-----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, UVNPWbc3HxKVHnQ+kDi1riJg6McPCy50oek1H3eh+og/8cVjaH+Yp1Ve1vkJ8ndL uYVY9MppBq8HDpBfwgz8mw== 0000950129-97-000646.txt : 19970222 0000950129-97-000646.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950129-97-000646 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-09971 FILM NUMBER: 97531535 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. - FORM 10-K 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, 1996 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, 1996: $6,292,799,462 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, 1996, Shares Outstanding: 124,918,699 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. 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.............................................. 8 Item Three Legal Proceedings...................................... 8 Item Four Submission of Matters to a Vote of Security Holders.... 9 Executive Officers of the Registrant and Principal Subsidiary............................................ 10 PART II Item Five Market for Registrant's Common Equity and Related Stockholder Matters................................... 11 Item Six Selected Financial Data................................ 11 Item Seven Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 12 Item Eight Financial Statements and Supplementary Financial Information........................................... 18 Item Nine Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 37 PART III Items Ten and Eleven Directors and Executive Officers of the Registrant and Executive Compensation................................ 37 Item Twelve Security Ownership of Certain Beneficial Owners and Management............................................ 37 Item Thirteen Certain Relationships and Related Transactions......... 37 PART IV Item Fourteen Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 37
3 PART I ITEMS ONE AND TWO BUSINESS AND PROPERTIES Burlington Resources Inc. ("BR") is a holding company engaged, through its principal subsidiary, Burlington Resources Oil & Gas Company (formerly known as Meridian Oil Inc.) and its affiliated companies (together the "Company"), in the exploration, development, production and marketing of oil and gas. The Company is the largest independent (nonintegrated) oil and gas company in the United States in terms of total domestic proved equivalent reserves which were estimated at 6.4 TCFE at December 31, 1996. From its inception in 1988 through 1993, BR restructured its assets to become solely an oil and gas exploration and production company. The restructuring included the sale of non-strategic assets (real estate, minerals and forest products) resulting in cumulative gross proceeds of $1.4 billion and the 1992 spin-off of El Paso Natural Gas Company ("EPNG"). The net proceeds from non-strategic asset sales were reinvested in domestic oil and gas reserves and in the repurchase of the Company's common stock. For definitions of certain oil and gas terms used herein, see "Certain Definitions" on page 8. GENERAL INFORMATION The Company's objective is to build long-term shareholder value through value-added growth and effective cost management by increasing production, reserves, earnings and cash flow. The Company intends to achieve this objective primarily by increasing its focus on high potential, high margin exploration and development projects. The Company will continue to pursue acquisitions that complement its core area focus and provide future growth potential. On July 11, 1996, the Company announced the acceleration of its on-going divestiture program. The Company sold over 9,500 working interest wells from January 1, 1994 to December 31, 1996, including its working interest in approximately 4,000 wells sold during 1996. By July 31, 1997, the Company expects to sell its working interest in approximately 9,200 additional wells, thus reducing its pre-1994 working interest well count over 50 percent. The net book value of the wells to be sold is approximately $350 million at December 31, 1996 and the related net production represented about 12 percent of the Company's average daily produced volumes at December 31, 1996. This accelerated divestiture program allowed the Company to reorganize and reduce the number of its operating divisions from five to three. The accelerated divestiture program and reorganization is expected to result in more than a 20 percent reduction in the Company's 1995 level of production expenses per MCFE. It will also result in a reduction of approximately 425 employees or 20 percent of total employees and a reduction of over 10 percent of the Company's 1995 corporate administrative expenses per MCFE. All levels of personnel within the Company were included in the employee reduction. As a result of the divestiture program and reorganization, the Company recorded a pretax charge of approximately $30 million for severance and other related exit costs in the third quarter of 1996. Since December 31, 1995, headcount has been reduced by 373 employees, of which 334 employees have been terminated under the restructuring program. Approximately $7 million of accrued unpaid benefits remain on the consolidated balance sheet as of December 31, 1996. The Company expects that substantially all benefits will be paid by July 31, 1997. The Company's operations are now conducted from three division offices located in Farmington, New Mexico, Midland, Texas and Houston, Texas. Virtually all of the Company's oil and gas production is from properties located in the United States. Following is a description of the Company's major areas of activity in each division. SAN JUAN DIVISION. The San Juan Division ("San Juan"), located in Farmington, New Mexico is the most prolific operating area of the Company in terms of reserves and production. San Juan's 1 4 activities are centered in the San Juan Basin in northwest New Mexico and southwest Colorado. The San Juan Basin encompasses nearly 7,500 square miles, or approximately 4.8 million acres, with the major portion located in the New Mexico counties of Rio Arriba and San Juan. The Company is the largest private holder of productive leasehold acreage in this area with over 1 million net acres under its control. The Company has an interest in approximately 9,500 wells and currently operates approximately 6,300 of these wells. San Juan has approximately 60 percent of the Company's reserves. There are four significant gas producing horizons in the San Juan Basin. These horizons, which range in depth from approximately 1,000 feet to 8,500 feet, are the Fruitland Coal, the Pictured Cliffs, the Mesaverde and the Dakota. The Pictured Cliffs, Mesaverde and Dakota are sandstone formations while the Fruitland Coal produces natural gas which is adsorbed to the surface of coal seams. The Company continues to be an industry leader in the development of the Fruitland Coal formation. San Juan's net coal seam production averaged 385 MMCF of gas per day during 1996 from approximately 1,300 wells. During 1996, San Juan participated in 103 new wells and 297 mechanical workovers on existing wells. San Juan's capital investment for 1996 was $98 million. The Company has continued to grow its production in what is considered one of the most mature basins in the United States. Net production from San Juan averaged 717 MMCF of gas per day and 1.7 MBbls of oil per day. San Juan's average daily net production represented approximately 59 percent of the Company's total average daily gas production and 3 percent of the Company's total average daily oil production. In order to manage production more effectively, improve recovery of reserves and remove impurities, the Company owns and operates the Val Verde plant and gathering system which includes approximately 420 miles of gathering lines and 13 compressor stations to gather and treat coal seam gas in the San Juan Basin. GULF COAST DIVISION. The Gulf Coast Division ("Gulf Coast"), located in Houston, Texas, explores for and produces oil and gas offshore in the Gulf of Mexico and onshore, primarily in south Louisiana and south Texas. The complex geologic conditions and multiple prospective oil and gas formations, encountered as deep as 25,000 feet, make the Gulf Coast Basin an attractive area for the application of advanced technologies such as three dimensional ("3-D") seismic. The application of 3-D seismic technology has been instrumental in the exploration and development of Gulf Coast's assets with over 800 square miles of 3-D seismic data acquired in 1996. In 1994, the Company established an operating position in the shallow offshore waters of the Gulf of Mexico through its acquisition of Diamond Shamrock Offshore Partners Limited Partnership. In 1996, the Company acquired additional offshore assets from Gulfstream Resources, Inc. The principal assets purchased were three fields; Eugene Island Block 205, Eugene Island Block 89 and West Cameron Block 2. The properties are located from 2 miles to 50 miles off the Louisiana coast in water depths ranging from 10 feet to 120 feet. The Company currently has interests in 131 offshore federal and state waters' lease blocks, 63 of which are operated by the Company. The Company currently has interests in 16 deeper water blocks in water depths greater than 600 feet. During 1996, Gulf Coast invested approximately $150 million in offshore operations including the drilling of 47 new wells and 23 mechanical workovers. The most notable new field brought on to production in 1996 for the Gulf Coast was High Island Block A-371, an exploration discovery made in late 1994, located off the coast of Texas in 400 feet of water. The platform began initial production in the second quarter of 1996, with simultaneous drilling and production activities taking place during the second half of 1996. The field was producing 93 MMCF of gas per day net to the Company at year end 1996. Since establishing an asset position in the offshore Gulf of Mexico in 1994, the Company has grown natural gas production from approximately 100 MMCF per day to approximately 240 MMCF per day at year end 1996. Gulf Coast's onshore activities in 1996 were primarily in the south Louisiana fields of Garden City, Lake Arthur and Sulphur