 6.2 6.4 6.4 NATURAL GAS PRODUCTION Year Ended December 31, (MMCF per day) [Bar Graph] 1996 1,603 1997 1,669 1998 1,647 NATURAL GAS PRICES Year Ended December 31, ($ per MCF) [Bar Graph] 1996 $2.05 1997 $2.18 1998 $1.97 4 OIL RESERVES December 31, (MMBbls) [Bar Graph] 1996 305.8 1997 253.7 1998 273.2 OIL PRODUCTION Year Ended December 31, (MBbls per day) [Bar Graph] 1996 91.1 1997 87.2 1998 82.7 OIL PRICES Year Ended December 31, ($ per Bbl) [Bar Graph] 1996 $20.39 1997 $19.24 1998 $13.28 CAPITAL EXPENDITURES* Year Ended December 31, ($ Millions) [Bar Graph] 1996 $804 1997 $1,245 1998 $1,165 RESERVE REPLACEMENT* Year Ended December 31, (Percent of Production) [Bar Graph] 1996 115% 1997 188% 1998 123% 3 yr. avg. 142% RESERVE REPLACEMENT COSTS* Year Ended December 31, ($ per MCFE) [Bar Graph] 1996 $.82 1997 $.77 1998 $1.10 3 yr. avg. $.88 *Includes Acquisitions 5 [Map Graphic] Permian San Juan Anadarko Wind River Williston Deep Water Onshore Gulf Coast Shelf [Globe Graphic] N. America [Globe Graphic] Venezuela Colombia [Globe Graphic] North Sea East Irish Sea Egypt Algeria [Globe Graphic] Indonesia STATISTICAL DATA OPERATIONAL HIGHLIGHTS
OPERATING DATA 1998 1997 1996 Year-end Proved Reserves Gas (BCF) 6,380 6,418 6,231 Oil (MMBbls) 273.2 253.7 305.8 Total (BCFE) 8,019 7,940 8,066 Production Gas (MMCF per day) 1,647 1,669 1,603 Oil (MBbls per day) 82.7 87.2 91.1 Total (MMCFE per day) 2,143 2,192 2,150 Average Sales Price Gas (per MCF) $ 1.97 $ 2.18 $ 2.05 Oil (per Bbl) $13.28 $19.24 $20.39 Average Production Costs (per MCFE) $ .49 $ .51 $ .54 Wells Drilled (Net) 361 317 241 Percentage Successful 88% 89% 90% Gross Wells Drilling at Year end 30 55 77 Net Wells Drilling at Year end 17 29 32
FINANCIAL DATA
(In Millions, Except per Share Amounts) 1998 1997 1996 Revenues $1,637 $2,000 $2,200 Operating Income 218 503 580 Net Income (a) 86 319 335 Basic Earnings per Common Share (a) $ .48 $ 1.80 $ 1.89 Weighted Average Common Shares 177 177 177 Cash Flows from Operations $ 770 $1,122 $ 995 Capital Expenditures 1,165 1,245 804 Total Assets 5,917 5,821 5,683 Long-term Debt 1,938 1,748 1,853 Stockholders' Equity $3,018 $3,016 $ 2,808 Long-term Debt to Capital Ratio 39% 37% 40% Cash Dividends per Common Share $ .55 $ .46 $ .44
(a) Included in 1997 is an $80 million pretax charge ($71 million after tax or $.40 per share) related to the LL&E merger for severance and related exit costs, and transaction costs. Also included in 1997 is a $50 million pretax gain ($31 million after tax or $.18 per share) related to the sales of oil and gas properties associated with the divestiture program. Excluding these non-recurring items, Basic Earnings per Share would have been $2.02 in 1997. Excluding the non-recurring item related to the reorganization charge of $30 million ($18 million after tax or $.11 per share), Basic Earnings per Common Share would have been $2.00 in 1996. 1 6 "Even after a challenging year like 1998, BR's mission remains unchanged. Our objective is to deliver long-term shareholder value through value-added growth and effective cost management." TO OUR FELLOW STOCKHOLDERS SHAREHOLDER LETTER Nineteen ninety-eight was a year which provided us all a vivid reminder of the extremely cyclical nature of our business as the industry experienced considerable volatility, uncertainty and turmoil. Although the year began with a great deal of optimism, an unseasonably mild winter and economic difficulties in key areas of the world led to extremely low oil prices and disappointing natural gas prices by year end. In response to this collapse in commodity prices, the industry's activity level - which began 1998 at record highs - ended the year near historical lows. This environment is taking its toll on the industry, causing many companies severe financial distress, forcing the sale of key assets, necessitating capital spending curtailments and driving industry consolidation. Though BR's financial results have been negatively affected by lower commodity prices, our solid balance sheet, high quality asset base and operational efficiency have allowed us to remain profitable and focused on our long-term value creation strategy. We have made prudent adjustments in our capital program to keep spending levels in line with expected cash flows. However, we have maintained funding for the programs and projects which we believe are key to our goal of delivering sustained value growth over a longer time horizon. Capital expenditures totaled $1.2 billion in 1998 leading to solid operating results. We replaced 123% of 1998 production at a cost of $1.10 per MCFE. Reserve additions included the first reserves bookings from our highly successful Algerian exploration program, as well as substantial additions from the San Juan Basin of New Mexico. During 1998, we continued the program we began several years ago investing significant capital in geological and geophysical activities and lease acquisitions, investments which form the basis for substantial reserve additions in future years. In fact, over the past three years, we have dedicated $477 million to this area of our business. We now expect to begin to reap the benefits of these prior expenditures with a higher percentage of our 1999 exploration program targeted for the drill bit. [Oil and gas platform and other equipment Graphics] During 1998, our production levels declined 2 percent from the previous year. While we anticipated the decline in our oil volumes, our gas production for the year was lower than expected for several reasons: unplanned mechanical downtime, weather related production interruptions and accelerating decline rates, primarily in our Gulf of Mexico operations. Operationally, 1998 was highlighted by a number of successes domestically and internationally. We achieved a record level of production from our San Juan operations for the twelfth consecutive year. Development of the Madden Field in Wyoming moved forward with a successful drilling program in the shallow Lance and Lower Fort Union Formations, the increase in capacity at the Lost Cabin Gas Plant and the initiation of production from our third successful Deep Madison Formation well. 2 7 [PHOTO OF CHAIRMAN, PRESIDENT AND CEO] In the Northwest European Shelf, we began development of our East Irish Sea properties, with plans for first production in the fourth quarter of 1999. We successfully drilled three new wells in Algeria and participated in the development of the giant Qoubba Field. We also expanded the Company's presence in North Africa with our entry into Egypt's Offshore North Sinai Block. Even after a challenging year like 1998, BR's mission remains unchanged. Our objective is to deliver long-term shareholder value through value-added growth and effective cost management. We are committed to maintaining our focus on this goal, irrspective of near-term production gains or commodity price swings, and we are resolute in maintaining the financial strength of the Company to pursue this objective. BR's debt to total capital ratio at year end stood at 39 percent, among the strongest in the E & P sector. With our initial 1999 capital budget set at $750 million, we believe that we will be able to maintain our solid financial position during 1999. Such strength will enable us to quickly react to the opportunities that are sure to be generated in the current operating environment. Admittedly, we have adopted an aggressive long-term growth target. In order to position ourselves for success, we have transformed Burlington Resources from a purely domestic exploitation company into a global Super Independent. Because of the maturity of the United States from an exploration perspective, we are building an international exploration and production business where we believe a number of meaningful growth opportunities exist. Our strong domestic asset base provides a dependable source of cash flow, although there are limited opportunities within this business unit to provide the type of significant growth we desire. The exception, of course, is the Deep water play in the Gulf of Mexico to which we have made a major commitment. Growth initiatives such as our Deep water Gulf of Mexico and international programs require large capital investments and longer lead times. Our strong balance sheet and stable domestic production base provide us with key advantages in pursuing this strategy. We are enthusiastically looking ahead to our 1999 capital program. In North America, our Deep water exploration program will become fully operational, with seven to ten wells planned for the year. In light of the current industry environment, some of our anticipated 1999 Deep water activity may be delayed due to a lack of partner participation. We are completing a plant expansion at the Madden Field, doubling capacity to relieve current production constraints and in preparation for the next Deep Madison well, which is currently drilling. Our San Juan Basin conventional gas development will intensify in 1999 with an expanded Mesaverde infill drilling program. Internationally, in addition to new exploration and appraisal drilling, we will commence development of the MLN Field in Algeria once we receive government approval for our exploitation plan. The Company will drill at least one of the high potential exploration prospects identified on Venezuela's Delta Centro Block in the first half of the year and initiate the second phase of our East Irish Sea development by mid-year 1999. 1998 PROVED RESERVES Total: 8.0 TCFE [Pie Chart] International Gas 7% International Oil 3% Domestic Gas 73% Domestic Oil 17% 1998 DAILY PRODUCTION Total: 2.1 BCFE [Pie Chart] International Gas 3% International Oil 5% Domestic Gas 74% Domestic Oil 18% [Photo of a Treating Plant] 8 "In pursuing our long-term strategy, we strive to maintain a balance between near-term production and long-term value growth." In pursuing our long-term strategy, we strive to maintain a balance between near-term production and long-term value growth. However, we refuse to fall prey to the temptation of adding production volumes that do not generate true, long-term value in order to meet artificially imposed, short-term growth targets. When we face the inevitable trade-offs in capital allocation, as we must in today's lower price environment, our choices are driven by what is best for our shareholders in the long run. Our 1999 capital program reflects this discipline with our decision to reduce capital spending on the Gulf of Mexico Shelf where smaller reserve targets and steeper decline rates have made this area less attractive in relation to other opportunities that can have a significant impact on the Company's underlying value. Last year we saw unprecedented deterioration of equity values among E & P companies and we were certainly not satisfied with the performance of our stock. Although there is a great deal of pessimism about our industry as we approach the millennium, at Burlington Resources we are much more optimistic. BR possesses a high quality domestic asset base that generates considerable cash flow for reinvestment; a well balanced risk portfolio that includes a large inventory of exploitation opportunities capable of maintaining stable annual production without deterioration in overall value; a growing portfolio of high potential growth oriented exploration projects; and, finally, superior financial stability and flexibility. These qualities allow us to generate, nurture and fund high-impact opportunities for the future, even in difficult times. Reduced industry spending in 1999 will undoubtedly tighten natural gas supply and create upward pressure on that commodity's price. As one of the largest holders of U.S. natural gas, we believe our shareholders are superbly positioned to benefit from the inevitable improvement in this market. And, as one of the strongest independent E & P companies, both financially and operationally, we believe our disciplined approach to investment in long-term growth opportunities will deliver competitive value accretion to our shareholders. On the pages that follow, we hope to give you insight into our progress, plans for the future and efforts in positioning ourselves for growth and building long-term shareholder value. In closing, this annual report is dedicated to the memory of a friend and former officer, Hays Warden, retired Senior Vice President and Controller, who recently lost a battle with cancer. Hays contributed much to BR and will be missed. /s/ Bobby S. Shackouls - ---------------------- Bobby S. Shackouls Chairman, President and Chief Executive Officer [Photo Montage] 9 REVIEW OF 1998 OPERATIONS NORTH AMERICA & INTERNATIONAL 5 10 [BURLINGTON RESOURCES NORTH AMERICA GRAPHIC] BUSINESS AT A GLANCE Burlington Resources North America (BRNA) was formed as a separate business unit in 1998 to reinforce the value creation potential of the Company's high quality domestic assets. With reserves of 7.2 TCFE (81 percent natural gas and 19 percent oil), the size and quality of BRNA's asset base is unparalleled among independent oil and gas companies. These assets have yielded solid operating results and a strong production profile since BR's inception and are expected to be the springboard for the Company's future growth. BRNA is the largest independent natural gas producer in the U.S. Proved natural gas reserves at year-end 1998 stood at 5.9 TCF. This reserve base provides an optimal balance between near-term cash flow generation and long-term stability, with a reserve-to-production index of ten years. [Globe Graphic] 6 11 NORTH AMERICA 1998 HIGHLIGHTS Formed BR North America as a separate business unit. Added 734 BCFE of proved reserves. Achieved record gas production levels in the San Juan Basin for the twelfth consecutive year. Expanded the Mesaverde 80-acre infill program to two new pilot areas. Debottlenecked the Lost Cabin Gas Plant at the Madden Field, increasing the plant inlet capacity to 65 MMCF of gas per day. Reduced Madden Field shallow formation average drilling costs by over 35 percent. Completed delineation of Cedar Hills Field in preparation for unitization and waterflooding. Drilled 28 successful wells in the onshore Gulf Coast area. First Deep water Gulf of Mexico production for BR came on stream from the Cinammon prospect at Green Canyon 89. NORTH AMERICA RESERVES December 31, 1998
GAS OIL TOTAL (BCF) (MMBbls) (BCFE) - ------------------------------------- Proved Developed Reserves 4,565 199.2 5,760 Proved Undeveloped Reserves 1,293 27.4 1,458 - ------------------------------------- Total Proved Reserves 5,858 226.6 7,218 - -------------------------------------
"BR North America's primary business objective is to implement a balanced portfolio of projects which, in aggregate, will contribute to BR's corporate value growth goals each year." Technological innovation and cost containment have led to the development of several core assets in the U.S., where investment repeatability and economies of scale have allowed the Company to achieve superior returns. A prime example is the San Juan Basin, where BR is the largest and lowest cost operator. New business development activities are focused in areas that may become core assets in the future. One example of this strategy is the Deep water Gulf of Mexico, where the Company has amassed a 185-block leasehold inventory. BRNA's primary business objective is to implement a balanced portfolio of projects which, in aggregate, will contribute to BR's corporate value growth goals. Activities are organized around core asset and strategic focus areas. Each focus area develops strategies consistent with its unique strengths and opportunities. Investment options include exploration, exploitation, developmentand acquisition projects, as well as other business opportunities designed to enhance the value of core operations. The Company continuously evaluates its asset portfolio based on investment performance and anticipated investment potential. This evaluation drives capital allocation and business strategies for each asset area. During 1998, oil and gas capital expenditures related to BRNA's operations totaled $921 million: $407 million for exploration; $491 million for development projects; and $23 million related to proved acquisitions. As a result of these investments, the business unit added 734 BCFE to its proved oil and gas reserves, achieving a reserve replacement ratio of 102 percent. Reserve replacement costs averaged $1.25 per MCFE. These 1998 results represent continuing strong operating performance in the U.S. Over the last three years, BR's U.S. reserve replacement has averaged 131 percent, while its reserve replacement costs have averaged $.89 per MCFE. SAN JUAN BASIN The San Juan Basin is the cornerstone of BR, providing significant earnings and the cash flow to fuel the Company's long-term growth strategy. The assets in this basin account for approximately half of BR's gas reserves and daily gas production. These assets generate more than three times the cash flow required to maintain production levels in this basin. [Gas Plant and South Louisiana Graphics] 7 12 NORTH AMERICA 1998 PROVED RESERVES Total: 7.2 TCFE [PIE CHART GRAPHIC] Onshore Oil 16% Offshore Oil 3% Onshore Gas 75% Offshore Gas 6% [PIE CHART GRAPHIC] North America 1998 Daily Production Total: 1.9 BCFE Onshore Oil 15% Offshore Oil 5% Onshore Gas 63% Offshore Gas 17% As the largest operator and the lowest cost producer in the basin, BR continually adds significant value by using its technical expertise to optimize costs. The San Juan Basin, located in northwest New Mexico and southwest Colorado, is one of the most prolific hydrocarbon producing basins in the U.S. The four major gas producing horizons, the Fruitland Coal, Pictured Cliffs, Mesaverde and Dakota, in the basin range in depth from 1,000 to 8,500 feet. In 1998, BR achieved a record level of gas production in the basin for the twelfth consecutive year. At year end, net daily gas production reached over 840 MMCF per day. Over the last ten years, BR has grown production in the San Juan Basin at an annual compound rate of over 15 percent. While the rate of growth has moderated in recent years as the coalbed methane play has matured, the growth rate over the last five years has averaged seven percent. Contributing approximately half of BR's net gas production from the San Juan Basin, the Fruitland Coal is the largest producing coalbed methane reservoir ever discovered worldwide. Because of BR's development of the Fruitland Coal, it is the world's largest producer of coalbed methane. BR also operates the Val Verde Plant, the basin's largest treating plant, along with approximately 420 miles of gathering lines and 14 compressor stations. Optimization projects such as recavitations and wellsite compression have added net incremental coal seam gas volumes in each of the last five years, to a peak of over 460 MMCF of gas per day in early 1998. Net annualized coal seam gas volumes remained relatively constant at 450 MMCF per day for the year. In the conventional horizons, a major focus of the efforts has been the Mesaverde Formation which was originally developed in the 1950's on 320 acre spacing and down spaced in the early 1970's on 160 acre spacing. In 1994, BR undertook an extensive study of the formation across the entire basin. Results indicated that down-spaced drilling (infill drilling) on 80 acre spacing could increase gross recoverable gas reserves by approximately 1.5 TCF across the basin. A pilot infill drilling program begun in 1997 was expanded in 1998 to include two additional pilot areas. To date, BR has drilled 38 Mesaverde infill wells, investing about $9 million. New basin-wide increased density pool rules that allow for 80 acre infilling of the Mesaverde formation were approved by the New Mexico Oil Conservation Division in February 1999. BR plans to drill 50 new wells in 1999. By 2000, the development program is planned to level out at 90 wells per year. The Company plans to spend about $80 million to drill in excess of 400 infill wells over the next five years. In total, the Mesaverde infill program exposes the Company to significant gas reserves at a cost to add of about $.32 per MCF. Another effort started in 1998 was the Lewis Shale project, involving data gathering from one of the major source rock shales in the basin. Results are promising, with the average gross production increase for the first 29 completions at 300 MCF of gas per day and a cost to add of around $.30 per MCF of gas. The project will continue in 1999 by adding Lewis Shale to existing Mesaverde well bores with 66 completions planned. If results continue to be favorable, the Company could expand the program to recomplete over 1,000 wells in the Lewis Shale over the next five years. Total net costs for the expanded program would be approximately $145 million, resulting in significant increases in reserves. [Pipe and gas plant Graphics] 8 13 NORTH AMERICA PRODUCTION & PRICES Year Ended December 31,
1998 1997 1996 - --------------------------------------------------------------- Production Gas 1,580 1,592 1,520 (MMCF per day) Oil 66.2 68.3 72.2 (MBbls per day) - --------------------------------------------------------------- Average Sales Prices Gas (per MCF) $ 1.94 $ 2.16 $ 2.02 Oil (per Bbl) $ 13.31 $ 19.32 $ 20.64 - ---------------------------------------------------------------
In 1997, BR continued its exploratory efforts in the Deep Pennsylvanian Formation. Two exploratory wells were drilled that confirmed reservoir quality rock and hydrocarbon sourcing. During 1998, the Company acquired 350 square miles of 3-D seismic aimed at locating structural or stratigraphic trapping of hydrocarbons and delineating prospects for 1999. BR holds 815,000 gross acres in the Pennsylvanian Formation. While this is a risky opportunity, the target sizes are large enough that success could result in substantial growth in production. Early in 1998, BR acquired additional interest in the Allison Unit. The acquisition substantially increased the Company's ownership in the unit and added proved reserves of 75 BCFE. It allowed BR to accelerate development activity in the unit in 1998 and into 1999. The Company will continue to pursue strategic acquisitions that strengthen its significant position in the basin. PERMIAN BASIN BR's position in the Permian Basin comprises in excess of 662,000 net acres in several significant trends. These properties continue to provide a large number of opportunities to add both oil and gas reserves. Net production in the basin was approximately 85 MMCF of gas per day and 12,600 Bbls of oil per day in 1998. The Company's primary asset in the Permian Basin is the Waddell Ranch, where BR controls nearly 77,000 gross or 37,000 net acres. Since assuming operations in 1991, BR has continuously increased oil production on the Waddell Ranch primarily through exploitation and optimization. In 1998, approximately 154 total projects were completed on the Waddell Ranch at a cost of $19 million. In 1999, the Company will implement more than 150 projects to increase recoveries from existing waterfloods through expansion and optimization. ANADARKO BASIN [GAS PLANT GRAPHIC] The Anadarko Basin offers a balanced, diverse inventory of exploitation and exploration opportunities. During 1998, BR spent $63.5 million in the basin, completing 55 drilling and workover projects and acquiring 265 square miles of 3-D seismic data surveys. Average net gas production for the year from the basin was 107 MMCF of gas per day and oil production reached 600 Bbls per day. A consolidated acreage position of approximately 250,000 net acres, in conjunction with over 700 square miles of proprietary 3-D seismic data, yields a significant competitive advantage for growth in the coming years. In addition, BR's focus on reducing development costs should allow enhanced economic viability of low-risk exploitation projects in the future. WILLISTON BASIN The Williston Basin, located in western North Dakota and northeast Montana, is one of BR's primary oil producing areas. During 1998, 104 projects were completed in the basin at a cost of $89 million. At year end, net daily oil production for the basin was approximately 22,000 Bbls per day. The Company's activity in 1998 focused on the Cedar Hills and East Lookout Butte Fields. These fields are located along the Cedar Creek Anticline and are part of the Red River "B" "The cornerstone of BR is the San Juan Basin, providing significant earnings and the cash flow to fuel the Company's long-term growth strategy." 9 14 NORTH AMERICA WELLS DRILLED Year Ended December 31, 1998 1997 1996 - --------------------------------------------- PRODUCTIVE Exploratory 16.3 29.0 23.3 Development 297.7 247.5 189.3 - --------------------------------------------- DRY Exploratory 27.5 26.5 17.5 Development 12.5 8.5 5.9 - --------------------------------------------- TOTAL NET WELLS 354.0 311.5 236.0 - --------------------------------------------- NORTH AMERICA CAPITAL EXPENDITURES Year Ended December 31, ($ Millions)
1998 1997 1996 - ---------------------------------------------------- OIL AND GAS ACTIVITIES $ 921 $ 927 $ 676 - ---------------------------------------------------- PLANTS AND PIPELINES 60 40 45 - ---------------------------------------------------- ADMINISTRATION 45 32 8 - ---------------------------------------------------- TOTAL $1,026 $ 999 $ 729 - ----------------------------------------------------
NORTH AMERICA UNIT COSTS Year Ended December 31, ($ per MCFE)
1998 1997 1996 - ----------------------------------------------------------- AVERAGE PRODUCTION COSTS $ .47 $ .50 $ .52 - ----------------------------------------------------------- DD&A Rates $ .59 $ .58 $ .57 - -----------------------------------------------------------
Trend. During 1998, the Cedar Hills Field delineation was completed in preparation for unitization and secondary recovery. If unitization of the field proceeds on schedule, plans for 1999 include constructing waterflood facilities, infill drilling and converting producing wells into water injectors. Production response to waterflooding is anticipated in 2001. In the East Lookout Butte Field, BR is operator of a horizontal waterflood program. During 1998, BR drilled 24 infill wells and expects to complete infill drilling by year-end 1999. With horizontal drilling technology and expertise, BR believes it has a key technical advantage in the Williston Basin. The Company has drilled over 300 horizontal wells in the basin and over 95 percent of the 1999 drilling budget for the basin will be spent on approximately 50 horizontal wells. While most E&P companies use outside directional drilling personnel on their horizontal wells, BR does all of its directional work with its own wellsite, geoscience and engineering staff. This has proven to be cost effective and has allowed BR to develop world class horizontal drilling capabilities, ultimately translating into higher well productivity and reserve recovery. This technical knowledge will be even more valuable when applied to other domestic and international opportunities requiring precision directional drilling skills. WIND RIVER BASIN BR's major asset in the Wind River Basin is the Madden Field in central Wyoming, an asset whose value is being significantly enhanced by applying the Company's engineering expertise. The field produces natural gas from multiple horizons, ranging in depth from 5,500 to over 24,000 feet. The Company's working interest varies by horizon, from 27 to 56 percent. The Madden Deep Unit, operated by BR, covers 70,000 gross acres. There are currently three well completions in the prolific deep Madison Formation and 58 producing wells in the shallower formations. Increased drilling activity in the shallow horizons in 1998 overcame the natural field decline and resulted in gross shallow gas production increasing from 72 MMCF of gas per day early in the year to around 92 MMCF of gas per day at year end. The total year-end field production of 140 MMCF of gas per day is the highest sustained rate ever recorded in this 30 year old gas field. With commissioning of additional gas processing capacity in the field, gross field production is expected to grow to approximately 240 MMCF of gas per day by the end of 1999. During 1998, the shallow drilling program was concentrated in the Lower Fort Union and Lance Formations. These programs were quite successful, with 13 wells drilled during the year. Completed well costs in Lower Fort Union wells have been reduced from an average of $1.4 million in late 1997 to under $900 thousand on the wells drilled in 1998. Additionally, with the average well now being drilled in 12 to 14 days, drilling time has been cut in half. The 1999 drilling program includes drilling 20 more Lower Fort Union and shallow Lance wells. In 1998, BR successfully connected and initiated production from the Bighorn #4-36, the third well completed in the deeper Madison Formation. Completed in 1997, this well extended the lowest known gas in the pool, increasing proved gross reserves to approximately 2 TCF of gas. Unlike the gas produced from the shallow formations, the Madison Formation contains carbon dioxide and hydrogen sulfide and must be processed prior to sale. Constructed for this purpose, the Lost Cabin Gas Plant was debottlenecked during the year, increasing gross inlet capacity from 50 to 65 MMCF of gas per day. Because production levels continue to be constrained by plant capacity, an expansion is currently under construction to provide an incremental inlet capacity of 65 MMCF of gas per day in the third quarter 1999. 10 15 "With horizontal drilling technology and expertise, BR believes it has a key technical advantage in the Williston Basin."
NORTH AMERICA PRODUCTIVE WELLS December 31, 1998 Gross Net - ----------------------------------- Oil 5,559 2,920 - ----------------------------------- Gas 10,667 6,004 - -----------------------------------
BR is currently drilling the fourth Madison well. The Bighorn #5-6 was spud in January 1999, marking the beginning of the next development phase of the Madison Formation. This well provides a necessary take point to drain existing proved reserves. With continued encouraging performance of the existing producing wells, plans are to drill lower on the structure following the Bighorn #5-6. The Company believes drilling lower on this structure could possibly double proved reserves in the formation. In late 1998, BR reached agreement to participate in the construction of additional gathering capacity to move gas from central Wyoming toward available transportation and away from the pipeline constraints. This investment by BR is key to optimizing the value of its current and future Madden natural gas reserves. Cost containment, an aggressive development program and an innovative gas marketing and transportation plan combine to maximize the value of this world class asset, which should provide BR with steady cash flow and earnings for the next two decades or more. ONSHORE GULF COAST The Company has a long history of exploration and development in south Louisiana. Its 600,000 acres of fee lands provide a competitive advantage in an area where acreage costs are high, leasehold positions are difficult to maintain and seismic data is expensive to gather. Most of the fee lands are now covered by 3-D seismic data, a significant factor in the Company's successful drilling program in 1998. In 1998, BR participated in the drilling of 16 successful wells, which not only sustained net production but increased it from 134 MMCF of gas per day and 8,300 Bbls of oil per day in 1997 to 160 MMCF of gas per day and 9,600 Bbls of oil per day in 1998. An example of BR fee land operations is at Four Isle Dome, located in Terrebonne Parish, about 25 miles southwest of Houma, Louisiana. The field was first discovered in 1927 and contains 35 pay sands ranging in depth from 5,700 to 17,500 feet. Since 1997, BR has increased its working interest from 25 percent to 45 percent and assumed operatorship. This has allowed BR to drill aggressively, resulting in four successful wells and one recompletion, bringing the total active well count to seven at year end. Gross daily gas production increased from under one MMCF of gas per day to over 40 MMCF of gas per day over this period. Continued interpretation of a 55 square mile 3-D seismic survey has yielded at least four additional prospects to be drilled in the Four Isle Dome area in the next 12 to 18 months. The Company is highly optimistic about these prospects because 3-D seismic data shows amplitude events that correlate well with productive reservoirs. Successful results could yield additional volume increases similar to those achieved in 1998. Other unexploited flanks of the Four Isle Dome remain to be mapped, which should continue the rejuvenation of the field. Another area of onshore activity in 1998 was in the Transition Zone, an area covering five miles of Louisiana coastline from the Sabine River to Vermilion Bay. The Company's current acreage position includes 9,400 gross acres, supported by 3-D seismic data of over 1,000 square miles. The Transition Zone contains objectives in multiple formations ranging from 13,000 to 21,000 feet. Although the Transition Zone drilling represents higher risk, potential reserve targets of 20 to 800 BCF of gas led the Company to participate in a venture with a 50 percent working interest. Two non-commercial wells have been drilled to date and a third well was in progress at year end. During 1998, the Gulf Coast program expanded into south Texas where the Company participated in drilling 12 successful wells. At Armstrong Ranch in Jim Hogg County, BR has found new opportunities in another older production area. This field was 11 16
NORTH AMERICA ACREAGE December 31, 1998 GROSS NET - -------------------------------------- DEVELOPED ACRES 5,658,325 3,017,448 - -------------------------------------- UNDEVELOPED ACRES 12,074,044 9,697,818 - --------------------------------------
"Most of the fee lands are now covered by 3-D seismic data, a significant factor in the Company's successful drilling program in 1998." discovered in 1959 using reflection 2-D seismic data, with first production occurring in the same year. To date, the field has produced in excess of 650 BCF. In 1998, BR successfully drilled two wells in the Wilcox Formation which were awaiting final completion at year end. When a pipeline is completed, the two wells are anticipated to produce at a gross combined rate of 20 MMCF of gas per day. Three additional Wilcox Formation wells are scheduled for drilling in 1999, as well as a lower Wilcox test. With a total acreage position of over 860,000 acres in south Louisiana and south Texas and many exploitation opportunities using 3-D seismic data, BR looks optimistically to its onshore program to help offset the steep decline on its Gulf of Mexico Shelf, which is consistent with industry experience in this area. GULF OF MEXICO SHELF BR's history on the Gulf of Mexico Shelf dates back to the 1970's. The "Shelf" is defined as water depths less than 600 feet. BR invested $218 million on the Shelf in 1998, with net gas production averaging about 307 MMCF of gas per day and net oil production averaging 14,000 Bbls per day for the year. At year end, the Company had an interest in a total of 236 Shelf leases, many of which are held by production. In addition to non-operated interests in numerous blocks, BR operates 60 platforms and 35 fields. Although the industry's drilling activity on the Shelf has increased dramatically over the last ten years and many completion technology improvements have been made, production has remained fairly constant. Smaller reserve targets, steeper production decline rates and depressed commodity prices led BR to reassess the economic viability of exploration and exploitation programs on the Shelf. As a result, BR is reducing its 1999 capital commitment by almost 80 percent, to around $50 million, focusing on low risk exploitation activities. Such activities include South Timbalier 148, where the Company owns a 40 percent working interest. It is located 80 miles south of New Orleans, Louisiana, in 110 feet of water. BR's interpretation of 3-D seismic data has resulted in the drilling of seven successful wells, with net production on the block increasing from two MMCF of gas per day and 25 Bbls of oil per day in 1994, to a peak of 54 MMCF of gas per day and 2,100 Bbls of oil per day at mid-year 1998. In 1998, BR participated in the drilling of the B-2 and A-9/A-9ST wells, recompleted the B-1 well, and achieved an annualized production increase of 10 MMCF of gas per day and 400 Bbls of oil per day. At year end, the net gas production in the field had declined to 23 MMCF of gas per day and oil production to 660 Bbls per day, exemplifying the steep production declines being experienced by all participants on the Shelf. BR's interpretation of additional 3-D seismic data in the surrounding area prompted the Company to negotiate a farmin of the adjacent South Timbalier Block 149. At year end, the E-4 exploratory well was drilling near the projected total depth of 21,776 feet. High Island A-371, located 115 miles southeast of Galveston, Texas, in 400 feet of water, is a 100 percent BR-owned field that first produced in 1996. At its peak in 1996, High Island A-371 produced at a gross rate of 100 MMCF of gas per day. At year-end 1998, gross production declined to around 14 MMCF of gas per day. BR has identified six additional drilling opportunities on the block and will drill several of these prospects in 1999, which could help turn around the natural production decline of this field. [offshore platform graphic] 12 17 "BR will continue to pursue opportunities in the Deep water in 2000 and beyond." NORTH AMERICA PLANS FOR 1999 Drill 50 wells in the Mesaverde 80-acre infill program. Accomplish 66 Lewis Shale completions in existing Mesaverde well bores. Drill approximately 50 horizontal wells in the Williston Basin. Drill the fourth deep Madison well, the Bighorn #5-6, at the Madden Field and complete the Lost Cabin Gas Plant expansion, bringing the inlet capacity to 130 MMCF of gas per day. Drill 7 to 10 wells in the Gulf of Mexico Deep water program, including BR's first operated prospect, Spoon, at Ewing Bank Block 913. GULF OF MEXICO DEEP WATER Hydrocarbon basins in the U.S. have continued to mature, making economically attractive exploration opportunities increasingly rare. The Deep water Gulf of Mexico represents one of the last world class exploration opportunities in the U.S. The Company believes that the Deep water provides an excellent opportunity for value-added growth in North America. A significant part of BR's future growth strategy revolves around its Deep water commitment. The Company's exploratory Deep water acreage is diverse, covering water depths from 600 to 8,000 feet, but is focused on several geologic trends. The acreage position offers a balance of near-term and long-term drilling opportunities, while