Mines. In 1996, Gulf Coast invested a total of approximately $20 million in south Louisiana which included investments for the drilling of 10 new wells and 19 mechanical 2 5 workovers. The Garden City Field properties were acquired in February 1995. Since that time, the Company has more than tripled its net oil and gas volumes from 7 MMCFE to over 23 MMCFE per day at year end 1996. Total capital investments in Gulf Coast's areas of activity in 1996 were $179 million. Net production from Gulf Coast averaged 235 MMCF of gas per day and 13.7 MBbls of oil per day. Gulf Coast's average daily net production represented approximately 19 percent of the Company's total average daily gas production and 27 percent of the Company's total average daily oil production. Gulf Coast has approximately 12 percent of the Company's reserves. MID-CONTINENT DIVISION. The Mid-Continent Division ("Mid-Continent"), located in Midland, Texas operates primarily in three basins; the Permian Basin in west Texas, the Anadarko Basin in western Oklahoma and the Williston Basin in western North Dakota, northwest South Dakota and northeast Montana. The Permian Basin includes essentially all of west Texas and southeast New Mexico and encompasses approximately 68,000 square miles. The Company's reserve base in the Permian Basin has more than doubled since 1988 from internal development projects and through the acquisition of producing properties. The Company has an interest in over 8,300 Permian Basin wells, of which over 3,900 are operated. The most productive structural feature in the Permian Basin is the Central Basin Platform in which the Company controls over 150,000 net acres of mineral interests. This area is about 170 miles long and 50 miles wide trending northwest from west Texas to southeast New Mexico. Over 20 different formations, ranging in depth from 2,000 feet to over 12,000 feet, produce oil and gas on the Central Basin Platform. The largest consolidated block of acreage in this basin in which the Company has an interest is the Waddell Ranch, located 40 miles west of Midland, Texas. The Company operates over 1,500 wells on the Waddell Ranch with a combined average net production in 1996 of 4.6 MBbls of oil per day and 22 MMCF of gas per day. Due to the complex geologic nature of the Permian Basin, 3-D seismic technology has been an effective exploration and production tool in this area. In 1996, approximately 280 square miles of 3-D seismic were acquired for a total investment of approximately $5 million. The utilization of 3-D data resulted in the drilling of 35 wells in 1996, including 7 horizontal wells. The Anadarko Basin encompasses over 30,000 square miles and contains some of the deepest producing formations in the world. The basin produces oil and gas from multiple zones ranging in depth from less than 1,000 feet to over 26,000 feet. The Company controls over 350,000 net acres principally located in the Anadarko Basin in western Oklahoma. The Company operates over 300 wells in this basin with total net production during 1996 averaging 121 MMCF of gas per day. The Company has been concentrating its Anadarko Basin activity in the Elk City and Strong City Fields where the application of 3-D seismic technology, computerized modeling and advanced reservoir stimulation are enhancing the value of these assets. The primary producing horizons in these fields are the Morrow, Springer and Cherokee Red Fork formations. During 1996, the Company participated in the drilling of 38 new wells to these formations at a net cost of approximately $20 million. The Williston Basin encompasses approximately 225,000 square miles and has 18 producing horizons ranging in depth from 4,500 feet to over 15,000 feet. The Company controls over 3.6 million net acres in the basin through both mineral and leasehold interest. Mid-Continent's activities have been focused on the use of advanced technologies such as 3-D seismic and horizontal drilling to increase the value of its assets. In 1996, Mid-Continent was very active in exploration programs in the Red River "B" and Lodgepole horizons. In total, Mid-Continent participated in the completion of 89 horizontal wells in 1996 throughout the Williston Basin at a net cost of approximately $50 million. During 1996, Mid-Continent's net oil production from the Williston Basin averaged 18 MBbls of oil per day. 3 6 Capital investments in Mid-Continent totaled $178 million in 1996. Net production averaged 273 MMCF of gas per day and 35.7 MBbls of oil per day. Mid-Continent's average daily net production represented approximately 22 percent of the Company's total average daily gas production and 70 percent of the Company's total average daily oil production. Mid-Continent has approximately 28 percent of the Company's reserves. SECTION 29 TAX CREDITS A number of formations located within the Company's producing areas have wells that qualify for tax credits under Section 29 of the Internal Revenue Code of 1954, as amended ("IRC"). IRC Section 29 provides for a tax credit from non-conventional fuel sources such as oil produced from shale and tar sands and natural gas produced from geopressured brine, Devonian shale, coal seams and tight sands formations. The Company estimates that the tax credit rate will range from $.52 to $1.02 per MMBTU depending on fuel source. The Company earned approximately $59 million of tax credits in 1996. CAPITAL EXPENDITURES AND MAJOR PROJECTS Following are the Company's capital expenditures.
YEAR ENDED DECEMBER 31, ------------------------ 1996 1995 1994 ---- ---- ---- (IN MILLIONS) Oil and Gas Activities................................ $519 $547 $810 Plants and Pipelines.................................. 26 28 36 Administrative........................................ 9 14 36 ---- ---- ---- Total....................................... $554 $589 $882 ==== ==== ====
Capital expenditures for oil and gas activities in 1996 of $519 million include 17 percent for proved property acquisitions, 63 percent for development and 20 percent for exploration. Included in capital expenditures for oil and gas activities are exploration costs expensed under the successful efforts method of accounting and capitalized interest. Drilling Activity. Drilling activity in 1996 was principally in the San Juan, Gulf Coast, Permian, Anadarko and Williston basins. Lower net drilling activity levels, as seen in the table below, are a result of the Company's increased focus on higher potential exploration and development projects. Larger expenditures in fewer projects, particularly in the Gulf Coast, reflect the Company's continued focus on increasing its operating and capital efficiencies. The following table sets forth the Company's net productive and dry wells.
YEAR ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 ---- ---- ---- Productive wells Exploratory..................................... 16.3 18.1 15.9 Development..................................... 186.1 291.7 342.2 ---- ---- ---- 202.4 309.8 358.1 ---- ---- ---- Dry wells Exploratory..................................... 11.5 15.8 3.7 Development..................................... 5.9 37.8 13.3 ---- ---- ---- 17.4 53.6 17.0 ---- ---- ---- Total net wells......................... 219.8 363.4 375.1 ==== ==== ====
4 7 As of December 31, 1996, 52 gross wells, representing approximately 24 net wells, were being drilled. Asset Rationalization. The Company focuses its acquisition activity in areas where it has production in order to maximize the efficiencies gained in combining operations or in new areas where the Company can transfer its technological expertise or take advantage of premium markets. In addition, the Company uses a selective acquisition process that emphasizes the purchase of reserves as well as properties having upside potential that can be developed by the utilization of both conventional and advanced technologies. As a component of its overall growth strategy, the Company acquired 107 BCFE of producing oil and gas properties at a cost of approximately $87 million during 1996. Approximately 87 percent of the reserves acquired during the year were located in the prolific Gulf Coast Basin. The most notable acquisition in 1996 was the purchase of Gulfstream Resources, Inc. for $77 million. This acquired asset consisted of 3 offshore Louisiana oil and gas properties. The Company will continue to pursue transactions which enable the consolidation of assets and increase operating efficiencies. In an effort to maintain its high quality asset base, the Company continues to divest non-strategic oil and gas assets. On July 11, 1996, the Company announced the acceleration of its on-going divestiture program. During 1996, the Company divested its working interest in approximately 4,000 wells and related facilities. Gross proceeds from all 1996 asset divestitures were approximately $160 million. In February 1995, the Company completed the sale of its intrastate natural gas pipeline systems and its underground gas storage facility, including gas inventory, for approximately $80 million. PRODUCTIVE WELLS, DEVELOPED AND UNDEVELOPED ACREAGE Working interests in productive wells, developed acreage and undeveloped leasehold acreage at December 31, 1996 follow.
PRODUCTIVE WELLS - ---------------------------- OIL GAS DEVELOPED ACRES UNDEVELOPED ACRES - ------------- ------------- -------------------- -------------------- GROSS NET GROSS NET GROSS NET GROSS NET - ------ ----- ------ ----- --------- --------- --------- --------- 10,486 4,667 12,634 7,267 4,905,000 2,704,000 2,708,000 1,428,000
Excluded from the acreage data are approximately 7 million undeveloped acres of Company-owned oil and gas mineral rights, of which approximately 3 to 4 million acres are considered to have potential for oil and gas exploration. 5 8 OIL AND GAS PRODUCTION, PRICES AND PRODUCTION COSTS The Company's average daily production represents its net ownership after deduction of all royalty interests held by others but includes royalty interests and net profits interests owned by the Company. The Company's average natural gas price includes amounts from the sale of NGLs, less the actual costs incurred to gather, treat, process and transport the hydrocarbons to market. Following are production and prices.