also having the scale to provide for repeatable investments. BR has identified approximately 75 leads or prospects on the basis of 2-D and 3-D seismic data. At year end, BR had 185 blocks in its inventory, making it one of the largest leaseholders in the Deep water. In December 1998, production came on stream at Green Canyon Block 89, the Cinnamon prospect, from the A-1 Well. Three additional wells are planned for the first phase of development on this block in which BR owns a 17 percent interest. Although BR's Deep water program is not scheduled to be fully underway until 1999, the Company participated in the drilling of three wells in 1998, none of which found commercial quantities of hydrocarbons. In preparation for its fully operational Deep water drilling program, BR contracted for the construction of a semisubmersible drilling rig capable of operating in water depths up to 7,500 feet. The rig will be delivered in the third quarter of 2000 and will be exclusively available to BR for up to six years. BR's Deep water drilling program is scheduled to accelerate in 1999, with seven to ten wells planned. In light of the current industry environment, some of our anticipated 1999 Deep water activity may be delayed due to a lack of partner participation. In total, the 1999 program should expose the Company to significant reserve potential. The first well to be drilled in the 1999 program is the BR-operated Spoon prospect, located in Ewing Bank Block 913 in approximately 800 feet of water. In addition, joint ventures have been forged between BR and other companies to share risk and to gain exposure to other exploration opportunities. One such venture will begin drilling in 1999. In the fourth quarter of 1999, the joint venture will take delivery of a drillship capable of drilling in up to 10,000 feet of water. The rig will be available to the joint venture for up to five years. BR will continue to pursue opportunities in the Deep water in 2000 and beyond. The Company projects that its typical program in the future will consist of drilling up to ten new wells per year. Based on its success from an aggressive exploration program, BR plans to commit the capital to fund its drilling program, as well as the capital necessary for future development. [offshore drilling rig graphic] 13 18 [BURLINGTON RESOURCES INTERNATIONAL GRAPHIC] BUSINESS AT A GLANCE BR entered the international oil and gas business through two major events: its merger with LL&E, which had an established international presence, and the acquisition of approximately 700 BCF of undeveloped proved and probable gas reserves in the East Irish Sea. In 1998, BR affirmed its commitment to a global presence as a key element of its long-term growth strategy by forming Burlington Resources International (BRI). BRI's proved reserves at year-end 1998 totaled 801 BCFE, approximately 35 percent oil and 65 percent natural gas. The proved reserves are concentrated in the Northwest European Shelf, in the Irish Sea and the United Kingdom and Dutch sectors of the North Sea. BRI also has proven reserves in Algeria, Colombia and Indonesia. Although it is a relatively small part of BR's total business today, BRI is positioning itself to provide significant future growth to BR through high potential exploration and development opportunities. [GLOBE GRAPHIC] 14 19 INTERNATIONAL 1998 HIGHLIGHTS Formed BR International Inc. as a separate operating unit. Successful exploration discovery on North Sea Block 21/12. The well tested at 8,200 Bbls of oil per day. Participated with a 26 percent interest. Reached transportation and processing agreements for the East Irish Sea Dalton and Millom Fields. Eventful year in Algeria with the discovery of the MLSE Field, commencement of Qoubba field development and successful drilling of 3 wells in Block 405. Entered into an agreement to earn a working interest in both exploration and development opportunities in the Offshore North Sinai Concession in Egypt. Completed environmental and pre-drilling engineering work at Delta Centro Block in Venezuela in preparation for 1999 drilling program. Participated in a 22-year agreement to provide up to 325 MMCF of gas per day to Singapore from the Indonesian Kakap Block in the West Natuna Sea.
INTERNATIONAL RESERVES As of December 31, 1998 GAS OIL TOTAL (BCF) (MMBbls) (BCFE) - ------------------------------------ Proved Developed Reserves 258 14.5 345 - ------------------------------------ Proved Undeveloped Reserves 264 32.1 456 - ------------------------------------ Total Proved Reserves 522 46.6 801 - ------------------------------------
"BRI has adopted a strategy with three major elements: focus, balance and discipline." In building its portfolio, BRI adopted a strategy based on focus, balance and discipline. Focus translates into a decision to concentrate in a limited number of geographical areas. Each area must be capable of becoming material to BR and offer potential for repeatable or continued investment opportunities to provide sustainable growth. Balance refers to building a portfolio which includes acquisition, exploitation and exploration opportunities, as well as creating a mix of short, medium and longer term projects that can provide a sustainable and growing production profile. Finally, although a sense of urgency is crucial to grow the international business and contribute to corporate growth goals, BR takes a disciplined approach when considering new projects and ventures. This approach assures that opportunities create value and are beneficial to the corporate portfolio. An objective assessment was undertaken in 1998 of hydrocarbon basins around the world based on geotechnical, commercial and geopolitical risks balanced with BR's knowledge and competencies. As a result, five areas were selected for business development activities: the Northwest European Shelf; North Africa; Northern South America; the Far East; and West Africa. Strategies for the first four are centered around expanding the Company's existing assets in these areas, while an entry strategy has been developed for West Africa, where the Company currently has no operations. Oil and gas capital expenditures devoted to international activities totaled $136 million in 1998: $102 million for exploration; $30 million for development activities; and $4 million related to proved acquisition activities. Proved reserves added during the year totaled 225 BCFE. International projects are typically viewed on a multi-year investment cycle. As a start-up operation, single year statistics are somewhat distorted. Nonetheless, BR's international reserve replacement averaged 260 percent over the three-year period 1996 to 1998, and reserve replacement costs over the same period averaged $.82 per MCFE. [Oil and gas equipment graphic] 15 20 INTERNATIONAL 1998 PROVED RESERVES Total: 801 BCFE [PIE CHART GRAPHIC] Oil - 35% Gas - 65% INTERNATIONAL 1998 DAILY PRODUCTION Total: 166 MMCFE [PIE CHART GRAPHIC] Oil - 60% Gas - 40% [NORTH SEA DRILLING PLATFORM GRAPHIC] NORTHWEST EUROPEAN SHELF BR's Northwest European Shelf focus area includes the U.K., Dutch and Danish sectors of the North Sea, as well as the East Irish Sea. Current production comes from the U.K. and Dutch sectors of the North Sea, where in 1998 the Company's average net production was 66 MMCF of gas per day and 11 MBbls of oil per day. In the U.K. North Sea, production is from the T-Block Complex, where BR has an 11 percent working interest, and from the Brae Complex, where the Company has a six percent working interest. Although base production is declining in both fields, this is being mitigated by new exploration and development opportunities within each area. In 1999, newly identified leads at Brae will be evaluated for drilling. Also, one well is scheduled for drilling at the T-Block Thelma Field to extend field limits. The Company participates in natural gas exploration and production in the Dutch and Danish sectors of the North Sea. Net production in this area averaged 30 MMCF of gas per day in 1998. In 1999, three wells are scheduled to be drilled in the Dutch North Sea. In the Danish North Sea, BR participated in a new license which was awarded for exploration on the Ribe and Viborg Blocks. During 1999, seismic evaluation of leads on these blocks will be conducted, with exploratory drilling expected in 2000. Work commitment under the license requires acquisition of 170 square miles of seismic data and drilling of three wells. The Company has assessed the reserve potential of this area to be significant. In mid-1998, BR acquired a 20 percent working interest in central North Sea Blocks 21/12 and 21/13 through two farmins. In August 1998, an exploratory discovery was made when the 21/12-3 well encountered a 100-foot thick oil producing Jurassic sandstone formation. BR has a 26 percent interest in this well as a result of a farmin. The well, located 80 miles off the coast of Scotland in 279 feet of water, tested at a stabilized rate of 8,200 Bbls of oil per day. Development options are currently being evaluated. BR's most exciting project on the Northwest European Shelf is in the East Irish Sea. In late 1997, BR acquired ten licenses in the East Irish Sea, encompassing 267,000 acres at a cost of $143 million, including a 90 percent working interest in seven operated, undeveloped gas fields with estimated gross recoverable reserves in excess of 700 BCF. The properties are located 25 miles offshore in approximately 100 feet of water and are covered by high quality 3-D seismic surveys. BR originally included construction of processing and transportation facilities into the project timing and economic evaluation. Development plans were accelerated and economics were enhanced when an agreement was reached with a nearby operator to transport and process the gas from two sweet gas fields, Dalton and Millom. The Company also received development and operatorship approval for Dalton Annex B from the U.K. government. The first development well for these fields was spud in February 1999, with a total of three wells scheduled for the year. Subsea completion of these wells will initiate first production in October 1999, with gross production reaching 95 MMCF of gas per day by year end. Additional drilling, completion and facilities work is scheduled in 2000. Gross production from the project is expected to reach 170 MMCF of gas per day. Development options for the five remaining sour gas fields are being evaluated. 16 21 INTERNATIONAL PRODUCTION & PRICES YEAR ENDED DECEMBER 31,
1998 1997 1996 - --------------------------------------------------------------- PRODUCTION Gas 67 77 83 (MMCF per day) Oil 16.5 18.9 18.9 (MBbls per day) - --------------------------------------------------------------- AVERAGE SALES PRICES Gas (per MCF) $ 2.56 $ 2.69 $ 2.56 Oil (per Bbl) $13.16 $18.95 $19.45 - ---------------------------------------------------------------
INTERNATIONAL CAPITAL EXPENDITURES YEAR ENDED DECEMBER 31, ($ MILLIONS)
1998 1997 1996 - -------------------------------------------------------- Oil and Gas Activities $136 $228 $ 62 - -------------------------------------------------------- Plants and Pipelines -- 10 9 - -------------------------------------------------------- Administration 3 8 4 - -------------------------------------------------------- Total $139 $246 $ 75 - --------------------------------------------------------
INTERNATIONAL UNIT COSTS YEAR ENDED DECEMBER 31, ($ PER MCFE)
1998 1997 1996 - ---------------------------------------------------------------- Average Production Costs $ .71 $ .60 $ .71 - ---------------------------------------------------------------- DD&A Rates $ 1.06 $ 1.08 $ 1.13 - ----------------------------------------------------------------
NORTH AFRICA The Company's operations on Algeria's Block 405, located in the Berkine Basin of eastern Algeria, are the centerpiece of the Company's North African focus area. Industry activity in this highly prospective area has discovered in excess of three billion Bbls of recoverable oil reserves since the country opened to foreign investment in 1989. BR was a relatively early entrant into Algeria, having initiated a production sharing agreement in 1993 that gave the Company a 65 percent working interest, before participation by Sonatrach, the state-owned oil company, in two exploration blocks in the Saharan Berkine Basin, Blocks 215 and 405. As operator, BR has drilled 12 wells on Block 405 so far and all have encountered hydrocarbons. Appraisal of these accumulations is ongoing. However, the Company now believes it has discovered at least three commercial oil fields, the MLN Field, the MLSE Field and the MLNE Field which is an extension of the giant Qoubba Field, discovered on adjacent blocks. A fourth discovery well, the MLC-1, is currently under evaluation. The Company is also appraising deeper accumulations encountered in at least three wells. The nature and full extent of this deeper reservoir is not yet known. Proved reserves for Block 405 were booked in 1998 with the potential to increase significantly with successful delineation of recent discoveries. In compliance with its production sharing agreement, the Company relinquished a portion of Block 405 in 1998 as it entered the second five-year exploration phase of the contract. The area relinquished included a portion of the unexplored area of the block, as well as the MLE gas discovery, which was the first well drilled on the block. BR also relinquished Block 215 in 1998. Capital and exploration expenditures in Algeria totaled $45 million in 1998. Of this total, $33 million was devoted to exploratory, development and appraisal drilling, $11 million was related to seismic evaluation and $1 million was committed to production facility construction. Two wells were drilled in the central portion of Block 405 in 1998. In August, BR began drilling the MLW-1, a wildcat well 8.4 miles southwest of MLN-4, which had encountered the presence of a deeper Devonian reservoir in addition to the Triassic TAG. The MLW-1 encountered hydrocarbons at both intervals. While the TAG Formation failed to produce fluids to the surface, the Devonian flowed 1,545 Bbls of oil per day and 3 MMCF of gas per day, confirming the presence of a productive Devonian reservoir in the western portion of the block. Following the completion of the MLW-1, the rig was moved to drill the MLN-5, 6.8 miles northeast of the MLW-1 and 1.6 miles southwest of the MLN-4. The well tested at a rate of 6,820 Bbls per day of 44 degree API gravity oil and 7 MMCF of gas per day from the Devonian Formation, but was not productive in the TAG reservoir. Two other thin hydrocarbon zones identified were not tested and will be evaluated in future drilling. The presence of the Devonian at MLN-4, MLN-5 and MLW-1 is highly encouraging and could indicate a very productive and widespread accumulation on Block 405. Additional drilling in 1999 should provide additional data in determining the extent and potential of the reservoir. At year end, the Company was planning development for the MLN Field. The plan will be submitted to the government in 1999 and, with timely approval by Sonatrach, production at the field is anticipated in late 2001. [PIPE GRAPHIC] 22 INTERNATIONAL WELLS DRILLED YEAR ENDED DECEMBER 31,
1998 1997 1996 - --------------------------------------------------------------- Productive Exploratory 3.5 2.4 2.0 Development 1.8 1.3 2.4 - --------------------------------------------------------------- Dry Exploratory 2.0 1.3 0.6 Development -- 0.1 -- - --------------------------------------------------------------- Total Net Wells 7.3 5.1 5.0 - ---------------------------------------------------------------
INTERNATIONAL PRODUCTIVE WELLS DECEMBER 31, 1998
Gross Net - ------------------------------------------------------ Oil 134 19 - ------------------------------------------------------ Gas 59 5 - ------------------------------------------------------
In June of 1998, BR announced the discovery of a new field, MLSE, with the successful drilling of the MLSE-1. Located in the southeastern portion of the block, the well encountered four hydrocarbon bearing intervals. The well flowed at a combined rate of 14,638 Bbls of oil per day and 107 MMCF of gas per day. In the fourth quarter, the MLSE-2 was drilled, establishing the limits of the two main producing horizons and was suspended as a potential water injector. In late 1998, additional 3-D seismic survey work was initiated to cover the southeast portion of the block. When this survey is completed in 1999, additional drilling will more fully appraise the extent of the MLSE Field. The MLNE Field, representing approximately six percent of the giant Qoubba Field, which extends onto the block from the north, is currently under development. Production is anticipated in 2002. BR will drill six more wells on Block 405 in 1999. A total capital commitment of $84 million has been earmarked for drilling, facilities development and completion of seismic survey work. BR's approach to exploration includes allocating a small part of its portfolio to frontier exploration opportunities. These are high-risk opportunities in relatively unexplored regions that provide tremendous upside potential if a discovery is made. In 1998, BR took a 20 percent interest in a frontier exploration project of this type in Eritrea. The concession covers nine million gross acres and carries a commitment to drill at least three wells. The first well was drilled in 1998 and although the well was unsuccessful, the fact that free oil was encountered in sidewall cores was very encouraging. The second well on the concession was also unsuccessful. The third well was spud in January 1999. Although a high-risk venture, any success in Eritrea could be significant because of the huge acreage position covered by the concession. In December 1998, BR announced an agreement to earn a working interest in both exploration and development opportunities at the Offshore North Sinai Block, located in the Nile River Delta area of the Mediterranean Sea. The agreement provides the Company with a 50 percent working interest in an 870,000 gross acre block that contains three proved undeveloped Pliocene gas fields, several additional exploration prospects which are similar in nature to these Pliocene accumulations and an exploration prospect in deeper Miocene stratigraphy. In exchange, BR has agreed to fund a disproportionate share of future capital commitment to develop these proved undeveloped gas reserves. Initial development is projected to begin during 1999, with production to commence during 2001. Additionally, if the high potential deeper Miocene prospect, referred to as Seti East, is successful and deemed to be commercial, BR has agreed to fund a disproportionate share of future development costs associated with the project, as well. Total capital committed to this project in 1999 is $22 million. NORTHERN SOUTH AMERICA BR's efforts in Latin America are focused in northern South America. Presently, the Company has a 14 percent interest in the Casanare Association Contract in Colombia as well as exploration interests in Venezuela, Colombia and Peru. The Latin American strategy provides the springboard to quickly transform the business from a highly leveraged exploration portfolio to one of balance - providing production, exploitation and exploration opportunities. BR intends to aggregate substantive interest in key producing assets then work to enhance the value through exploitation. Success of the strategy hinges on maintaining focus, aggressive pursuit of key assets and value-based acquisitions. 18 23 INTERNATIONAL ACREAGE DECEMBER 31, 1998
Gross Net - -------------------------------------------------------------- Developed Acres 165,401 12,745 - -------------------------------------------------------------- Undeveloped Acres 16,112,345 5,125,131 - --------------------------------------------------------------
INTERNATIONAL PLANS FOR 1999 Submit plan of development for the Algerian MLN Field in Block 405. Drill 6 additional wells in Algeria on Block 405 and participate in 12 development wells in the Qoubba Field. Begin development of the Dalton and Millom fields in the East Irish Sea, with initial gross production of 95 MMCF of gas per day commencing in the fourth quarter of 1999. Commence exploratory drilling on the Delta Centro Block in Venezuela. Pursue aggressively opportunities to establish a West African focus area and expand the Far East focus area. Of the exploration interests, the most significant is the Delta Centro Block in eastern Venezuela. BR operates this block with a 35 percent working interest. Located in the Orinoco River Basin near the prolific Oficina Trend the 525,000 gross acre block is covered by 230 square miles of 3-D seismic and 230 miles of 2-D seismic data. As part of its work commitment, the Company will drill three exploratory wells before the end of 2001, with an option to extend the exploratory period for an additional four years. The most promising prospect, Wakajara, is scheduled for drilling in 1999. During 1998, extensive environmental evaluation was performed in preparation for drilling. In Colombia, BR has a 14 percent non-operated working interest in 12 fields in the Casanare Association Contract Area. During 1998, three development wells were drilled in this area, mitigating natural production declines in these mature fields. The Company also holds a 25 percent working interest in a 288,000 gross acre association contract located in the San Jacinto Association Contract Area. The contract is located in the upper Magdalena Valley Basin. During 1998, 93 miles of 2-D seismic data were acquired. A decision on the initial exploratory well is expected by mid-year 1999. Peru Block 32 is non-operated with BR holding a 35 percent interest. Results of the 1998 acquisition and processing of approximately 450 kilometers of 2-D seismic have resulted in the identification of the Guineayacu prospect. Site preparation for drilling of this exploratory well should commence by year-end 1999, with drilling anticipated in early 2000. FAR EAST BR holds a 15 percent working interest in the Indonesian KAKAP block, located in the West Natuna Sea. The partners in KAKAP recently negotiated a 22 year agreement for the sale of up to 325 MMCF of gas per day to Singapore. This long-term sales agreement enhances the value of KAKAP reserves and production, which historically have had limited marketability. BR has selected the Far East as a potential focus area for value-added growth. The Far East growth strategy targets selected basins in Indonesia, Thailand, Malaysia, Vietnam, China, Bangladesh and Australia, primarily by acquisition. WEST AFRICA The fifth focus area selected by BR is West Africa, unique in being the only focus area that has not been established around an existing acreage position. This region was selected on the basis of its world class reserves, tremendous upside potential, relative stability, and very active deal flow. During 1998, the West Africa team was established, conducted initial studies of the region, and pursued several attractive exploration and production opportunities. BR is committed to establishing a strategic foothold within the West Africa region that will lead to a significant value-added position in this prolific hydrocarbon province. [SAND DUNES AND MEN ON AIR BOAT GRAPHICS] 19 24 BURLINGTON RESOURCES 1998 Financial Review CONTENTS Selected Financial Data ............................... 21 Management's Discussion & Analysis of Financial Condition and Results of Operations ...... 22 Financial Statements .................................. 26 Report of Management .................................. 44 Report of Independent Accountants ..................... 45 Supplementary Financial Information ................... 46 20 25 BURLINGTON RESOURCES INC. SELECTED FINANCIAL DATA The selected financial data for Burlington Resources Inc. ("the Company") set forth below for the five years ended December 31, 1998 should be read in conjunction with the consolidated financial statements.
- ----------------------------------------------------------------------------------------------------------------------------------- (In Millions, Except per Share Amounts) 1998 1997 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------------- Income Statement Data Revenues $ 1,637 $ 2,000 $ 2,200 $ 1,734 $ 1,871 Operating Income (Loss) 218 503 580 (397) (159) Net Income (Loss) 86 319 335 (261) (73) Basic Earnings (Loss) per Common Share .48 1.80 1.89 (1.47) (.41) Diluted Earnings (Loss) per Common Share $ .48 $ 1.79 $ 1.88 $ (1.47) $ (.41) - ----------------------------------------------------------------------------------------------------------------------------------- Balance Sheet Data Total Assets $ 5,917 $ 5,821 $ 5,683 $ 5,608 $ 6,285 Long-term Debt 1,938 1,748 1,853 2,042 2,049 Stockholders' Equity 3,018 3,016 2,808 2,591 2,920 Cash Dividends Declared per Common Share $ .55 $ .46 $ .44 $ .44 $ .58 Common Shares Outstanding 177 177 177 178 177
21 26 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION AND LIQUIDITY The Company's long-term debt to capital ratio at December 31, 1998 and 1997 was 39 percent and 37 percent, respectively. The Company's credit facilities are comprised of a $600 million revolving credit agreement that expires in February 2003 and a $400 million revolving credit agreement that expires in February 2000. The $400 million revolving credit agreement is renewable annually by mutual consent. As of December 31, 1998, there were no borrowings outstanding under the credit facilities. At December 31, 1998, the Company had outstanding commercial paper borrowings of $190 million at an average interest rate of 6 percent. The Company also has the capacity to issue $1 billion of securities under a shelf registration statement filed with the Securities and Exchange Commission. The Company has a total of $640 million of debt to be repaid in 1999. Of this amount, $450 million represents fixed-rate debt which the Company intends to refinance with other fixed-rate long-term debt in 1999. The remaining $190 million represents commercial paper. In July 1998, the Company's Board of Directors approved the repurchase of up to two million shares of its Common Stock. During 1998, the Company repurchased 435,000 shares of its Common Stock for $15 million. Since December 1988, the Company has repurchased approximately 32 million shares. In conjunction with the Company's stock repurchase program, the Company sold put options ("options") during 1998. The options entitled the holders, upon exercise on the expiration dates, to sell shares of BR Common Stock to the Company at specified prices. Alternatively, the Company retained the ability to settle the options in cash. During 1998, the Company sold 400,000 options with an average strike price of $37.25 per share and received an average premium of $2.67 per option. During 1998, 110,000 options were exercised, 25,000 expired and 265,000 remained outstanding at December 31, 1998 with expiration dates through March of 1999. Net cash provided by operating activities for 1998 was $770 million compared to $1,122 million and $995 million in 1997 and 1996, respectively. The decrease in 1998 compared to 1997 was primarily due to lower operating income and working capital changes. The increase in 1997 compared to 1996 was primarily due to significantly higher operating income and working capital changes. In June 1997, the Company completed its divestiture program of non-strategic assets which was announced in July 1996. As planned, the Company sold approximately 27,000 wells and related facilities. Before closing adjustments, gross proceeds for 1997 from the sales of oil and gas properties related to this divestiture program were approximately $450 million. On July 31, 1996, the Company completed the sale of its crude oil refinery and terminal, including crude oil and refined product inventories, for approximately $70 million. The net book value of refinery property, plant and equipment and inventory at that date was approximately $68 million. The Company and its subsidiaries are named defendants in numerous lawsuits and named parties in numerous governmental and other proceedings arising in the ordinary course of business. While the outcome of lawsuits and other proceedings cannot be predicted with certainty, management believes these matters will not have a material adverse effect on the consolidated financial position of the Company, although results of operations and cash flows could be significantly impacted in the reporting periods in which such matters are resolved. The Company has certain other commitments and uncertainties related to its normal operations. Management believes that there are no other commitments, uncertainties or contingent liabilities that will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. CAPITAL EXPENDITURES AND RESOURCES Capital expenditures during 1998 totaled $1,165 million compared to $1,245 million and $804 million in 1997 and 1996, respectively. The Company invested $1,030 million on internal development and exploration during 1998 compared to $941 million and $646 million in 1997 and 1996, respectively. The Company invested $27 million for proved property acquisitions in 1998 compared to $214 million and $92 million in 1997 and 1996, respectively. Capital expenditures for 1999, excluding proved property acquisitions, are projected to be approximately $750 million. Capital expenditures are expected to be primarily for internal development and exploration of oil and gas properties and plant and pipeline expenditures. Capital expenditures will be funded from internal cash flows, supplemented, if needed, by external financing. 22 27 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MARKETING Domestic In pursuit of its mission to build long-term shareholder value, the Company's marketing strategy is to maximize the value of its production by developing marketing flexibility from the wellhead to its ultimate sale. The Company's gas production is gathered, processed, exchanged and transported utilizing various firm and interruptible contracts and routes to access the highest value market hubs. The Company's customers include local distribution companies, electric utilities and a diverse portfolio of industrial users. The Company maintains the capacity to ensure its production can be marketed either at the wellhead or downstream at market sensitive prices. All of the Company's crude oil production is sold to third parties at the wellhead or transported to market hubs where it is sold or exchanged. NGLs are typically transported to market hubs, primarily in the Houston area, and sold to third parties. International The Company's international oil and gas is produced from non-operated properties. These products are sold to third parties either directly by the Company or by the operators of the properties. Commodity Pricing and Demand Substantially all of the Company's crude oil and natural gas production is sold on the spot market or under short-term contracts at market sensitive prices. Spot market prices for domestic crude oil and natural gas are subject to volatile trading patterns in the commodity futures markets, including among others, the New York Mercantile Exchange ("NYMEX"). Crude oil prices are also affected by quality differentials, by worldwide political developments and by the actions of the Organization of Petroleum Exporting Countries. There is also a difference between the NYMEX futures contract price for a particular month and the actual cash price received for that month in a U.S. producing basin or at a U.S market hub, which is referred to as the "basis differential." In the ordinary course and conduct of its business, the Company utilizes futures contracts traded on the NYMEX and the Kansas City Board of Trade, and over-the-counter price and basis swaps and options with major crude oil and natural gas merchants and financial institutions to hedge its price risk exposure related to the Company's U.S. production. The gains and losses realized as a result of these derivative transactions are substantially offset in the cash market when the hedged commodity is delivered. In order to accommodate the needs of its customers, the Company also uses price swaps to convert gas sold under fixed price contracts to market prices. The Company uses a sensitivity analysis technique to evaluate the hypothetical effect that changes in the market value of crude oil and natural gas may have on the fair value of the Company's derivative instruments. At December 31, 1998, the potential decrease in fair value of commodity derivative instruments assuming a 10 percent adverse movement in the underlying commodities would result in an 89 percent decrease in the net deferred amount. For purposes of calculating the hypothetical change in fair value, the relevant variables are the type of commodity (crude oil or natural gas), the commodity futures prices, the volatility of commodity prices and the basis and quality differentials. The hypothetical change in fair value is calculated by multiplying the difference between the hypothetical price (adjusted for any basis or quality differentials) and the contractual price by the contractual volumes. DIVIDENDS On January 13, 1999, the Board of Directors declared a common stock quarterly cash dividend of $.1375 per share, payable April 1, 1999 to shareholders of record on March 12, 1999. Dividend levels are determined by the Board of Directors based on profitability, capital expenditures, financing and other factors. The Company declared cash dividends on Common Stock totaling approximately $98 million during 1998. 23 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Year Ended December 31, 1998 Compared With Year Ended December 31, 1997 The Company reported net income of $86 million or $.48 basic earnings per common share in 1998 compared to $319 million or $1.80 basic earnings per common share in 1997. The 1997 results included a $.40 per share charge related to the 1997 merger with The Louisiana Land and Exploration Company ("LL&E") for severance and related exit costs and transaction costs. The 1997 results also included an $.18 per share gain related to the sales of oil and gas properties. Revenues were $1,637 million in 1998 compared to $2,000 million in 1997. Average oil prices decreased 31 percent to $13.28 per barrel in 1998 and average gas prices decreased 10 percent to $1.97 per MCF which decreased revenues $180 million and $129 million, respectively. Oil sales volumes decreased 5 percent in 1998 to 82.7 MBbls per day and gas sales volumes decreased 1 percent to 1,647 MMCF per day which decreased revenues $31 million and $18 million, respectively. Oil and gas sales volumes decreased primarily due to natural production declines in certain areas, adverse weather conditions and third-party plant outages. Costs and Expenses were $1,419 million in 1998 compared to $1,497 million in 1997. Costs and expenses in 1997 included an $80 million charge related to the 1997 merger with LL&E for severance and related exit costs and transaction costs. Excluding the $80 million charge in 1997, costs and expenses in 1998 increased $2 million compared to 1997. The increase was primarily due to a $39 million increase in exploration costs and a $4 million increase in production and processing expenses. These increases were partially offset by a $19 million decrease in production taxes, a $15 million decrease in administrative expenses and a $7 million decrease in depreciation, depletion and amortization expenses. Administrative expenses decreased primarily due to a reduction in employees. Interest Expense was $148 million in 1998 compared to $142 million in 1997. The increase was primarily due to higher outstanding commercial paper balances during 1998. Other Income-Net was $25 million in 1998 compared to $50 million in 1997. The decrease in other income is primarily related to lower gains on sales of oil and gas properties. The effective income tax rate was an expense of 9 percent in 1998 compared to an expense of 23 percent in 1997. The decreased tax expense in 1998 versus 1997 was primarily a result of lower pretax income partially offset by lower benefits from nonconventional fuel tax credits. Year Ended December 31, 1997 Compared With Year Ended December 31, 1996 The Company reported net income of $319 million or $1.80 basic earnings per common share in 1997 compared to net income of $335 million or $1.89 basic earnings per common share in 1996. The 1997 results included a $.40 per share charge related to the merger with LL&E for severance and related exit costs and transaction costs. The 1997 results also included an $.18 per share gain related to the sales of oil and gas properties. The 1996 results included an $.11 per share charge related to the divestiture program and reorganization for severance and other related exit costs. Revenues were $2,000 million in 1997 compared to $2,200 million in 1996. Revenues decreased $264 million as a result of the sale of the refinery on July 31, 1996. Average oil prices decreased 6 percent to $19.24 per barrel and oil sales volumes decreased 4 percent to 87.2 MBbls per day which decreased revenues $37 million and $31 million, respectively. These decreases were partially offset by an average gas price increase of 6 percent to $2.18 per MCF and an increase in gas sales volumes of 4 percent to 1,669 MMCF per day which increased revenues $82 million and $46 million, respectively. Gas volumes increased due to continued development of gas properties. Oil volumes were down primarily due to the divestiture program. Costs and Expenses were $1,497 million in 1997 compared to $1,620 million in 1996. Costs and expenses in 1997 included an $80 million charge related to the merger with LL&E for severance and related exit costs and transaction costs. Costs and expenses in 1996 included $30 million related to the divestiture program and reorganization. Excluding the $80 million charge in 1997 and the $30 million charge in 1996, costs and expenses in 1997 decreased $173 million from 1996. The decrease was primarily due to a $254 million decrease in refinery costs resulting from the sale of the refinery and a $27 million decrease in production and processing expenses. These decreases were partially offset by a $100 million increase in exploration costs, a $5 million increase in depreciation, depletion and amortization and a $4 million increase in production taxes. 