YEAR ENDED DECEMBER 31, --------------------------------------------- 1996 1995 1994 ---- ---- ---- Production Gas (MMCF per day)................................. 1,225 1,165 1,052 Oil (MBbls per day)................................ 51.1 48.0 45.6 Average sales prices Gas per MCF........................................ $ 1.91 $ 1.25 $ 1.65 Oil per barrel..................................... 20.69 16.69 15.66 Average production costs per MCFE.................... .53 .51 .54 Depreciation, depletion and amortization rates per MCFE............................................... $ .55 $ .63 $ .62
In 1996, 1995 and 1994, approximately 55 percent, 58 percent and 66 percent, respectively, of the Company's gas production was transported to direct sale customers through EPNG's pipeline facilities. These transportation arrangements are pursuant to EPNG's approved Federal Energy Regulatory Commission ("FERC") 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. RESERVES The following table sets forth estimates by the Company's petroleum engineers of proved oil and gas reserves at December 31, 1996. These reserves have been reduced for royalty interests owned by others.
GAS OIL TOTAL (BCF) (MMBBLS) (BCFE) ----- -------- ------ Proved Developed Reserves...................... 4,314 174.2 5,359 Proved Undeveloped Reserves.................... 900 29.4 1,076 ----- ----- ----- Total Proved Reserves................ 5,214 203.6 6,435 ===== ===== =====
For further information on reserves, including information on future net cash flows and the standardized measure of discounted future net cash flows, see "Financial Statements and Supplementary Financial Information--Supplemental Oil and Gas Disclosures." MARKETING Marketing Strategy. In pursuit of its objective to build long-term shareholder value, the Company will continue to develop premium markets for its production. In addition, the Company adds value through such activities as processing, gathering, exchanging and transporting hydrocarbons for both itself and third parties. Financial instruments and fixed-price gas sales contracts are used from time to time in order to hedge the price of a portion of the Company's production. Wellhead Marketing. Substantially all of the Company's oil and gas production is sold on the spot market and under short-term contracts at market sensitive prices. Substantially all of the Company's gas production is sold to Burlington Resources Trading Inc. ("BRTI"), a wholly-owned marketing subsidiary of the Company. However, most of the Company's crude oil production is sold at the wellhead to third parties. 6 9 NGL Marketing. The Company is engaged in the fractionation, transportation and marketing of NGLs which are sold to a variety of distributors, refiners and petrochemical users. NGL sales were 15.4 MMBbls, 13.3 MMBbls and 12.7 MMBbls, for the years ended December 31, 1996, 1995 and 1994, respectively. Transportation. The Company enters into contracts which provide firm transportation capacity rights on interstate and intrastate pipeline systems. Currently, approximately one-half of the Company's demand charges are for eastward transportation from the San Juan Basin. The cost of such transportation is expected to continue to be more than offset by (i) the proceeds received from the sale of gas at locations east of the San Juan Basin and (ii) increases in realized San Juan Basin prices which occur as a result of less supply competing for California demand. 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 gas purchasing and processing contracts and for oil, 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. Regulation of Oil and Gas Production, Sales and Transportation. Numerous departments and agencies, both federal and state, have issued rules and regulations governing the oil and gas industry and its individual members, compliance with which is often difficult and costly and some of which carry substantial noncompliance penalties. State and federal statutes and regulations require drilling permits, drilling bonds and operating reports. Most states in which the Company operates also have statutes and regulations 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 states also limit production to the market demand for oil and gas. Such statutes and regulations 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 gas are deregulated. The Company operates various gathering systems. The United States Department of Transportation and comparable state agencies regulate, under various enabling statutes, the safety aspects of the transportation and storage activities of these facilities by prescribing safety and operating standards. The FERC has implemented orders deregulating the field area services of affiliates of interstate pipeline companies. These orders, while subject to review by the Supreme Court, have caused state agencies and legislatures to reexamine the regulation of all gathering systems within their jurisdiction, including the Company's. The Company does not expect these actions to materially affect its gathering system operations or revenues. The FERC has instituted proceedings concerning offshore and interstate pipeline companies' incentive and/or deregulated ratemaking. These proceedings are still in their early stages. The Company does not expect that these proceedings will have a materially adverse effect on the consolidated financial position or results of operations of the Company. Environmental Regulation. Various federal, state and local laws and regulations covering the discharge of materials into the environment, or otherwise relating to the protection of the environment, may affect the Company's operations and costs as a result of their effect on oil and gas exploration, development and production operations. Offshore oil and gas operations 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. Department of 7 10 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 environmental laws and regulations to expend amounts that will have a materially adverse effect on the consolidated financial position or results of operations of the Company. Filings of Reserve Estimates With Other Agencies. During 1996, the Company filed estimates of oil and gas reserves for the year 1995 with the Department of Energy. These estimates were not materially different from the reserve data presented herein. CERTAIN DEFINITIONS Gas volumes are stated at the legal pressure base of the state or area in which the reserves are located and at 60 degrees Fahrenheit. As used in this Form 10-K, "MCF" means thousand cubic feet, "MMCF" means million cubic feet, "BCF" means billion cubic feet, "MBbls" means thousands of barrels, "MMBbls" means millions of barrels, "MCFE" means thousand cubic feet of gas equivalent, "MMBTU" means million British thermal units, "MMCFE" means million cubic feet of gas equivalent, "BCFE" means billion cubic feet of gas equivalent and "TCFE" means trillion cubic feet of gas equivalent. Oil is converted into cubic feet of gas equivalent based on 6 MCF of gas to one barrel of oil. "NGL" means natural gas liquids. 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. 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. 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. With respect to information on working interests in acreage and wells, "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. EMPLOYEES The Company had 1,423 and 1,796 employees at December 31, 1996 and 1995, respectively. ITEM THREE LEGAL PROCEEDINGS On May 25, 1995, the 270th Judicial District Court of Harris County, Texas entered an order in a lawsuit styled Caroline Altheide, et al. v. Meridian Oil Inc. (now known as Burlington Resources Oil & Gas Company), et al., which allowed the suit to be maintained as a class action on behalf of all royalty and overriding royalty interest owners in all Burlington Resources Oil & Gas Company ("BROG") properties and all working interest owners in properties operated by BROG who received payments from BROG at any time from and after December 1, 1986 based upon wellhead sales of natural gas to BRTI. The lawsuit involves claims for unspecified actual and punitive damages based upon alleged breaches of duties owed to interest owners because of the use of corporate affiliates to gather, treat and market natural gas. The plaintiffs allege that BROG's gas producing affiliates have sold natural gas to marketing affiliates at lower inter-affiliate settlement prices which were then used as the basis for accounting to interest owners. Plaintiffs also allege that BROG's pricing includes inappropriate deductions of inflated gathering and transportation costs. BROG has consistently denied liability and 8 11 perfected an interlocutory appeal of the class certification order on May 30, 1995. Oral argument on the interlocutory appeal of the class certification order was heard February 28, 1996. Following the argument, but in advance of a decision by the appellate court, the parties executed a settlement agreement dated August 6, 1996, which the trial court preliminarily approved on August 12, 1996. After notice to the class members, the court conducted a hearing on November 8, 1996, and gave final approval to the terms of the parties' settlement agreement in its Judgment signed on November 12, 1996. Four class members who appeared through counsel at the November 8, 1996 hearing to object to the settlement filed a motion for a new trial or, in the alternative, to modify, alter or amend judgment, which motion was denied by Order signed December 16, 1996. Thereafter, the four objectors filed a Notice of Appeal. The Company intends to defend any appeals vigorously. The Company and its subsidiaries are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits and other proceedings cannot be predicted with certainty, management expects these matters, including the above-described Altheide litigation, will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. ITEM FOUR SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of 1996, no matters were submitted to a vote of security holders. 9 12 EXECUTIVE OFFICERS OF THE REGISTRANT AND PRINCIPAL SUBSIDIARY THOMAS H. O'LEARY, 62 Chairman of the Board Burlington Resources Inc. December 1995 to Present Chairman of the Board, President and Chief Executive Officer, February 1993 to December 1995; Chairman of the Board and Chief Executive Officer, July 1992 to February 1993; Chairman of the Board, President and Chief Executive Officer, October 1990 to July 1992. BOBBY S. SHACKOULS, 46 President and Chief Executive Officer Burlington Resources Inc. December 1995 to Present 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; President and Chief Operating Officer, Torch Energy Advisors, Inc., July 1991 to May 1993. JOHN E. HAGALE, 40 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; Vice President, Finance, Burlington Resources Inc., March 1992 to February 1993; Vice President, Taxes, Burlington Resources Inc., December 1990 to March 1992. RANDOLPH P. MUNDT, 46 Executive Vice President, Marketing Burlington Resources Oil & Gas Company March 1995 to Present Senior Vice President, Operations, Burlington Resources Oil & Gas Company, October 1994 to March 1995; Senior Vice President, Acquisitions and Land, Meridian Oil Inc., July 1993 to October 1994; Senior Vice President, Strategic Planning and Asset Management, Meridian Oil Inc., December 1990 to July 1993. C. RAY OWEN, 51 Executive Vice President and Chief Operating Officer Burlington Resources Oil & Gas Company October 1994 to Present Senior Vice President, Operations, Burlington Resources Oil & Gas Company, March 1993 to October 1994; Vice President, Regional Operations, Meridian Oil Inc., December 1990 to March 1993. GERALD J. SCHISSLER, 52 Executive Vice President, Law and Corporate Affairs Burlington Resources Inc. December 1995 to Present Executive Vice President, Law and Corporate Affairs, Burlington Resources Oil and Gas Company, July 1993 to Present; Senior Vice President, Law, Burlington Resources Inc., December 1993 to December 1995; Consultant, June 1991 to July 1993. 10 13 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, 1996, the number of common stockholders was 20,073. Information on common stock prices and quarterly dividends is shown on page 36. ITEM SIX SELECTED FINANCIAL DATA The selected financial data for the Company set forth below for the five years ended December 31, 1996 should be read in conjunction with the consolidated financial statements.
1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) CONTINUING OPERATIONS FOR THE YEAR ENDED Revenues.................................... $1,293 $ 873 $1,055 $1,043 $ 943 Operating Income (Loss)..................... 418 (467) 175 256 240 Income (Loss)............................... 255 (280) 154 256 190 Earnings (Loss) per Common Share(a)......... 2.02 (2.20) 1.20 1.96 1.44 Cash Dividends Declared per Common Share(b)................................. $ .55 $ .55 $ .55 $ .55 $ .60 AT YEAR END Total Assets(c)............................. $4,316 $4,142 $4,809 $4,448 $4,470 Long-term Debt.............................. 1,347 1,350 1,309 819 1,003 Stockholders' Equity(c)..................... $2,333 $2,220 $2,568 $2,608 $2,406 Common Shares Outstanding................... 125 127 127 130 129
- --------------- (a) Excluding the charge related to the divestiture program and reorganization for severance and other related exit costs totaling $.15 per share, Earnings per Common Share would have been $2.17 in 1996. Excluding non-recurring items totaling $2.39, $.47 and $.24 per share, Earnings per Common Share would have been $.19, $1.49 and $1.20 in 1995, 1993 and 1992, respectively. (b) On January 13, 1993, the Company increased its quarterly dividend rate to $.1375 per share. In July 1992, the quarterly dividend rate was reduced from $.175 per share to $.125 per share to reflect the June 30, 1992 spin-off of EPNG to the Company's stockholders. (c) In 1995, as a result of the impairment of oil and gas assets related to the adoption of SFAS No. 121, the Company recognized a non-cash, pretax charge of $490 million ($304 million after tax). 11 14 ITEM SEVEN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION AND LIQUIDITY The Company's total long-term debt to capital (long-term debt and stockholders' equity) ratio at December 31, 1996 and 1995 was 37 percent and 38 percent, respectively. In February 1996, the Company issued $150 million of 6.875% Debentures due February 15, 2026. The net proceeds were used for general corporate purposes, including acquisition of oil and gas properties, repayment of commercial paper, capital expenditures and repurchases of the Company's common stock. The Company's credit facilities are comprised of a $600 million revolving credit agreement that expires in July 2001 and a $300 million revolving credit agreement that expires July 1997. The $300 million revolving credit agreement is renewable annually by mutual consent and was renewed in July 1996. As of December 31, 1996, there were no borrowings outstanding under the credit facilities. The Company also has the capacity to issue $200 million of debt securities under a shelf registration statement filed with the Securities and Exchange Commission. During 1996, the Company repurchased approximately 2.7 million shares of its common stock for $112 million. Since December 1988, the Company has repurchased approximately 30 million shares and currently has the Board of Directors' approval to repurchase an additional 10 million shares. Net cash provided by operating activities for 1996 was $652 million compared to $452 million and $498 million in 1995 and 1994, respectively. The increase in 1996 compared to 1995 was primarily due to significantly higher operating income and $108 million in proceeds received from a prepaid premium, partially offset by other changes in working capital. The prepaid premium related to an obligation to deliver gas from certain coal seam wells through December 31, 2002. Net cash provided by operating activities in 1995 included the sale of a receivable related to a claim resulting from the breach of a take-or-pay gas contract and the sale of gas-in-storage inventory for approximately $39 million and $20 million, respectively. In an effort to maintain its high quality asset base, the Company continues to divest non-strategic oil and gas assets. On July 11, 1996, the Company announced the acceleration of its on-going divestiture program. During 1996, the Company divested its working interest in approximately 4,000 wells and related facilities. Gross proceeds from all 1996 asset divestitures were approximately $160 million. The Company is involved in certain environmental proceedings and other related matters. Although it is possible that new information or future developments could require the Company to reassess its potential exposure related to these matters, the Company believes, based upon available information, the resolution of these issues will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. The Company has certain commitments and uncertainties related to its normal operations. Management believes that there are no commitments, uncertainties or contingent liabilities that will have a materially adverse effect on the consolidated financial position or results of operations of the Company. CAPITAL EXPENDITURES AND RESOURCES Capital expenditures during 1996 totaled $554 million compared to $589 million and $882 million in 1995 and 1994, respectively. The Company spent $111 million for property acquisitions in 1996 compared to $143 million and $501 million in 1995 and 1994, respectively. The Company spent $408 million on internal development and exploration during 1996 compared to $404 million and $309 million in 1995 and 1994, respectively. 12 15 Capital expenditures for 1997, projected to be approximately $650 million, are expected to be primarily for development and exploration of oil and gas properties, reserve acquisitions, and plant and pipeline expenditures. Capital expenditures will be funded from internal cash flow supplemented, if needed, by external financing. The Company anticipates continued increases in gas production. The increased gas production is expected to be a result of the continuing development of the Company's gas reserves, exploration of undeveloped acreage and the Company's producing property acquisition program. The Company expects to market its additional gas production in the Gulf Coast, the Midwest, the East Coast and its traditional California market. MARKETING Marketing Strategy. In pursuit of its objective to build long-term shareholder value, the Company will continue to develop premium markets for its production. In addition, the Company adds value through such activities as processing, gathering, exchanging and transporting hydrocarbons for both itself and third parties. Financial instruments and fixed-price gas sales contracts are used from time to time in order to hedge the price of a portion of the Company's production. Wellhead Marketing. Substantially all of the Company's oil and gas production is sold on the spot market and under short-term contracts at market sensitive prices. Substantially all of the Company's gas production is sold to Burlington Resources Trading Inc., a wholly-owned marketing subsidiary of the Company. However, most of the Company's crude oil production is sold at the wellhead to third parties. NGL Marketing. The Company is engaged in the fractionation, transportation and marketing of NGLs which are sold to a variety of distributors, refiners and petrochemical users. NGL sales were 15.4 MMBbls, 13.3 MMBbls and 12.7 MMBbls, for the years ended December 31, 1996, 1995 and 1994, respectively. Transportation. The Company enters into contracts which provide firm transportation capacity rights on interstate and intrastate pipeline systems. Currently, approximately one-half of the Company's demand charges are for eastward transportation from the San Juan Basin. The cost of such transportation is expected to continue to be more than offset by (i) the proceeds received from the sale of gas at locations east of the San Juan Basin and (ii) increases in realized San Juan Basin prices which occur as a result of less supply competing for California market demand. DIVIDENDS On January 16, 1997, the Board of Directors declared a common stock quarterly dividend of $.1375 per share, payable April 1, 1997. 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 $69 million during 1996. RESULTS OF OPERATIONS Year Ended December 31, 1996 Compared With Year Ended December 31, 1995 The Company reported net income of $255 million or $2.02 per share in 1996 compared to a net loss of $280 million or $2.20 per share in 1995. The 1995 results include a $2.39 per share non-cash charge resulting from the Company's adoption of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of ("SFAS No. 121"). Revenues were $1,293 million in 1996 compared to $873 million in 1995. Average gas sales prices increased 53 percent in 1996 to $1.91 per MCF and average oil prices increased 24 percent to $20.69 per barrel which increased revenues $296 million and $75 million, respectively. Oil and gas sales 13 16 volumes increased primarily due to continued development and exploration of the Company's oil and gas properties and producing property acquisitions. Gas sales volumes improved 5 percent to 1,225 MMCF per day and oil sales volumes improved 6 percent to 51.1 MBbls per day which increased revenues $27 million and $19 million, respectively. Costs and Expenses were $875 million in 1996 compared to $1,340 million in 1995. Costs and expenses in 1995 included a $490 million non-cash charge related to the impairment of oil and gas properties which resulted from the Company's adoption of SFAS No. 121, effective September 30, 1995. Excluding the $490 million non-cash charge, costs and expenses for 1996 increased $25 million compared to 1995. The increase was primarily due to an approximate $30 million reorganization charge for severance and other related exit costs, a $21 million increase in production and processing expenses resulting