24 29 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest Expense was $142 million in 1997 compared to $147 million in 1996. The decrease was primarily due to lower outstanding commercial paper balances during 1997. Other Income -- Net was $50 million in 1997 due to a gain related to the sales of oil and gas properties associated with the Company's 1996 divestiture program. OTHER MATTERS Year 2000 Compliance The Company began a program during 1996 to assess computer software and hardware (hereafter referred to as information technology) for year 2000 compliance. The Company determined that because significant portions of information technology were scheduled for replacement before the year 2000 that its exposure with respect to information technology was not material. The Company's year 2000 project plan involves four phases; assessment, remediation, testing, and implementation. The Company has completed its assessment of all material systems that could be affected by the year 2000 issue. The assessment confirmed that information technology exposures were not material, however, assets used in producing, gathering and transporting hydrocarbons (hereafter referred to as operating equipment) are at risk. For its operating equipment, the Company has completed 85 percent of the remediation phase for all operationally significant equipment and expects to complete testing and implementation in the second quarter of 1999. The total cost of the year 2000 project is being funded through operating cash flows and is estimated at $3 million of which $2 million has been incurred. The Company has contacted all third-party vendors and suppliers of products and services that it considers critical to its operations in order to ascertain their level of year 2000 readiness. The Company has no means of ensuring that all customers and suppliers will be year 2000 compliant. The inability of these parties to complete their year 2000 resolution process could materially impact the Company. As a result, the Company will consider new business relationships with alternate providers of products and services as necessary and to the extent alternatives are available. The Company's plan to complete the year 2000 modifications is based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those plans. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes and similar uncertainties. The Company's goal is to ensure that all critical systems and processes under its direct control remain operational. However, because certain systems and processes may be linked with systems outside of the Company's control, there can be no assurance that all implementations will be successful. As a result, the Company is developing a contingency plan, which will be complete at the end of the first quarter 1999, to respond to any failures that may occur. The cost estimates associated with the contingency plan are currently being developed. Management does not expect the costs of the Company's year 2000 project to have a material adverse effect on the Company's financial position or results of operations. Presently, based on information available, the Company cannot conclude that any failure of the Company or third parties to achieve year 2000 compliance will not adversely effect the Company. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It also requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those items at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The Company plans to adopt SFAS No. 133 during the first quarter of the year ended December 31, 2000 and is currently evaluating the effects of this pronouncement. 25 30 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF INCOME
Year Ended December 31, - ---------------------------------------------------------------------------------- (In Millions, Except per Share Amounts) 1998 1997 1996 - ---------------------------------------------------------------------------------- REVENUES $1,637 $2,000 $2,200 - ---------------------------------------------------------------------------------- COSTS AND EXPENSES Production Taxes 95 114 110 Production and Processing 383 379 406 Refinery Costs -- -- 254 Depreciation, Depletion and Amortization 519 526 521 Exploration Costs 298 259 159 Reorganization Charge -- -- 30 Merger Costs -- 80 -- Administrative 124 139 140 - ---------------------------------------------------------------------------------- Total Costs and Expenses 1,419 1,497 1,620 - ---------------------------------------------------------------------------------- Operating Income 218 503 580 Interest Expense 148 142 147 Other Income -- Net 25 50 -- - ---------------------------------------------------------------------------------- Income Before Income Taxes 95 411 433 Income Tax Expense 9 92 98 - ---------------------------------------------------------------------------------- NET INCOME $ 86 $ 319 $ 335 ================================================================================== BASIC EARNINGS PER COMMON SHARE $ .48 $ 1.80 $ 1.89 ================================================================================== DILUTED EARNINGS PER COMMON SHARE $ .48 $ 1.79 $ 1.88 ==================================================================================
See accompanying Notes to Consolidated Financial Statements. 26 31 BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET
December 31, - --------------------------------------------------------------------------------------------------------------------- (In Millions, Except Share Data) 1998 1997 - --------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and Cash Equivalents $ -- $ 152 Short-term Investments -- 83 Accounts Receivable 402 376 Inventories 33 39 Other Current Assets 21 28 - --------------------------------------------------------------------------------------------------------------------- 456 678 - --------------------------------------------------------------------------------------------------------------------- Oil and Gas Properties (Successful Efforts Method) 9,348 8,666 Other Properties 828 689 - --------------------------------------------------------------------------------------------------------------------- 10,176 9,355 Accumulated Depreciation, Depletion and Amortization 4,818 4,315 - --------------------------------------------------------------------------------------------------------------------- Properties -- Net 5,358 5,040 - --------------------------------------------------------------------------------------------------------------------- Other Assets 103 103 - --------------------------------------------------------------------------------------------------------------------- Total Assets $ 5,917 $ 5,821 ===================================================================================================================== LIABILITIES Current Liabilities Accounts Payable $ 374 $ 396 Taxes Payable 53 71 Accrued Interest 26 28 Dividends Payable 24 24 Deferred Revenue 17 19 - --------------------------------------------------------------------------------------------------------------------- 494 538 - --------------------------------------------------------------------------------------------------------------------- Long-term Debt 1,938 1,748 - --------------------------------------------------------------------------------------------------------------------- Deferred Income Taxes 199 203 - --------------------------------------------------------------------------------------------------------------------- Deferred Revenue 40 56 - --------------------------------------------------------------------------------------------------------------------- Other Liabilities and Deferred Credits 217 260 - --------------------------------------------------------------------------------------------------------------------- Put Options on Common Stock 11 -- - --------------------------------------------------------------------------------------------------------------------- Commitments and Contingent Liabilities STOCKHOLDERS' EQUITY Preferred Stock, Par Value $.01 Per Share (Authorized 75,000,000 Shares; No Shares Issued) -- -- Common Stock, Par Value $.01 Per Share (Authorized 325,000,000 Shares; Issued 202,795,635 Shares) 2 2 Paid-in Capital 2,984 3,001 Retained Earnings 1,039 1,051 - --------------------------------------------------------------------------------------------------------------------- 4,025 4,054 Cost of Treasury Stock (25,420,562 and 26,087,134 Shares for 1998 and 1997, respectively) 1,007 1,038 - --------------------------------------------------------------------------------------------------------------------- Stockholders' Equity 3,018 3,016 ===================================================================================================================== Total Liabilities and Stockholders' Equity $ 5,917 $ 5,821 =====================================================================================================================
See accompanying Notes to Consolidated Financial Statements. 27 32 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------ (In Millions) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 86 $ 319 $ 335 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities Depreciation, Depletion and Amortization 534 538 534 Deferred Income Taxes (4) 36 32 Exploration Costs 298 259 159 Gain on Sales of Oil and Gas Properties (13) (50) -- Working Capital Changes Accounts Receivable (26) 108 (135) Inventories 6 (4) 39 Other Current Assets 7 -- 1 Accounts Payable (22) 47 (57) Taxes Payable (18) (3) 11 Accrued Interest (2) -- 2 Other Current Liabilities (2) (22) 37 Other (74) (106) 37 - ------------------------------------------------------------------------------------------------------ Net Cash Provided By Operating Activities 770 1,122 995 - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Additions to Properties (1,165) (1,245) (804) Short-term Investments 83 (83) -- Proceeds from Sales and Other 55 494 193 - ------------------------------------------------------------------------------------------------------ Net Cash Used In Investing Activities (1,027) (834) (611) - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Long-term Debt 190 -- 150 Reduction in Long-term Debt -- (105) (337) Dividends Paid (97) (74) (77) Common Stock Purchases (15) (58) (112) Other 27 24 38 - ------------------------------------------------------------------------------------------------------ Net Cash Provided By (Used In) Financing Activities 105 (213) (338) - ------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (152) 75 46 CASH AND CASH EQUIVALENTS Beginning of Year 152 77 31 - ------------------------------------------------------------------------------------------------------ End of Year $ -- $ 152 $ 77 ======================================================================================================
See accompanying Notes to Consolidated Financial Statements. 28 33 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Cost of Common Paid-in Retained Treasury Stockholders' (In Millions, Except per Share Data) Stock Capital Earnings Other Stock Equity - --------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 $ 2 $ 2,955 $ 555 $ (2) $ (919) $ 2,591 Net Income 335 335 Cash Dividends ($.44 per Share) (77) (77) Stock Purchases (2,706,000 Shares) (112) (112) Stock Option Activity and Other 27 2 42 71 - --------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 2 2,982 813 -- (989) 2,808 Net Income 319 319 Cash Dividends ($.46 per Share) (82) (82) Stock Purchases (1,312,500 Shares) (58) (58) Stock Option Activity and Other 19 1 9 29 - --------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 2 3,001 1,051 -- (1,038) 3,016 Net Income 86 86 Cash Dividends ($.55 per Share) (98) (98) Stock Purchases (435,000 Shares) (15) (15) Stock Option Activity and Other (17) 46 29 - --------------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1998 $ 2 $ 2,984 $ 1,039 $ -- $ (1,007) $ 3,018 ===========================================================================================================================
See accompanying Notes to Consolidated Financial Statements. 29 34 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION AND REPORTING The consolidated financial statements include the accounts of Burlington Resources Inc. ("BR") and its majority-owned subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. Due to the nature of financial reporting, management makes estimates and assumptions in preparing the consolidated financial statements. Actual results could differ from estimates. The consolidated financial statements include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on net income or stockholders' equity. CASH AND CASH EQUIVALENTS All short-term investments purchased with a maturity of three months or less are considered cash equivalents. Cash equivalents are stated at cost, which approximates market value. SHORT-TERM INVESTMENTS Short-term investments consist of highly-liquid debt securities with a maturity of more than three months. The securities are available for sale and are carried at fair value based on quoted market prices. As of December 31, 1997, the fair value of these investments approximated amortized cost. Unrealized gains and losses, net of tax, are included as a component of stockholders' equity until realized. Realized gains and losses are based on specific identification of the securities sold. INVENTORIES Inventories of materials, supplies and products are valued at the lower of average cost or market. PROPERTIES Oil and gas properties are accounted for using the successful efforts method. Under this method, all development costs and acquisition costs of proved properties are capitalized and amortized on a units-of-production basis over the remaining life of proved developed reserves and proved reserves, respectively. Costs of drilling exploratory wells are initially capitalized, but charged to expense if and when a well is determined to be unsuccessful. In addition, unamortized capital costs at a field level are reduced to fair value if the sum of expected undiscounted future cash flows is less than net book value. Costs of retired, sold or abandoned properties that constitute a part of an amortization base are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization. Gains or losses from the disposal of other properties are recognized currently. Expenditures for maintenance, repairs and minor renewals necessary to maintain properties in operating condition are expensed as incurred. Major replacements and renewals are capitalized. Estimated dismantlement and abandonment costs for oil and gas properties are accrued, net of salvage value, based on a units-of-production method. REVENUE RECOGNITION Gas revenues are recorded on the entitlement method. Under the entitlement method, revenue is recorded based on the Company's net interest. FUNCTIONAL CURRENCY International exploration and production operations are considered an extension of the Company's operations. The assets, liabilities and operations of international locations are therefore measured using the United States dollar as the functional currency. Foreign currency transaction adjustments, which are not material, are included in net income. HEDGING AND RELATED ACTIVITIES In order to mitigate the risk of market price fluctuations, the Company utilizes options and swaps to hedge future crude oil and natural gas production. Changes in the market value of these contracts are deferred until the gain or loss is recognized on the hedged commodity. To qualify as a hedge, these transactions must be designated as a hedge and changes in their fair value must correlate with changes in the price of anticipated future production such that the Company's exposure to the effects of commodity price changes is reduced. The Company also enters into swap agreements to convert fixed price gas sales contracts to market-sensitive contracts. Gains or losses resulting from these transactions are included in revenue as the related physical production is delivered. These instruments are measured for effectiveness on an enterprise basis both at the inception of the contract and on an ongoing basis. If these instruments are terminated prior to maturity, resulting gains or losses continue to be deferred until the hedged item is recognized in income. 30 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Treasury lock agreements are used to hedge interest rate exposure on specific anticipated debt issuances of the Company. Accordingly, the differential paid or received by the Company on maturity of a treasury lock agreement is recognized as an adjustment to interest expense over the term of the underlying financing transaction. CREDIT AND MARKET RISKS The Company manages and controls market and counterparty credit risk through established formal internal control procedures which are reviewed on an ongoing basis. The Company attempts to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures and through establishment of valuation reserves related to counterparty credit risk. In the normal course of business, collateral is not required for financial instruments with credit risk. INCOME TAXES Income taxes are provided based on earnings reported for tax return purposes in addition to a provision for deferred income taxes. Deferred income taxes are provided to reflect the tax consequences in future years of differences between the financial statement and tax basis of assets and liabilities. Tax credits are accounted for under the flow-through method, which reduces the provision for income taxes in the year the tax credits are earned. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. STOCK-BASED COMPENSATION The Company uses the intrinsic value based method of accounting for stock-based compensation. Under this method, the Company records no compensation expense for stock options granted when the exercise price for options granted is equal to the fair market value of the Company's stock on the date of the grant. EARNINGS PER COMMON SHARE Basic earnings per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. The weighted average number of common shares outstanding for computing basic EPS was 177 million for the years ended December 31, 1998, 1997 and 1996. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The weighted average number of common shares outstanding for computing diluted EPS, including dilutive stock options, was 178 million for the years ended December 31, 1998, 1997 and 1996. For the years ended December 31, 1998, 1997 and 1996, approximately 4 million, 600 thousand and 3 million shares, respectively, attributable to the exercise of outstanding options were excluded from the calculation of diluted EPS because the effect was antidilutive. No adjustments were made to reported net income in the computation of EPS. 2. MERGER On July 17, 1997, BR and The Louisiana Land and Exploration Company ("LL&E")announced that they had entered into an Agreement and Plan of Merger (the "Merger"). On October 22, 1997, the Merger was completed and LL&E became a wholly-owned subsidiary of the Company. Pursuant to the Merger, BR issued 52,795,635 shares of its Common Stock based on an exchange ratio of 1.525 for each outstanding share of LL&E stock. The Merger was accounted for as a pooling of interests and qualified as a tax-free reorganization. The transaction was valued at approximately $3 billion based on BR's closing stock price on October 22, 1997. During the fourth quarter of 1997, the Company recorded a pretax charge of $80 million ($71 million after tax) for direct costs associated with the Merger. These costs primarily consist of $44 million for severance and related exit costs and $36 million for direct transaction costs. Approximately $2 million of accrued unpaid costs remained on the consolidated balance sheet as of December 31, 1998. 3. INCOME TAXES The jurisdictional components of income before income taxes follow.