from a 6 percent increase in 1996 production levels and a $10 million increase in exploration costs. These increases were partially offset by a $24 million decrease in depreciation, depletion and amortization primarily due to the adoption of SFAS No. 121, a $9 million decrease in general and administrative expenses and a $3 million decrease in intrastate natural gas purchases. Interest Expense was $113 million in 1996 compared to $109 million in 1995. The increase was due to additional fixed-rate debt issued in February 1996 partially offset by lower outstanding commercial paper balances. The effective income tax rate was an expense of 17 percent in 1996 compared to a benefit of 52 percent in 1995. The increased tax expense in 1996 was due to higher pretax income and a decline in non-conventional fuel tax credits earned. The beneficial tax rate in 1995 was due to a pretax loss and the effect of non-conventional fuel tax credits. Year Ended December 31, 1995 Compared With Year Ended December 31, 1994 The Company reported a net loss of $280 million or $2.20 per share in 1995 compared to net income of $154 million or $1.20 per share in 1994. The 1995 results include a $2.39 per share non-cash charge resulting from the Company's adoption of SFAS No. 121. Revenues were $873 million in 1995 compared to $1,055 million in 1994. Gas sales volumes improved 11 percent to 1,165 MMCF per day and oil sales volumes improved 5 percent to 48 MBbls per day which increased revenues $68 million and $14 million, respectively. Gas and oil sales volumes increased primarily due to continued development and exploration of the Company's oil and gas properties and producing property acquisitions. Average oil prices increased by 7 percent to $16.69 per barrel which increased revenues by $18 million. The revenue increases were more than offset by a 24 percent decline in 1995 average gas sales prices to $1.25 per MCF which decreased revenues $170 million. Additionally, intrastate natural gas sales declined $96 million due to the sale of the intrastate pipeline systems in February 1995 and other revenues declined $9 million. Costs and Expenses were $1,340 million in 1995 compared to $880 million in 1994. The increase was primarily due to a non-cash charge of $490 million related to the impairment of oil and gas properties, a $38 million increase in production related expenses and an $18 million increase in exploration costs. The non-cash charge resulted from the Company's adoption of SFAS No. 121, effective September 30, 1995. The increases were partially offset by a $85 million reduction in intrastate natural gas purchases primarily due to the February 1995 sale of the intrastate pipeline systems. Interest Expense was $109 million in 1995 compared to $90 million in 1994. The increase was primarily due to additional fixed-rate debt issued in March 1995 and May 1994. The effective income tax rate was a benefit of 52 percent in 1995 compared to a benefit of 71 percent in 1994. The beneficial tax rate in 1995 was due to a pretax loss and non-conventional fuel tax credits earned. The beneficial tax rate in 1994 was due to low pretax income relative to the amount of non-conventional fuel tax credits earned. 14 17 OTHER MATTERS In September 1996, the Company received cash proceeds of $108 million for a transaction in which it conveyed a working interest in certain coal seam gas wells and retained a volumetric production payment. The cash proceeds represented a prepaid premium related to an obligation to deliver gas from the wells through December 31, 2002. The prepaid premium was recorded as deferred revenue and is being amortized into revenues as the gas is produced. Approximately $13 million of the deferred revenue was recognized in 1996. On July 11, 1996, the Company announced the acceleration of its on-going divestiture program. The Company sold over 9,500 working interest wells from January 1, 1994 to December 31, 1996, including its working interest in approximately 4,000 wells sold during 1996. By July 31, 1997, the Company expects to sell its working interest in approximately 9,200 additional wells, thus reducing its pre-1994 working interest well count over 50 percent. The net book value of the wells to be sold is approximately $350 million at December 31, 1996 and the related net production represented about 12 percent of the Company's average daily produced volumes at December 31, 1996. This accelerated divestiture program allowed the Company to reorganize and reduce the number of its operating divisions from five to three. The accelerated divestiture program and reorganization is expected to result in more than a 20 percent reduction in the Company's 1995 level of production expenses per MCFE. It will also result in a reduction of approximately 425 employees or 20 percent of total employees and a reduction of over 10 percent of the Company's 1995 corporate administrative expenses per MCFE. All levels of personnel within the Company were included in the employee reduction. As a result of the divestiture program and reorganization, the Company recorded a pretax charge of approximately $30 million for severance and other related exit costs in the third quarter of 1996. Since December 31, 1995, headcount has been reduced by 373 employees, of which 334 employees have been terminated under the restructuring program. Approximately $7 million of accrued unpaid benefits remain on the consolidated balance sheet as of December 31, 1996. The Company expects that substantially all benefits will be paid by July 31, 1997. 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. 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 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. 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. 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 producing basin or at a 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 15 18 price of transportation to consuming areas. Crude oil prices are affected by similar factors, by quality differentials, by worldwide political developments, and by actions of the Organization of Petroleum Exporting Countries. In the ordinary course and conduct of its business, the Company utilizes futures contracts traded on NYMEX and the Kansas City Board of Trade, and over-the-counter price and basis swaps with major crude oil and natural gas merchants and financial institutions to hedge its price risk exposure related to the Company's production and to fixed price commitments to sell crude oil and natural gas. Losses incurred as a result of derivatives transactions would reduce the realized price the Company receives for its crude oil and natural gas production. 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. 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. 16 19 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. Asset Rationalization Program. In July 1996, the Company announced the acceleration of its on-going divestiture program. The failure to complete this accelerated divestiture program, or any delay in this process, could have an adverse effect on the Company's ability to realize planned cost reductions and on its financial results. 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 purchasing and processing contracts and for natural gas and natural gas liquids 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 federal, 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 federal, 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. 17 20 ITEM EIGHT FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 --------- --------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues................................................... $1,293 $ 873 $1,055 Costs and Expenses......................................... 875 1,340 880 ------ ------ ------ Operating Income (Loss).................................... 418 (467) 175 Interest Expense........................................... 113 109 90 Other Expense (Income) -- Net.............................. (2) 1 (5) ------ ------ ------ Income (Loss) Before Income Taxes.......................... 307 (577) 90 Income Tax Expense (Benefit)............................... 52 (297) (64) ------ ------ ------ Net Income (Loss).......................................... $ 255 $ (280) $ 154 ====== ====== ====== Earnings (Loss) per Common Share........................... $ 2.02 $(2.20) $ 1.20 ====== ====== ======
See accompanying Notes to Consolidated Financial Statements. 18 21 BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET
DECEMBER 31, ---------------------- 1996 1995 -------- -------- (IN MILLIONS, EXCEPT SHARE DATA) ASSETS Current Assets Cash and Short-term Investments........................... $ 68 $ 20 Accounts Receivable....................................... 338 210 Inventories............................................... 18 18 Other Current Assets...................................... 18 17 ------ ------ 442 265 ------ ------ Oil and Gas Properties (Successful Efforts Method).......... 5,843 5,870 Other Properties............................................ 485 499 ------ ------ 6,328 6,369 Accumulated Depreciation, Depletion and Amortization...... 2,548 2,602 ------ ------ Properties -- Net...................................... 3,780 3,767 ------ ------ Other Assets................................................ 94 110 ------ ------ Total Assets...................................... $4,316 $4,142 ====== ====== LIABILITIES Current Liabilities Accounts Payable.......................................... $ 217 $ 214 Taxes Payable............................................. 62 59 Accrued Interest.......................................... 23 20 Dividends Payable......................................... 17 17 Deferred Revenue.......................................... 20 - Other Current Liabilities................................. 29 12 ------ ------ 368 322 ------ ------ Long-term Debt.............................................. 1,347 1,350 ------ ------ Deferred Income Taxes....................................... 85 87 ------ ------ Deferred Revenue............................................ 75 - ------ ------ Other Liabilities and Deferred Credits...................... 108 163 ------ ------ Commitments and Contingent Liabilities STOCKHOLDERS' EQUITY Common Stock, Par Value $.01 Per Share (Authorized 325,000,000 Shares; Issued 150,000,000 Shares)............ 2 2 Paid-in Capital............................................. 2,932 2,935 Retained Earnings........................................... 388 202 ------ ------ 3,322 3,139 Cost of Treasury Stock (25,081,301 and 23,425,621 Shares for 1996 and 1995, respectively).............................. 989 919 ------ ------ Common Stockholders' Equity................................. 2,333 2,220 ------ ------ Total Liabilities and Common Stockholders' Equity........................................... $4,316 $4,142 ====== ======
See accompanying Notes to Consolidated Financial Statements. 19 22 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 -------- -------- -------- (IN MILLIONS) Cash Flows From Operating Activities Net Income (Loss)......................................... $ 255 $(280) $ 154 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities Depreciation, Depletion and Amortization............... 346 373 337 Deferred Income Taxes.................................. (2) (371) (86) Exploration Costs...................................... 62 51 33 Impairment of Oil and Gas Properties................... - 490 - Working Capital Changes Accounts Receivable.................................... (128) (16) 25 Inventories............................................ - 17 (11) Other Current Assets................................... (1) 1 (3) Accounts Payable....................................... 3 36 (13) Taxes Payable.......................................... 3 12 (11) Accrued Interest....................................... 3 4 4 Other Current Liabilities.............................. 37 9 (18) Other..................................................... 74 126 87 ----- ----- ----- Net Cash Provided By Operating Activities......... 652 452 498 ----- ----- ----- Cash Flows From Investing Activities Additions to Properties................................... (554) (589) (882) Proceeds from Sales and Other............................. 131 183 83 ----- ----- ----- Net Cash Used In Investing Activities............. (423) (406) (799) ----- ----- ----- Cash Flows From Financing Activities Proceeds from Long-term Financing......................... 150 150 489 Reduction in Long-term Debt............................... (152) (108) - Dividends Paid............................................ (69) (70) (71) Common Stock Purchases.................................... (112) (5) (122) Other..................................................... 2 (12) 5 ----- ----- ----- Net Cash Provided By (Used In) Financing Activities...................................... (181) (45) 301 ----- ----- ----- Increase in Cash and Short-term Investments................. 48 1 - Cash and Short-term Investments Beginning of Year......................................... 20 19 19 ----- ----- ----- End of Year............................................... $ 68 $ 20 $ 19 ===== ===== =====
See accompanying Notes to Consolidated Financial Statements. 20 23 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
COST OF COMMON COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS' STOCK CAPITAL EARNINGS STOCK EQUITY ------ ------- -------- -------- ------------- (IN MILLIONS, EXCEPT SHARE DATA) Balance, December 31, 1993................. $2 $2,937 $468 $(798) $2,609 Net Income............................... 154 154 Cash Dividends ($.55 per Share).......... (71) (71) Stock Purchases (3,139,600 Shares)....... (122) (122) Stock Option Activity and Other.......... (1) (1) (2) -- ------ ---- ----- ------ Balance, December 31, 1994................. 2 2,936 551 (921) 2,568 Net Loss................................. (280) (280) Cash Dividends ($.55 per Share).......... (69) (69) Stock Purchases (132,900 Shares)......... (5) (5) Stock Option Activity and Other.......... (1) 7 6 -- ------ ---- ----- ------ Balance, December 31, 1995................. 2 2,935 202 (919) 2,220 Net Income............................... 255 255 Cash Dividends ($.55 per Share).......... (69) (69) Stock Purchases (2,706,000 Shares)....... (112) (112) Stock Option Activity and Other.......... (3) 42 39 -- ------ ---- ----- ------ Balance, December 31, 1996................. $2 $2,932 $388 $(989) $2,333 == ====== ==== ===== ======
See accompanying Notes to Consolidated Financial Statements. 21 24 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. 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 financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income or stockholders' equity. Cash and Short-term Investments 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. 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. All properties are stated at cost. Revenue Recognition Gas revenues are recorded on the entitlement method. Under the entitlement method, revenue is recorded based on the Company's net working interest. Hedging and Related Activities In order to mitigate the risk of market price fluctuations, oil and gas futures and options transactions may be entered into as hedges of the Company's production. Changes in the market value of futures and options transactions entered into as hedges are deferred until the gain or loss is recognized on the hedged transactions. The Company also enters into swap agreements to hedge oil or gas and to convert fixed price gas sales contracts to market-sensitive contracts. Gains or losses resulting from these transactions are recognized in the Company's Consolidated Statement of Income as the related physical production is delivered. 22 25 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 in order to reflect the tax consequences in future years of differences between the financial statement and tax basis of assets and liabilities at each year end. 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. Earnings per Common Share Earnings per common share is based on the weighted average number of common shares outstanding during the year including common shares equivalents when dilutive. The weighted average number of common shares outstanding was 126 million, 127 million and 129 million for the years 1996, 1995 and 1994, respectively. 2. DIVESTITURE PROGRAM AND REORGANIZATION On July 11, 1996, the Company announced the acceleration of its on-going divestiture program. The Company sold over 9,500 working interest wells from January 1, 1994 to December 31, 1996, including its working interest in approximately 4,000 wells sold during 1996. By July 31, 1997, the Company expects to sell its working interest in approximately 9,200 additional wells, thus reducing its pre-1994 working interest well count over 50 percent. The net book value of the wells to be sold is approximately $350 million at December 31, 1996 and the related net production represented about 12 percent of the Company's average daily produced volumes at December 31, 1996. This accelerated divestiture program allowed the Company to reorganize and reduce the number of its operating divisions from five to three. The accelerated divestiture program and reorganization is expected to result in more than a 20 percent reduction in the Company's 1995 level of production expenses per MCFE. It will also result in a reduction of approximately 425 employees or 20 percent of total employees and a reduction of over 10 percent of the Company's 1995 corporate administrative expenses per MCFE. All levels of personnel within the Company were included in the employee reduction. As a result of the divestiture program and reorganization, the Company recorded a pretax charge of approximately $30 million for severance and other related exit costs in the third quarter of 1996. Since December 31, 1995, headcount has been reduced by 373 employees, of which 334 employees have been terminated under the restructuring program. Approximately $7 million of accrued unpaid benefits remain on the consolidated balance sheet as of December 31, 1996. The Company expects that substantially all benefits will be paid by July 31, 1997. 3. SALE OF COAL SEAM GAS WELLS In September 1996, the Company received cash proceeds of $108 million for a transaction in which it conveyed a working interest in certain coal seam gas wells and retained a volumetric production payment. The cash proceeds represented a prepaid premium related to an obligation to deliver gas from the wells through December 31, 2002. The prepaid premium was recorded as deferred revenue and is being amortized into revenues as the gas is produced. Approximately $13 million of the deferred revenue was recognized in 1996. 23 26 4. MARKETING ACTIVITIES The Company's marketing activities include the purchase and resale of oil, gas and NGLs in addition to the marketing of its own production. The costs and expenses of third party product marketing consist primarily of the cost of product purchased and transportation costs. These costs are netted against the related marketing revenues for financial reporting purposes. The volumes of third party oil, gas and NGLs marketed follow.