Year Ended December 31, - ----------------------------------------------- (In Millions) 1998 1997 1996 - ----------------------------------------------- Domestic $139 $369 $400 Foreign (44) 42 33 - ----------------------------------------------- Total $ 95 $411 $433 ===============================================
31 36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The provision for income taxes follows.
Year Ended December 31, - ------------------------------------------------ (In Millions) 1998 1997 1996 - ------------------------------------------------ Current Federal $ 10 $ 44 $ 53 State 5 2 11 Foreign (2) 10 2 - ------------------------------------------------ 13 56 66 - ------------------------------------------------ Deferred Federal 8 30 18 State 1 11 9 Foreign (13) (5) 5 - ------------------------------------------------ (4) 36 32 - ------------------------------------------------ Total $ 9 $ 92 $ 98 ================================================
Reconciliation of the federal statutory income tax rate to the effective income tax rate follows.
Year Ended December 31, - ---------------------------------------------------------------------- 1998 1997 1996 - ---------------------------------------------------------------------- Statutory rate 35.0% 35.0% 35.0% State income taxes 4.1 2.1 3.0 Taxes on foreign income in excess of statutory rate .6 2.1 .2 Tax credits (33.4) (18.5) (15.0) Merger costs -- 4.6 -- Other 3.1 (2.8) (.7) - ---------------------------------------------------------------------- Effective rate 9.4% 22.5% 22.5% ======================================================================
Deferred income tax liabilities (assets) follow.
December 31, - ------------------------------------------------------------------------ (In Millions) 1998 1997 - ------------------------------------------------------------------------ Deferred income tax liabilities Excess of book over tax basis of properties $ 514 $ 548 Deferred income tax assets AMT credit carryforward (264) (255) Deferred foreign tax credits (71) (66) Net operating loss carryforward (3) (4) Foreign tax credit carryforward (2) (2) Financial accruals and other (10) (51) - ------------------------------------------------------------------------ (350) $(378) - ------------------------------------------------------------------------ Less valuation allowance 35 33 - ------------------------------------------------------------------------ Net deferred income tax liabilities $ 199 $ 203 ========================================================================
32 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The above net deferred tax liabilities, as of December 31, 1998 and 1997, include deferred state income tax liabilities of approximately $39 million for both years. The Alternative Minimum Tax ("AMT") credit carryforward, related primarily to nonconventional fuel tax credits, is available to offset future federal income tax liabilities. The AMT credit carryforward has no expiration. The benefit of these tax credits is recognized in net income for accounting purposes and is reflected in the current tax provision to the extent the Company is able to utilize the credits for tax return purposes. The foreign tax credit carryforward is available through the year 2003 to offset future federal income taxes. The federal income tax net operating loss carryforward is available through the year 2009 to offset future federal taxable income, subject to the separate return limitation provisions of the federal income tax regulations. A valuation allowance is provided for uncertainties surrounding the realization of certain foreign tax credit carryforwards and certain deferred foreign tax credits. 4. COMMODITY HEDGING ACTIVITIES Gas Swaps The Company enters into gas swap agreements to fix the price of anticipated future natural gas production. As of December 31, 1998, the Company has the following volumes hedged.
Total Hedged Average Production Volume Hedge/Strike Deferred Gain Period (MMBTU) Price (In Millions) - ----------------------------------------------------------- 1999 168,650,000 $2.39 $ 68 2000 201,300,000 2.33 26 2001 77,565,000 $2.36 $ 7
Gas Basis Swaps The Company enters into gas basis swap agreements to fix a component of the sales price of anticipated future natural gas production. This component is expressed as the differential between a location and Henry Hub. These transactions are accounted for as hedges of the Company's underlying production. As of December 31, 1998, the Company had 40 million MMBTU of 1999 natural gas production hedged at a fixed differential of approximately $.28 per MMBTU. The deferred loss on these transactions as of December 31, 1998 is approximately $2 million. Options Contracts The Company enters into put option agreements to set a floor price on anticipated future natural gas production while allowing the Company to participate in market price increases that exceed those floor prices. These transactions are accounted for as hedges of the Company's underlying production. As of December 31, 1998, the Company has 34 million MMBTU of 1999 natural gas production hedged at a floor price of $1.80 per MMBTU. The deferred gain on these transactions as of December 31, 1998 is approximately $1 million. 5. LONG-TERM DEBT Long-term debt follows.
December 31, - --------------------------------------------------------- (In Millions) 1998 1997 - --------------------------------------------------------- Commercial Paper $ 190 $ -- Notes, 7.15%, due 1999 300 300 Notes, 6 7/8%, due 1999 150 150 Notes, 9 5/8%, due 2000 150 150 Notes, 8 1/2%, due 2001 150 150 Notes, 8 1/4%, due 2002 100 100 Debentures, 9 7/8%, due 2010 150 150 Debentures, 7 5/8%, due 2013 100 100 Debentures, 9 1/8%, due 2021 150 150 Debentures, 7.65%, due 2023 200 200 Debentures, 8.20%, due 2025 150 150 Debentures, 6 7/8%, due 2026 150 150 Other, including discounts -- net (2) (2) - --------------------------------------------------------- Total $1,938 $1,748 =========================================================
33 38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company had fixed-rate debt maturities of $450 million, $150 million, $150 million, $100 million, $0 and $1,090 million due in 1999, 2000, 2001, 2002, 2003 and thereafter, respectively. The Company's commercial paper borrowings at December 31, 1998 had an average interest rate of 6 percent. The Company's credit facilities are comprised of a $600 million revolving credit agreement that expires in February 2003 and a $400 million revolving credit agreement that expires in February 2000. The $400 million revolving credit agreement is renewable annually by mutual consent. Annual fees are .08 and .12 percent, respectively, of the $600 million and $400 million commitments. At the Company's option, interest on borrowings is based on the Prime rate or Eurodollar rates. The unused commitment under these agreements is available to cover debt due within one year; therefore, commercial paper and fixed-rate debt due within one year are classified as long-term debt. Under the covenants of these agreements, debt cannot exceed 60 percent of capitalization (as defined in the agreements). As of December 31, 1998, there were no borrowings outstanding under these credit facilities. In addition, the Company has the capacity to issue $1 billion of securities under shelf registration statements filed with the Securities and Exchange Commission. The Company utilizes a treasury lock agreement to hedge the effect of interest rate movements on anticipated debt transactions. At December 31, 1998, the aggregate notional amount of the lock agreement was $128 million. At December 31, 1998, the fair value of the agreement was an obligation of $11 million. The treasury lock agreement matures in the first quarter 1999. 6. TRANSPORTATION ARRANGEMENTS WITH EL PASO NATURAL GAS COMPANY In 1998, 1997 and 1996, approximately 37 percent, 41 percent and 43 percent, respectively, of the Company's gas production was transported to direct sale customers through El Paso Natural Gas Company's ("EPNG") pipeline systems. These transportation arrangements are pursuant to EPNG's approved Federal Energy Regulatory Commission tariffs applicable to all shippers. The Company expects to continue to transport a substantial portion of its future gas production through EPNG's pipeline system. See Note 9 for demand charges paid to EPNG which provide the Company with firm and interruptible transportation capacity rights on interstate and intrastate pipeline systems. 34 39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. CAPITAL STOCK STOCK OPTIONS The Company's 1993 Stock Incentive Plan (the "1993 Plan") succeeds its 1988 Stock Option Plan which expired by its terms in May 1993 but remains in effect for options granted prior to May 1993. The 1993 Plan provides for the grant of stock options, restricted stock, stock purchase rights and stock appreciation rights or limited stock appreciation rights (together "SARs"). Under the 1993 Plan, options may be granted to officers and key employees at fair market value on the date of grant, exercisable in whole or part by the optionee after completion of at least one year of continuous employment from the grant date and have a term of ten years. At December 31, 1998, 6,049,276 shares were available for grant under the 1993 Plan. In 1997, the Company adopted the 1997 Employee Stock Incentive Plan (the "1997 Plan") from which stock options and restricted stock ("Awards") may be granted to employees who are not eligible to participate in the 1993 Plan. The options are granted at fair market value on the grant date, become exercisable in whole or part by the optionee after completion of at least one year of continuous employment and have a term of ten years. The 1997 Plan limits Awards, in aggregate, to a maximum of one million shares annually. Activity in the Company's stock option plans follows.
Weighted Average Options Exercise Price - ----------------------------------------------------------------------------------------------- Balance, December 31, 1995 6,283,659 $29.07 Granted 2,896,483 47.35 Exercised (2,288,458) 26.91 Cancelled (105,615) 34.74 - ----------------------------------------------------------------------------------------------- Balance, December 31, 1996 6,786,069 37.51 Granted 2,253,627 40.99 Exercised (886,009) 27.09 Cancelled (210,613) 47.82 - ----------------------------------------------------------------------------------------------- Balance, December 31, 1997 7,943,074 39.39 Granted 276,200 43.43 Exercised (1,060,365) 26.11 Cancelled (758,460) 47.35 - ----------------------------------------------------------------------------------------------- Balance, December 31, 1998 6,400,449 $40.82 ===============================================================================================
The following table summarizes information related to stock options outstanding and exercisable at December 31, 1998.
Weighted Average Options Range of Weighted Average Remaining Options Weighted Average Outstanding Exercise Prices Exercise Price Contractual Life Exercisable Exercise Price - --------------------------------------------------------------------------------------------------------------------------------- 2,267,554 $19.51 to $38.00 $30.36 5.1 years 2,090,366 $30.10 4,132,895 39.63 to 52.03 46.55 7.8 years 2,430,599 46.16 - --------------------------------------------------------------------------------------------------------------------------------- 6,400,449 $19.51 to $52.03 $40.82 6.9 years 4,520,965 $38.74 =================================================================================================================================
Exercisable stock options and weighted average exercise prices at December 31, 1997 and 1996 follow.
Weighted Average Options Exercisable Exercise Price - ------------------------------------------------------------- December 31, 1997 3,917,331 $33.93 ============================================================= December 31, 1996 3,593,423 $30.79 =============================================================
35 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The weighted average fair values of options granted during the years 1998, 1997 and 1996 were $11.32, $10.45 and $12.45, respectively. The fair values of employee stock options were calculated using a variation of the Black-Scholes stock option valuation model with the following weighted average assumptions for grants in 1998, 1997 and 1996: stock price volatility of 24.18 percent, 18.35 percent and 18.62 percent, respectively; risk free rate of return ranging from 4.66 percent to 6.00 percent; dividend yield of 1.36 percent, 1.07 percent and 1 percent, respectively; and an expected term of 5 years. If the fair value based method of accounting had been applied, the Company's net income and EPS would have been reduced to the pro forma amounts indicated below. The fair value of stock options included in the pro forma amounts is not necessarily indicative of future effects on net income and EPS.
Year Ended December 31, - ------------------------------------------------------------------- (In Millions, Except per share Amounts) 1998 1997 1996 - ------------------------------------------------------------------- Net income -- as reported $ 86 $ 319 $ 335 Net income -- pro forma 74 308 329 Basic EPS -- as reported .48 1.80 1.89 Basic EPS -- pro forma .42 1.74 1.86 Diluted EPS -- as reported .48 1.79 1.88 Diluted EPS -- pro forma $.42 $1.73 $1.85
STOCK APPRECIATION RIGHTS The Company has granted SARs in connection with certain outstanding options under the 1988 Stock Option Plan. SARs are subject to the same terms and conditions as the related options. A SAR entitles an option holder, in lieu of exercise of an option, to receive a cash payment equal to the difference between the option price and the fair market value of the Company's Common Stock based upon the plan provisions. To the extent the SAR is exercised, the related option is cancelled and to the extent the option is exercised, the related SAR is cancelled. The outstanding SARs are exercisable only under certain circumstances related to significant changes in the ownership of the Company or its holdings, or certain changes in the constitution of its Board of Directors. At December 31, 1998, there were 74,276 SARs outstanding related to stock options with a weighted average exercise price of $34.21 per share. PREFERRED STOCK AND PREFERRED STOCK PURCHASE RIGHTS The Company is authorized to issue 75,000,000 shares of preferred stock, par value $.01 per share, and as of December 31, 1998, there were no shares issued. On December 9, 1998, the Company's Board of Directors designated 3,250,000 of the authorized preferred shares as Series A Junior Participating Preferred Stock. Upon issuance, each one-hundredth of a share of Series A Junior Participating Preferred Stock will have dividend and voting rights approximately equal to those of one share of Common Stock of the Company. In addition, on December 9, 1998, the Board of Directors declared a dividend distribution of one Right for each outstanding share of Common Stock of the Company to shareholders of record on December 16, 1998. The Rights become exercisable if, without the Company's prior consent, a person or group acquires securities having 15 percent or more of the voting power of all of the Company's voting securities (an "Acquiring Person") or ten days following the announcement of a tender offer which would result in such ownership. Each Right, when exercisable, entitles the registered holder to purchase from the Company one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $200 per one hundredth of a share, subject to adjustment. If, after the Rights become exercisable, the Company were to be involved in a merger or other business combination in which its Common Stock was exchanged or changed or 50% or more of the Company's assets or earning power were sold, each Right would permit the holder to purchase, for the exercise price, stock of the acquiring company having a value of twice the exercise price. In addition, except for certain permitted offers, if any person or group becomes an Acquiring Person, each Right would permit the purchase, for the exercise price, of Common Stock of the Company having a value of twice the exercise price. Rights owned by an Acquiring Person are void. The Rights may be redeemed by the Company under certain circumstances until their expiration date for $.01 per Right. 36 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. RETIREMENT BENEFITS The Company's pension plans are non-contributory defined benefit plans covering substantially all employees. The benefits are based on years of credited service and final average compensation. Contributions to the plans are limited to amounts that are currently deductible for tax purposes. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. The Company has postretirement medical and dental care plans for a closed group of retirees and their dependents and certain employees. The postretirement benefit plans are unfunded and the Company funds claims on a cash basis. The Company also maintains a Medicare Part B reimbursement plan and life insurance coverage for a closed group of retirees. The following tables set forth the amounts recognized in the Consolidated Balance Sheet and Statement of Income.
Postretirement Pension Benefits Benefits - --------------------------------------------------------------------------------- Year Ended December 31, - --------------------------------------------------------------------------------- (In Millions) 1998 1997 1998 1997 - --------------------------------------------------------------------------------- Change in benefit obligation Benefit obligation at beginning of year $ 178 $ 161 $ 33 $ 31 Service cost 9 9 -- 1 Interest cost 12 12 2 3 Amendments 2 -- 1 -- Actuarial loss (gain) 8 17 (2) -- Benefits paid (27) (21) (2) (2) - --------------------------------------------------------------------------------- Benefit obligation at end of year 182 178 32 33 - --------------------------------------------------------------------------------- Change in plan assets Fair value of plan assets at beginning of year 161 144 -- -- Actual return on plan assets 30 28 -- -- Employer contribution 8 10 2 2 Benefits paid (27) (21) (2) (2) - --------------------------------------------------------------------------------- Fair value of plan assets at end of year 172 161 -- -- - --------------------------------------------------------------------------------- Funded status (10) (17) (32) (33) - --------------------------------------------------------------------------------- Unrecognized net actuarial loss 16 26 1 3 Unrecognized net transition obligation 1 2 -- -- Unrecognized prior service cost 2 -- 2 -- - --------------------------------------------------------------------------------- Net prepaid (accrued) benefit cost $ 9 $ 11 $ (29) $ (30) =================================================================================
37 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Postretirement Pension Benefits Benefits - --------------------------------------------------------------------------------------------------------- (In Millions) Year Ended December 31, - --------------------------------------------------------------------------------------------------------- 1998 1997 1996 1998 1997 1996 - --------------------------------------------------------------------------------------------------------- Benefit cost for the plans includes the following components Service cost $ 9 $ 9 $ 9 $-- $ 1 $ 1 Interest cost 12 12 12 1 3 3 Expected return on plan assets (13) (12) (12) -- -- -- Amortization of transition obligation -- -- 2 -- -- -- Amortization of prior service cost -- 1 1 -- -- -- Recognized net actuarial loss 2 1 2 -- -- -- - --------------------------------------------------------------------------------------------------------- Net benefit cost $ 10 $ 11 $ 14 $ 1 $ 4 $ 4 - ---------------------------------------------------------------------------------------------------------
Postretirement Pension Benefits Benefits - -------------------------------------------------------------------------------------------------------- December 31, - -------------------------------------------------------------------------------------------------------- 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------------------- Weighted average assumptions Discount rate 6.75% 7.25% 6.75% 7.25% Expected return on plan assets 9.00% 9.00% -- -- Rate of compensation increase 5.00% 5.00% -- -- - --------------------------------------------------------------------------------------------------------
During 1998, the Company recognized a settlement expense of approximately $800 thousand related to the employee reduction associated with the LL&E merger in the fourth quarter of 1997. A 5 percent annual rate of increase in the per capita cost of covered health care benefits was assumed for 1998. The rate is assumed to decrease gradually to 4 percent for 2003 and remain at that level thereafter. Assumed health care cost trends have a significant effect on the amounts reported for the postretirement medical and dental care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage (In Thousands) Point Increase Point Decrease - -------------------------------------------------------------------------------------------------------- Effect on total service and interest cost $ 152 $ (131) Effect on postretirement benefit obligation $2,841 $(2,457)
38 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. COMMITMENTS AND CONTINGENT LIABILITIES DEMAND CHARGES The Company has entered into contracts which provide firm transportation capacity rights on interstate and intrastate pipeline systems. The remaining terms on these contracts range from 1 to 9 years and require the Company to pay transportation demand charges regardless of the amount of pipeline capacity utilized by the Company. The Company paid $60 million, $49 million and $61 million of demand charges of which $44 million, $34 million and $47 million was paid to EPNG for the years ended December 31, 1998, 1997 and 1996, respectively. Future transportation demand charge commitments at December 31, 1998 follow.
Year Ended December 31, - ------------------------------------------------------------ (In Millions) 1999 $ 62 2000 47 2001 42 2002 41 2003 42 Thereafter 127 - ------------------------------------------------------------ Total $361 ============================================================
LEASE OBLIGATIONS The Company has operating leases for office space and other property and equipment. The Company incurred lease rental expense of $17 million, $18 million and $20 million for the years ended December 31, 1998, 1997 and 1996, respectively. Future minimum annual rental commitments at December 31, 1998 follow.
Year Ended December 31, - ---------------------------------------------------------- (In Millions) 1999 $ 18 2000 16 2001 16 2002 16 2003 16 Thereafter 68 - ---------------------------------------------------------- Total $150 ==========================================================
DRILLING RIG COMMITMENTS During 1998, the Company entered into agreements to lease or participate in the use of various drilling rigs. The exposure with respect to these commitments ranges from $152 million to $280 million depending on partner participation. These agreements extend through the year 2004. LEGAL PROCEEDINGS The Company is involved in several proceedings challenging the payment of royalties for its crude oil and natural gas production. On November 20, 1997, the Company and numerous other defendants entered into a settlement agreement in a lawsuit styled as The McMahon Foundation, et al. v. Amerada Hess Corporation, et al. This lawsuit is a proposed class action consisting of both working interest owners and royalty owners against numerous defendants, all of which are oil companies and/or purchasers of oil from oil companies, including Burlington Resources Oil & Gas Company, formerly known as Meridian Oil Inc. ("BROG") and LL&E. The plaintiffs allege that the defendants conspired to fix, depress, stabilize and maintain at artificially low levels the prices paid for oil by, among other things, setting their posted prices at arbitrary levels below competitive market prices. Cases involving similar allegations have been filed in federal courts in other states. On January 14, 1998, the United States Judicial Panel on Multidistrict Litigation issued an order consolidating these cases and transferring the McMahon case to the United States District Court for the Southern District of Texas in Corpus Christi. The Company and other defendants have entered into a Settlement Agreement which received preliminary approval by the Court on October 28, 1998. The Court has set a hearing to finally determine the fairness, accuracy and reasonableness of the Settlement Agreement beginning in April 1999. The Company is also involved in several governmental proceedings relating to the payment of royalties. Various administrative proceedings are pending before the Minerals Management Service ("MMS") of the United States Department of the Interior with respect to the proper valuation of oil and gas produced on federal and Indian lands for purposes of paying royalties on production sold by BROG to its affiliate, Burlington Resources Trading Inc. ("BRTI"), or gathered by its affiliate, Burlington Resources Gathering Inc. In general, these proceedings stem from regular MMS audits of the Company's royalty payments over various periods of time and involve the interpretation of the relevant federal regulations. Most of these administrative proceedings currently have been suspended pending 39 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS LEGAL PROCEEDINGS (CONTINUED) negotiations between the Company and the MMS to resolve their disputes regarding the appropriate valuation methodology or pending resolution of the federal False Claims Act litigation as hereinafter described. In late February 1998, the Company and numerous other oil and gas companies received a complaint filed in the United States District Court for the Eastern District of Texas in Lufkin in a lawsuit styled as United States of America ex rel J. Benjamin Johnson, Jr., et al v. Shell Oil Company, et al. alleging violations of the civil False Claims Act. The United States has intervened in this lawsuit as to some of the defendants, including the Company, and has filed a separate complaint. This suit alleges that the Company underpaid royalties for crude oil produced on federal and Indian lands through the use of below-market posted prices in the sale of oil from BROG to BRTI. The suit alleges that royalties paid by BROG based on these posted prices were lower than the royalties allegedly required to be paid under federal regulations, and that the forms filed by BROG with the MMS reporting the royalties paid were false, thereby violating the civil False Claims Act. The Company and others have also received document subpoenas and other inquiries from the Department of Justice relating to the payment of royalties to the federal government for natural gas production. These requests and inquiries have been made in the context of one or more other False Claims Act cases brought by individuals which remain under seal and are now being investigated by the Civil Division of the Department of Justice. The Company has responded and continues to respond to these requests and inquiries, but the Company does not know what action, if any, the Department of Justice will take with regard to these other cases. If the government chooses not to intervene and pursue these cases, the individuals who initially brought these cases are free to pursue them in return for a share, if any, of any final settlement or judgment. In addition, the Company has been advised that it is a target of a criminal investigation by the United States Attorney for the District of Wyoming into the alleged underpayment of oil and gas royalties. The Company has responded to numerous grand jury document subpoenas in connection with an investigation and is otherwise cooperating with the investigation. Management cannot predict when the investigation will be completed or its ultimate outcome. Based on the Company's present understanding of the various governmental proceedings relating to royalty payments, described in the preceding two paragraphs, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. However, in the event that the Company is found to have violated the civil False Claims Act or is indicted or convicted on criminal charges, the Company could be subjected to a variety of sanctions, including treble damages, substantial monetary fines, civil and/or criminal penalties and a temporary suspension from entering into future federal mineral leases and other federal contracts for a defined period of time. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings will not have a material adverse effect on the consolidated financial position of the Company, although results of operations and cash flows could be significantly impacted in the reporting periods in which such matters are resolved. In addition to the foregoing, the Company and its subsidiaries are named defendants in numerous other lawsuits and named parties in numerous governmental and other proceedings arising in the ordinary course of business. While the outcome of these other lawsuits and proceedings cannot be predicted with certainty, management believes these matters, other than the above-described proceedings, will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. 10. DIVESTITURE PROGRAM AND REORGANIZATION In June 1997, the Company completed its divestiture program of non-strategic assets which was announced in July 1996. As planned, the Company sold approximately 27,000 wells and related facilities. Before closing adjustments, gross proceeds for 1997 from the sales of oil and gas properties related to this divestiture program were approximately $450 million. During 1997, the Company recorded a pretax gain of approximately $50 million related to the sales of oil and gas properties. This program allowed the Company to reorganize and resulted in a reduction of 456 employees. As of December 31, 1997, this program was complete. On July 31, 1996, the Company completed the sale of its crude oil refinery and terminal, including crude oil and refined product inventories, for approximately $70 million. The net book value of refinery property, plant and equipment and inventory at that date was approximately $68 million. 40 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. DEFERRED REVENUE In September 1996, the Company received cash proceeds of $108 million for a transaction in which it is obligated to deliver gas through December 31, 2002. The proceeds were recorded as deferred revenue and are being amortized into revenues as the gas is delivered. Approximately $18 million, $20 million and $13 million of deferred revenue was recognized in 1998, 1997 and 1996, respectively. 12. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It also requires that an entity recognize all derivatives as either assets or liabilities on the balance sheet and measure those items at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction. The Company plans to adopt SFAS No. 133 during the first quarter of the year ended December 31, 2000 and is currently evaluating the effects of this pronouncement. 13. SUPPLEMENTAL CASH FLOW INFORMATION The following is additional information concerning supplemental disclosures of cash flow activities.
Year Ended December 31, - -------------------------------------------------------------------- (In Millions) 1998 1997 1996 - -------------------------------------------------------------------- Interest paid $150 $149 $154 Income taxes paid-- net $ 21 $ 56 $ 60
14. SEGMENT AND GEOGRAPHIC INFORMATION The Company's reportable segments are North America and International. Both segments are engaged principally in the exploration, development, production and marketing of oil and gas. The North America segment is responsible for the Company's operations in the U.S. and Canada and the International segment is responsible for all operations outside that geographical region. The accounting policies for the segments are the same as those described in Note 1 to the consolidated financial statements. There are no significant intersegment sales or transfers. 41 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following tables present information about reported segment operations.
Year Ended December 31, 1998 - --------------------------------------------------------------------------------------------------- (In Millions) North America International Total - --------------------------------------------------------------------------------------------------- Revenues $1,488 $149 $1,637 Depreciation, depletion and amortization 440 67 507 Operating income (loss) 391 (38) 353 Additions to oil and gas properties $ 981 $136 $1,117
Year Ended December 31, 1997 - --------------------------------------------------------------------------------------------------- (In Millions) North America International Total - --------------------------------------------------------------------------------------------------- Revenues $1,795 $205 $2,000 Depreciation, depletion and amortization 434 75 509 Operating income 686 53 739 Additions to oil and gas properties $ 977 $228 $1,205
Year Ended December 31, 1996 - --------------------------------------------------------------------------------------------------- (In Millions) North America International Total - --------------------------------------------------------------------------------------------------- Revenues $1,989 $211 $2,200 Depreciation, depletion and amortization 419 81 500 Operating income 717 54 771 Additions to oil and gas properties $ 730 $ 62 $ 792
42 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a reconciliation of segment operating income to consolidated income before income taxes.
Year Ended December 31, - --------------------------------------------------------------------------------------------------- (In Millions) 1998 1997 1996 - --------------------------------------------------------------------------------------------------- Total operating income for reportable segments $ 353 $ 739 $771 Corporate expenses(a) 135 236 191 Interest expense 148 142 147 Other income-- net 25 50 -- - --------------------------------------------------------------------------------------------------- Consolidated income before income taxes $ 95 $ 411 $433 ===================================================================================================
(a) In 1997, corporate expenses included an $80 million charge related to the Merger. In 1996, corporate expenses included a $30 million charge related to the reorganization. The following is a reconciliation of segment additions to oil and gas properties to consolidated amounts.
Year Ended December 31, - ---------------------------------------------------------------------------------------------------- (In Millions) 1998 1997 1996 - ---------------------------------------------------------------------------------------------------- Total additions to oil and gas properties for reportable segments $1,117 $1,205 $792 Administrative expenditures 48 40 12 - ---------------------------------------------------------------------------------------------------- Consolidated additions to properties $1,165 $1,245 $804 ====================================================================================================
43 48 REPORT OF MANAGEMENT The management of Burlington Resources is responsible for the preparation and integrity of all information contained in this Annual Report. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles. The financial statements include amounts that are management's best estimates and judgments. BR maintains a system of internal control and a program of internal auditing that provides management with reasonable assurance that BR's assets are protected and that published financial statements are reliable and free of material misstatement. Management is responsible for the effectiveness of internal controls. This is accomplished through established codes of conduct, accounting and other control systems, policies and procedures, employee selection and training, appropriate delegation of authority and segregation of responsibilities. The Audit Committee of the Board of Directors, composed solely of directors who are not officers or employees, meets regularly with the independent certified public accountants, financial management, counsel and corporate audit. To ensure complete independence, the certified public accountants and corporate audit have full and free access to the Audit Committee to discuss the results of their audits, the adequacy of internal controls and the quality of financial reporting. Our independent certified public accountants provide an objective independent review by their audit of the Company's financial statements. Their audit is conducted in accordance with generally accepted auditing standards and includes a review of internal accounting controls to the extent deemed necessary for the purposes of their audit. /s/ John E. Hagale /s/ Philip W. Cook ------------------ ------------------ John E. Hagale Philip W. Cook Executive Vice President and Vice President, Controller and Chief Financial Officer Chief Accounting Officer 44 49 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Burlington Resources Inc. In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, cash flows and stockholders' equity present fairly, in all material respects, the financial position of Burlington Resources Inc. and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PriceWaterhouseCoopers LLP Houston, Texas January 20, 1999 45 50 BURLINGTON RESOURCES INC. SUPPLEMENTARY FINANCIAL INFORMATION SUPPLEMENTAL OIL AND GAS DISCLOSURES -- UNAUDITED - -------------------------------------------------------------------------------- The supplemental data presented herein reflects information for all of the Company's oil and gas producing activities. Capitalized costs for oil and gas producing activities follow.
December 31, - -------------------------------------------------------------------------------- (In Millions) 1998 1997 - -------------------------------------------------------------------------------- Proved properties $9,154 $8,516 Unproved properties 194 150 - -------------------------------------------------------------------------------- 9,348 8,666 Accumulated depreciation, depletion and amortization 4,474 4,003 - -------------------------------------------------------------------------------- Net capitalized costs $4,874 $4,663 ================================================================================
Costs incurred for oil and gas property acquisition, exploration and development activities follow.
Year Ended December 31, 1998 - -------------------------------------------------------------------------------- (In Millions) North America International Total - -------------------------------------------------------------------------------- Property acquisition Unproved $ 92 $ 6 $ 98 Proved 23 4 27 Exploration 315 96 411 Development 491 30 521 - -------------------------------------------------------------------------------- Total costs incurred $921 $136 $1,057 ================================================================================
Year Ended December 31, 1997 - -------------------------------------------------------------------------------- (In Millions) North America International Total - -------------------------------------------------------------------------------- Property acquisition Unproved $ 93 $ 5 $ 98 Proved 54 160 214 Exploration 241 48 289 Development 539 15 554 - -------------------------------------------------------------------------------- Total costs incurred $927 $228 $1,155 ================================================================================
Year Ended December 31, 1996 - -------------------------------------------------------------------------------- (In Millions) North America International Total - -------------------------------------------------------------------------------- Property acquisition Unproved $ 48 $ 9 $ 57 Proved 92 -- 92 Exploration 134 29 163 Development 402 24 426 - -------------------------------------------------------------------------------- Total costs incurred $676 $62 $738 ================================================================================
46 51 SUPPLEMENTARY FINANCIAL INFORMATION Results of operations for oil and gas producing activities follow.