1996 1995 1994 ---- ---- ---- Oil (MBbls per day)..................................... 58 272 467 Gas (MMCF per day)...................................... 567 604 549 NGLs (MBbls per day).................................... 14 12 11
Hedging and Related Transactions In 1993, the Company entered into a gas swap agreement to offset the effects of a long-term fixed-price contract for natural gas. When taking into account the gas swap and the original fixed-price contract, the Company is a fixed-price payor and receivor on substantially the same volume of gas at the same price. The Company expects that there will be no gain or loss on these transactions. The Company is a fixed-price payor on approximately 5.6 BCF (which approximates 1 percent of the Company's 1996 gas production) at prices ranging from $1.38 to $2.40 per MMBTU for production through December 31, 1997. These transactions convert fixed-price contracts to market-sensitive contracts. The Company is a fixed-price receivor on approximately 16.3 BCF (which approximates 4 percent of the Company's 1996 gas production) at prices ranging from $1.80 to $3.67 per MMBTU for production through December 31, 1997. These transactions are a hedge of the Company's underlying production. The deferred loss on these types of transactions as of December 31, 1996 was $9.8 million. This opportunity loss will be substantially offset in the cash market when the hedged commodity is delivered in 1997, which has the effect of fixing the price at which the commodity is sold. The Company sells oil and gas futures contracts on the New York Mercantile Exchange ("NYMEX") and sells gas futures contracts on the Kansas City Board of Trade ("KBOT"). These contracts allow the Company to sell oil and gas at a future date for a specified price. Futures contracts which are sold are accounted for as hedges of the Company's underlying production. The crude oil positions outstanding as of December 31, 1996 totaled 2,930 MBbls (which approximates 16 percent of the Company's 1996 oil production) at NYMEX prices ranging from $20.50 to $25.10 per barrel for production through November 1997. The natural gas positions outstanding as of December 31, 1996 totaled 11.5 BCF (which approximates 3 percent of the Company's 1996 gas production) at NYMEX and KBOT prices ranging from $2.39 to $3.84 per MMBTU for production through April 1997. The deferred loss on oil and gas futures contracts as of December 31, 1996 was $12.2 million. This opportunity loss will be substantially offset in the cash market when the hedged commodity is delivered in 1997, which has the effect of fixing the price at which the commodity is sold. 24 27 5. INCOME TAXES The provision (benefit) for income taxes follows.
YEAR ENDED DECEMBER 31, ------------------------- 1996 1995 1994 ---- ----- ---- (IN MILLIONS) Current Federal................................................... $ 48 $ 61 $ 23 State..................................................... 6 12 (1) ---- ----- ---- 54 73 22 ---- ----- ---- Deferred Federal................................................... (11) (331) (89) State..................................................... 9 (39) 3 ---- ----- ---- (2) (370) (86) ---- ----- ---- Total............................................. $ 52 $(297) $(64) ==== ===== ====
Reconciliation of the federal statutory income tax rate to the effective income tax rate follows.
YEAR ENDED DECEMBER 31, ----------------------------- 1996 1995 1994 ----- ------ ------ Statutory rate.............................................. 35.0% (35.0)% 35.0% State income taxes net of federal tax benefit............... 3.2 (3.0) 1.1 Tax credits................................................. (21.1) (14.5) (103.3) Other....................................................... (.3) 1.0 (3.7) ----- ------ ------ Effective rate.................................... 16.8% (51.5)% (70.9)% ===== ====== ======
Deferred tax liabilities (assets) follow.
DECEMBER 31, ---------------- 1996 1995 ----- ----- (IN MILLIONS) Deferred liabilities Excess of book over tax basis of properties............... $ 285 $ 284 Financial accruals and provisions......................... 5 - ----- ----- 290 284 ----- ----- Deferred assets Financial accruals and provisions......................... - (16) AMT credits carryover..................................... (205) (181) ----- ----- (205) (197) ----- ----- Net deferred liability............................ $ 85 $ 87 ===== =====
The above net deferred tax liabilities as of December 31, 1996 and 1995, include deferred state income tax liabilities of approximately $28 million and $18 million, respectively. As of December 31, 1996, the Alternative Minimum Tax ("AMT") credits carryover of approximately $205 million, related primarily to non-conventional fuel tax credits, is available to offset future regular tax liabilities. The AMT credits carryover has no expiration date. The benefit of the tax credits is recognized in net income for accounting purposes. The benefit is reflected in the current tax provision to the extent the Company is able to utilize the credits for tax return purposes. 25 28 6. LONG-TERM DEBT Long-term Debt follows.
DECEMBER 31, ------------------ 1996 1995 ------ ------ (IN MILLIONS) Commercial Paper............................................ $ - $ 152 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 Debentures, 9 7/8%, due 2010................................ 150 150 Debentures, 9 1/8%, due 2021................................ 150 150 Debentures, 8.20%, due 2025................................. 150 150 Debentures, 6 7/8%, due 2026................................ 150 - Other, including discounts -- net........................... (3) (2) ------ ------ Total............................................. $1,347 $1,350 ====== ======
The Company has debt maturities of $450 million, $150 million and $150 million due in 1999, 2000 and 2001, respectively. The Company's credit facilities are comprised of a $600 million revolving credit agreement that expires in July 2001 and a $300 million revolving credit agreement that expires July 1997. The $300 million revolving credit agreement is renewable annually by mutual consent and was renewed in July 1996. Annual fees are .10 and .06 percent, respectively, of the 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 certain debt due within one year; therefore, commercial paper is classified as long-term debt. Under the covenants of these agreements, debt cannot exceed 52.5 percent of the sum of debt and tangible net worth (as defined in the agreements). Additionally, tangible net worth cannot be less than $1.3 billion. As of December 31, 1996, there were no borrowings outstanding under these credit facilities. In addition, the Company has the capacity to issue $200 million of debt securities under a shelf registration statement filed with the Securities and Exchange Commission. 7. TRANSPORTATION ARRANGEMENTS WITH EL PASO NATURAL GAS COMPANY In 1996, 1995 and 1994, approximately 55 percent, 58 percent and 66 percent, respectively, of the Company's gas production was transported to direct sale customers through El Paso Natural Gas Company's ("EPNG") pipeline facilities. 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 10 for demand charges paid to EPNG which provide the Company with firm and interruptible transportation capacity rights on interstate and intrastate pipeline systems. 8. CAPITAL STOCK Stock Options The Company's 1993 Stock Incentive Plan (the "1993 Plan") succeeds it's 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"). 26 29 Under the 1993 Plan, options may be granted to officers and key employees at fair market value at 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, 1996, 6,441,190 shares of options were available for grant under the 1993 Plan. Stock Appreciation Rights The Company has granted SARs in connection with certain outstanding options under the 1988 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, 1996, there were 406,633 SARs outstanding related to stock options with a weighted average exercise price of $27.19 per share. Activity in the Company's stock option plans follows.
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE ------- ---------------- Balance, December 31, 1993.................................. 2,933,173 $32.57 Granted................................................... 430,200 34.04 Exercised................................................. (62,631) 44.26 Cancelled................................................. (154,407) 35.47 ---------- Balance, December 31, 1994.................................. 3,146,335 32.69 Granted................................................... 415,600 39.93 Exercised................................................. (177,365) 29.66 Cancelled................................................. (31,300) 34.01 ---------- Balance, December 31, 1995.................................. 3,353,270 33.74 Granted................................................... 2,430,900 50.76 Exercised................................................. (1,038,864) 30.82 Cancelled................................................. (67,642) 39.76 ---------- Balance, December 31, 1996.................................. 4,677,664 $43.15 ==========
The following table summarizes information related to stock options outstanding and exercisable at December 31, 1996.
WEIGHTED WEIGHTED AVERAGE WEIGHTED AVERAGE REMAINING AVERAGE SHARES RANGE OF EXERCISE EXERCISE CONTRACTUAL SHARES EXERCISE OUTSTANDING PRICES PRICE LIFE EXERCISABLE PRICE - ----------- ----------------- -------- ----------- ----------- -------- 1,015,646 $21.54 to $31.83 $29.48 4.1 years 1,015,646 $29.48 3,662,018 33.88 to 50.81 46.94 9.1 years 1,243,118 39.40 --------- --------- 4,677,664 $21.54 to $50.81 $43.15 8.0 years 2,258,764 $34.94 ========= =========
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation, which is effective for the Company's fiscal year beginning January 1, 1996. SFAS No. 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity instrument and encourages all entities to adopt that method of accounting for all of their 27 30 employee stock compensation plans and include the cost in the income statement as compensation expense. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. The Company accounts for compensation cost for stock option plans in accordance with APB Opinion No. 25. The weighted average fair values of options granted during the years 1996 and 1995 were $13.15 and $9.38, 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 1996 and 1995: stock price volatility of 17.94 percent; risk free rate of return ranging from 5.45 percent to 6.90 percent; dividend rate of $.55 per year; and an expected term of 5 years. If the fair value based method of accounting in SFAS 123 had been applied, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below.