Year Ended December 31, 1998 - ------------------------------------------------------------------------------------------------------- (In Millions) North America International Total - ------------------------------------------------------------------------------------------------------- Revenues $1,448 $ 149 $1,597 - ------------------------------------------------------------------------------------------------------- Production costs 343 43 386 Exploration costs 239 59 298 Operating expenses 177 32 209 Depreciation, depletion and amortization 429 64 493 - ------------------------------------------------------------------------------------------------------- 1,188 198 1,386 - ------------------------------------------------------------------------------------------------------- Operating income (loss) 260 (49) 211 Income tax provision (benefit) 64 (11) 53 - ------------------------------------------------------------------------------------------------------- Results of operations for oil and gas producing activities $ 196 $ (38) $ 158 =======================================================================================================
Year Ended December 31, 1997 - ------------------------------------------------------------------------------------------------------- (In Millions) North America International Total - ------------------------------------------------------------------------------------------------------- Revenues $1,747 $ 205 $1,952 - ------------------------------------------------------------------------------------------------------- Production costs 363 42 405 Exploration costs 234 25 259 Operating expenses 220 10 230 Depreciation, depletion and amortization 422 75 497 - ------------------------------------------------------------------------------------------------------- 1,239 152 1,391 - ------------------------------------------------------------------------------------------------------- Operating income 508 53 561 Income tax provision 103 27 130 - ------------------------------------------------------------------------------------------------------- Results of operations for oil and gas producing activities $ 405 $ 26 $ 431 =======================================================================================================
Year Ended December 31, 1996 - ------------------------------------------------------------------------------------------------------- (In Millions) North America International Total - ------------------------------------------------------------------------------------------------------- Revenues $1,682 $ 211 $1,893 - ------------------------------------------------------------------------------------------------------- Production costs 372 51 423 Exploration costs 145 14 159 Operating expenses 224 11 235 Depreciation, depletion and amortization 408 81 489 - ------------------------------------------------------------------------------------------------------- 1,149 157 1,306 - ------------------------------------------------------------------------------------------------------- Operating income 533 54 587 Income tax provision 131 20 151 - ------------------------------------------------------------------------------------------------------- Results of operations for oil and gas producing activities $ 402 $ 34 $ 436 =======================================================================================================
47 52 SUPPLEMENTARY FINANCIAL INFORMATION The following table reflects estimated quantities of proved oil and gas reserves. These reserves have been reduced for royalty interests owned by others. These reserves have been estimated by the Company's petroleum engineers. The Company considers such estimates to be reasonable, however, due to inherent uncertainties, estimates of underground reserves are imprecise and subject to change over time as additional information becomes available.
Oil (MMBbls) Gas (BCF) - ---------------------------------------------------------------------------------------------------------------------------- North America International Total North America International Total - ---------------------------------------------------------------------------------------------------------------------------- PROVED DEVELOPED AND UNDEVELOPED RESERVES December 31, 1995 257.6 36.1 293.7 6,197 289 6,486 Revision of previous estimates 6.6 (.4) 6.2 (8) 28 20 Extensions, discoveries and other additions 33.1 2.3 35.4 474 34 508 Production (26.1) (7.2) (33.3) (559) (28) (587) Purchases of reserves in place 8.0 -- 8.0 78 -- 78 Sales of reserves in place (4.2) -- (4.2) (274) -- (274) - ---------------------------------------------------------------------------------------------------------------------------- December 31, 1996 275.0 30.8 305.8 5,908 323 6,231 Revisions of previous estimates (15.6) (2.6) (18.2) 68 (4) 64 Extensions, discoveries and other additions 44.9 .3 45.2 913 1 914 Production (24.6) (7.2) (31.8) (583) (26) (609) Purchases of reserves in place 1.4 -- 1.4 116 240 356 Sales of reserves in place (48.7) -- (48.7) (538) -- (538) - ---------------------------------------------------------------------------------------------------------------------------- December 31, 1997 232.4 21.3 253.7 5,884 534 6,418 Revision of previous estimates (8.4) 1.6 (6.8) (94) (6) (100) Extensions, discoveries and other additions 26.7 29.7 56.4 636 35 671 Production (24.2) (6.0) (30.2) (577) (24) (601) Purchases of reserves in place .1 -- .1 81 8 89 Sales of reserves in place -- -- -- (72) (25) (97) - ---------------------------------------------------------------------------------------------------------------------------- December 31, 1998 226.6 46.6 273.2 5,858 522 6,380 ============================================================================================================================ PROVED DEVELOPED RESERVES December 31, 1995 224.8 30.3 255.1 5,064 271 5,335 December 31, 1996 242.0 25.4 267.4 4,870 265 5,135 December 31, 1997 203.9 15.6 219.5 4,641 233 4,874 December 31, 1998 199.2 14.5 213.7 4,565 258 4,823
48 53 SUPPLEMENTARY FINANCIAL INFORMATION A summary of the standardized measure of discounted future net cash flows relating to proved oil and gas reserves is shown below. Future net cash flows are computed using year end sales prices, costs and statutory tax rates (adjusted for tax credits and other items) that relate to the Company's existing proved oil and gas reserves.
December 31, 1998 - -------------------------------------------------------------------------------------------------------- (In Millions) North America International Total - -------------------------------------------------------------------------------------------------------- Future cash inflows $13,840 $1,912 $15,752 Less related future Production costs 3,761 773 4,534 Development costs 617 296 913 Income taxes 2,113 190 2,303 - -------------------------------------------------------------------------------------------------------- Future net cash flows 7,349 653 8,002 10% annual discount for estimated timing of cash flows 3,643 301 3,944 - -------------------------------------------------------------------------------------------------------- Standardized measure of discounted future net cash flows $ 3,706 $ 352 $ 4,058 ========================================================================================================
December 31, 1997 - -------------------------------------------------------------------------------------------------------- (In Millions) North America International Total - -------------------------------------------------------------------------------------------------------- Future cash inflows $15,934 $1,800 $17,734 Less related future Production costs 4,076 702 4,778 Development costs 736 214 950 Income taxes 2,767 200 2,967 - -------------------------------------------------------------------------------------------------------- Future net cash flows 8,355 684 9,039 10% annual discount for estimated timing of cash flows 3,960 234 4,194 - -------------------------------------------------------------------------------------------------------- Standardized measure of discounted future net cash flows $ 4,395 $ 450 $ 4,845 ========================================================================================================
A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and gas reserves follows.
Year Ended December 31, - ---------------------------------------------------------------------------------------------------- (In Millions) 1998 1997 1996 - ---------------------------------------------------------------------------------------------------- January 1 $ 4,845 $ 7,505 $ 4,393 - ---------------------------------------------------------------------------------------------------- Revisions of previous estimates Changes in prices and costs (904) (4,167) 4,981 Changes in quantities (100) (23) 119 Changes in rate of production (262) (436) (77) Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs 465 655 782 Purchases of reserves in place 56 246 148 Sales of reserves in place (77) (667) (177) Accretion of discount 612 1,048 529 Sales of oil and gas, net of production costs (1,211) (1,547) (1,470) Net change in income taxes 297 1,697 (1,652) Other 337 534 (71) - ---------------------------------------------------------------------------------------------------- Net change (787) (2,660) 3,112 - ---------------------------------------------------------------------------------------------------- December 31 $ 4,058 $ 4,845 $ 7,505 ====================================================================================================
49 54 BURLINGTON RESOURCES INC. QUARTERLY FINANCIAL DATA -- UNAUDITED
1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ (In Millions, Except per Share Amounts) 4th 3rd 2nd 1st 4th 3rd 2nd 1st - ------------------------------------------------------------------------------------------------------------------------------ Revenues $ 403 $ 390 $ 412 $ 432 $ 541 $ 464 $ 427 $ 568 Operating Income(a) 14 41 64 99 87 116 93 207 Net Income(a)(b) -- 15 23 48 37 65 86 131 Basic Earnings per Common Share -- .08 .13 .27 .20 .37 .49 .74 Diluted Earnings per Common Share -- .08 .13 .27 .20 .37 .49 .73 Cash Dividends Declared per Common Share $ .14 $ .13 $ .14 $ .14 $ .14 $ .10 $ .11 $ .11 - ------------------------------------------------------------------------------------------------------------------------------ Common Stock Price Range High $43 1/8 $ 44 1/2 $ 49 5/8 $ 49 1/2 $53 5/8 $53 3/16 $48 5/8 $54 1/2 Low $ 32 $29 7/16 $38 3/16 $38 15/16 $42 1/2 $ 43 5/8 $39 3/4 $42 5/8
(a) During the fourth quarter of 1997, as a result of the Merger, the Company recorded a pretax charge of $80 million ($71 million after tax). (b) During the second quarter of 1997, as a result of the divestiture program, the Company recorded a pretax gain of $50 million ($31 million after tax). 50 55 EXECUTIVE OFFICERS OF THE REGISTRANT BOBBY S. SHACKOULS, 48 Chairman of the Board, President and Chief Executive Officer Burlington Resources Inc. July 1997 to Present President and Chief Executive Officer, Burlington Resources Inc., December 1995 to July 1997; President and Chief Executive Officer, Burlington Resources Oil & Gas Company, October 1994 to Present; Executive Vice President and Chief Operating Officer, Meridian Oil Inc., June 1993 to October 1994. JOHN E. HAGALE, 42 Executive Vice President and Chief Financial Officer Burlington Resources Inc. December 1995 to Present Executive Vice President and Chief Financial Officer, Burlington Resources Oil & Gas Company, March 1993 to Present; Senior Vice President and Chief Financial Officer, Burlington Resources Inc., April 1994 to December 1995. RANDY L. LIMBACHER, 40 President and Chief Executive Officer Burlington Resources North America July 1998 to Present Vice President, Gulf Coast Division, Burlington Resources Oil & Gas Company, February 1997 to June 1998; Vice President, Farmington Region, Burlington Resources Oil & Gas Company, June 1993 to January 1997. H. LEIGHTON STEWARD, 64 Vice Chairman of the Board Burlington Resources Inc. October 1997 to Present Chairman of the Board, President and Chief Executive Officer, The Louisiana Land and Exploration Company, November 1996 to October 1997; Chairman of the Board and Chief Executive Officer, The Louisiana Land and Exploration Company, September 1995 to November 1996; and Chairman of the Board, President and Chief Executive Officer, The Louisiana Land and Exploration Company, January 1989 to September 1995. L. DAVID HANOWER, 39 Senior Vice President Law and Administration Burlington Resources Inc. July 1998 to Present Senior Vice President, Law, Burlington Resources Inc., April 1996 to June 1998, Vice President, Law, Burlington Resources Inc., April 1991 to April 1996; Senior Vice President, Law, Burlington Resources Oil & Gas Company, July 1993 to June 1998. JOHN A. WILLIAMS, 54 President and Chief Executive Officer Burlington Resources International July 1998 to Present Senior Vice President, Exploration, Burlington Resources Inc., October 1997 to June 1998; Senior Vice President, Exploration and Production, The Louisiana Land and Exploration Company, September 1995 to October 1997; Vice President, The Louisiana Land and Exploration Company, March 1988 to September 1995. 51 56 FORWARD-LOOKING STATEMENTS The Company may, in discussions of its future plans, objectives and expected performance in periodic reports filed by the Company with the Securities and Exchange Commission (or documents incorporated by reference therein) and in written and oral presentations made by the Company, include projections or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, as amended. Such projections and forward-looking statements are based on assumptions which the Company believes are reasonable, but are by their nature inherently uncertain. In all cases, there can be no assurance that such assumptions will prove correct or that projected events will occur, and actual results could differ materially from those projected. 52 57 BOARD OF DIRECTORS John V. Byrne (1) President Emeritus Oregon State University S. Parker Gilbert (2) Former Chairman Morgan Stanley Group Inc. Laird I. Grant (1) Former President, Chief Executive Officer and Chief Investment Officer Rockefeller & Co., Inc. John T. LaMacchia (2) (3) President and Chief Executive Officer Cincinnati Bell Inc. James F. McDonald (1) (3) President and Chief Executive Officer Scientific-Atlanta, Inc. Kenneth W. Orce (1) Senior Partner Cahill Gordon & Reindel Donald M. Roberts (1) Retired Vice Chairman and Treasurer United States Trust Company of New York and U.S. Trust Corporation John F. Schwarz (2) Chairman, President and Chief Executive Officer Entech Enterprises, Inc. Walter Scott, Jr. (2) (3) Chairman Level 3 Communications, Inc. Bobby S. Shackouls (3) Chairman of the Board, President and Chief Executive Officer Burlington Resources Inc. H. Leighton Steward (3) Vice Chairman of the Board Burlington Resources Inc. William E. Wall (2) Of Counsel Siderius Lonergan (1) Audit Committee (2) Compensation and Nominating Committee (3) Executive Committee EXECUTIVE OFFICERS Bobby S. Shackouls Chairman of the Board, President and Chief Executive Officer Burlington Resources Inc. H. Leighton Steward Vice Chairman of the Board Burlington Resources Inc. John E. Hagale Executive Vice President and Chief Financial Officer Burlington Resources Inc. L. David Hanower Senior Vice President, Law and Administration Burlington Resources Inc. Randy L. Limbacher President and Chief Executive Officer Burlington Resources North America John A. Williams President and Chief Executive Officer Burlington Resources International CORPORATE INFORMATION Principal Corporate Office Burlington Resources Inc. 5051 Westheimer, Suite 1400 Houston, Texas 77056 (713) 624-9500 http://www.br-inc.com Annual Meeting The Annual Meeting of Stockholders will be in Houston, Texas on April 7, 1999. Formal notice of the meeting will be mailed in advance. Stock Exchange Listing New York Stock Exchange Symbol: BR Stock Transfer Agent and Registrar BankBoston, N.A. c/o EquiServe P.O. Box 8040 Boston, Massachusetts 02266-8040 (800) 736-3001 http://www.equiserve.com Additional copies of this Annual Report and the Company's Form 10-K filed with the Securities and Exchange Commission are available, without charge, by writing or calling: Investor Relations Burlington Resources Inc. P.O. Box 4239 Houston, Texas 77210 (800) 262-3456 [GRAPHIC OF GAS PLANT] 58 [PHOTOS OF MAN, SUNSET, & SATELLITE] BURLINGTON RESOURCES 5051 WESTHEIMER, SUITE 1400 HOUSTON, TEXAS 77056 EX-21.1 8 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 BURLINGTON RESOURCES INC. SUBSIDIARIES OF THE REGISTRANT The following is a list of the significant subsidiaries of Burlington Resources Inc. showing the place of incorporation and the percentage of voting securities owned.
PERCENTAGE OF VOTING SECURITIES OWNED DIRECTLY OR JURISDICTION OF INDIRECTLY BY NAME OF COMPANY INCORPORATION IMMEDIATE PARENT --------------- --------------- ---------------- Burlington Resources North America Inc. .................... Delaware 100% Burlington Resources International Inc...................... Delaware 100% Burlington Resources Hydrocarbons Inc. ..................... Delaware 100% Burlington Resources Oil & Gas Company...................... Delaware 100% Burlington Resources Trading Inc. .......................... Delaware 100% Glacier Park Company........................................ Delaware 100% The Louisiana Land and Exploration Company.................. Maryland 100%
The names of certain subsidiaries are omitted as such subsidiaries, considered as a single subsidiary, would not constitute a significant subsidiary. EX-23.1 9 CONSENT OF INDEPENDENT ACCOUNTANTS. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Burlington Resources Inc. (the "Company") on Form S-8 (Registration Nos. 33-22493, 33-25807, 33-26024, as amended in Registration No. 2-97533, 33-33626, 33-46518, 33-53973, 333-02029, 333-32603, 333-40565 and 333-60081) and on Form S-3 (Registration Nos. 33-54477, 333-24999 and 333-52213) of our report dated January 20, 1999, on our audits of the consolidated financial statements of the Company as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, which report is incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. PricewaterhouseCoopers LLP February 25, 1999 Houston, Texas EX-27.1 10 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1998 AND THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1998 DEC-31-1998 0 0 402 0 33 456 10,176 4,818 5,917 494 0 0 0 2 3,016 5,917 1,637 1,637 1,419 1,419 (25) 0 148 95 9 86 0 0 0 86 0.48 0.48 Other Stockholders' Equity = Total Equity less Common Stock
-----END PRIVACY-ENHANCED MESSAGE-----