YEAR ENDED DECEMBER 31, 1996 -------------------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Net Income -- as reported................................... $ 255 Net Income -- pro forma..................................... 252 Earnings per Common Share -- as reported.................... 2.02 Earnings per Common Share -- pro forma...................... $1.99
The fair value of stock options for year 1995 did not result in a change to reported Net Income or Earnings per Common Share and, therefore, no pro forma disclosures for that period are included. The fair value of stock options included in the pro forma amounts for year 1996 is not necessarily indicative of future effects on net income and earnings 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, 1996 there were no shares issued. On December 15, 1988, the Company's Board of Directors designated 3,250,000 of the authorized preferred shares as Series A Preferred Stock. Upon issuance each one-hundredth of a share of Series A 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 15, 1988, the Board of Directors declared a dividend distribution of one Right for each outstanding share of Common Stock of the Company. The Rights were amended on February 23, 1989. 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 Preferred Stock at a price of $95 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 (the "Merger Right"). 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 (the "Subscription Right"). Rights owned by an Acquiring Person are void as they relate to the Subscription Right or the Merger Right. The Rights may be redeemed by the Company under certain circumstances until their expiration date for $.05 per Right. 28 31 9. PENSION PLANS 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 highest five-year average compensation levels. Contributions to the plans are based upon the Projected Unit Credit actuarial funding method and 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 following information relates to the Company plans.
DECEMBER 31, ---------------------- 1996 1995 -------- -------- (IN MILLIONS) Actuarial present value of benefit obligations Accumulated benefit obligation, including vested benefits of $98 and $101............................... $ 101 $ 104 ======== ======== Projected benefit obligation for service to date.......... $ 129 $ 145 Plan assets, primarily marketable equity and debt securities, at fair value................................. (119) (113) -------- -------- Funded status of projected benefit obligation............... 10 32 Unrecognized net loss....................................... (20) (44) Unamortized net transition obligation....................... (2) (3) -------- -------- Net prepaid pension asset................................... $ (12) $ (15) ======== ========
YEAR ENDED DECEMBER 31, ------------------------ 1996 1995 1994 ---- ---- ---- (IN MILLIONS) Pension cost for the plans includes the following components Service cost -- benefits earned during the period......... $ 6 $ 6 $ 7 Interest cost on projected benefit obligation............. 10 9 9 Actual (return) loss on plan assets....................... (15) (18) 1 Net amortization and deferred amounts..................... 9 12 (5) ---- ---- ---- Net pension cost.......................................... $ 10 $ 9 $ 12 ==== ==== ====
The projected benefit obligation was determined using a weighted average discount rate of 7.75 percent in 1996 and 7.50 percent in 1995, and a rate of increase in future compensation levels of 5 percent. The expected long-term rate of return on plan assets was 9 percent in both 1996 and 1995. During 1996, the Company recognized a curtailment expense of approximately $500 thousand related to the employee reduction associated with the reorganization. 10. 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 in terms from 1 to 11 years and require the Company to pay transportation demand charges regardless of the amount of pipeline capacity utilized by the Company. The Company paid $61 million, $53 million and $48 million of demand charges of which $47 million, $40 million and $37 million was paid to EPNG for the years ended December 31, 1996, 1995 and 1994, respectively. Currently, approximately one-half of the Company's demand charges are for eastward transportation from the San Juan Basin. This transportation cost was more than offset by (i) the proceeds 29 32 received from the sale of gas at locations east of the San Juan Basin and (ii) increases in realized San Juan Basin prices which occurred as a result of less supply competing for California market demand. Future transportation demand charge commitments at December 31, 1996 follow.
YEAR ENDED DECEMBER 31, ------------ (IN MILLIONS) 1997........................................................ $ 63 1998........................................................ 63 1999........................................................ 63 2000........................................................ 45 2001........................................................ 39 Thereafter.................................................. 201 -------- Total.................................................. $ 474 ========
Lease Obligations The Company has operating leases for office space and other property and equipment. The Company incurred lease rental expense of $14 million, $14 million and $17 million for the years ended December 31, 1996, 1995 and 1994, respectively. Future minimum annual rental commitments at December 31, 1996 follow.
YEAR ENDED DECEMBER 31, ------------ (IN MILLIONS) 1997........................................................ $ 15 1998........................................................ 14 1999........................................................ 12 2000........................................................ 9 2001........................................................ 9 Thereafter.................................................. 70 -------- Total.................................................. $ 129 ========
Legal Proceedings On May 25, 1995, the 270th Judicial District Court of Harris County, Texas entered an order in a lawsuit styled Caroline Altheide, et al. v. Meridian Oil Inc. (now known as Burlington Resources Oil & Gas Company), et al., which allowed the suit to be maintained as a class action on behalf of all royalty and overriding royalty interest owners in all Burlington Resources Oil & Gas Company ("BROG") properties and all working interest owners in properties operated by BROG who received payments from BROG at any time from and after December 1, 1986 based upon wellhead sales of natural gas to Burlington Resources Trading Inc. ("BRTI"). The lawsuit involves claims for unspecified actual and punitive damages based upon alleged breaches of duties owed to interest owners because of the use of corporate affiliates to gather, treat and market natural gas. The plaintiffs allege that BROG's gas producing affiliates have sold natural gas to marketing affiliates at lower inter-affiliate settlement prices which were then used as the basis for accounting to interest owners. Plaintiffs also allege that BROG's pricing includes inappropriate deductions of inflated gathering and transportation costs. BROG has consistently denied liability and perfected an interlocutory appeal of the class certification order on May 30, 1995. Oral argument on the interlocutory appeal of the class certification order was heard February 28, 1996. Following the argument, but in advance of a decision by the appellate court, the parties executed a settlement agreement dated August 6, 1996, which the trial court preliminarily approved on August 12, 1996. After notice to the class members, the court conducted a hearing on November 8, 1996, and gave final approval to the terms of the parties' settlement agreement in its 30 33 Judgment signed on November 12, 1996. Four class members who appeared through counsel at the November 8, 1996 hearing to object to the settlement filed a motion for a new trial or, in the alternative, to modify, alter or amend judgment, which motion was denied by Order signed December 16, 1996. Thereafter, the four objectors filed a Notice of Appeal. The Company intends to defend any appeals vigorously. The Company and its subsidiaries are named defendants in numerous lawsuits and named parties in numerous governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits and other proceedings cannot be predicted with certainty, management expects these matters, including the above-described Altheide litigation, will not have a materially adverse effect on the consolidated financial position or results of operations of the Company. 11. IMPAIRMENT OF OIL AND GAS PROPERTIES Effective September 30, 1995, the Company adopted SFAS No. 121 which requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes indicate that the net book value of the asset may not be recoverable. An impairment loss is recognized if the sum of expected future cash flows from the use of the asset is less than the net book value of the asset. Under SFAS No. 121, the Company evaluates impairment of its oil and gas properties on a field-by-field basis rather than in the aggregate. Based upon this evaluation, in 1995, certain properties were deemed to be impaired. For those properties, the Company adjusted the net book value of the properties to their fair value based upon expected future discounted cash flows. As a result of the Company's adoption of SFAS No. 121 in September 1995, combined with a weak gas market, the Company recognized a non-cash, pretax charge of $490 million ($304 million after tax) related to its oil and gas properties. 12. OTHER INFORMATION Supplemental Cash Flow Information The following is additional information concerning supplemental disclosures of cash flow activities.
YEAR ENDED DECEMBER 31, ------------------------ 1996 1995 1994 ---- ---- ---- (IN MILLIONS) Interest Paid...................................... $108 $104 $86 Income Taxes Paid--Net............................. $ 56 $ 61 $41
31 34 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Burlington Resources Inc. We have audited the accompanying consolidated balance sheets of Burlington Resources Inc. as of December 31, 1996 and 1995, and the related consolidated statements of income, cash flows and common stockholders' equity for each of the three years in the period ended December 31, 1996. 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 in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Burlington Resources Inc. at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in Note 11 to the consolidated financial statements, the Company changed its method of accounting for the impairment of long-lived assets in 1995. /s/ COOPERS & LYBRAND L.L.P. Houston, Texas January 15, 1997 32 35 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, ------------------ 1996 1995 ------ ------ (IN MILLIONS) Proved properties........................................... $5,795 $5,830 Unproved properties......................................... 48 40 ------ ------ 5,843 5,870 Accumulated depreciation, depletion and amortization........ 2,350 2,410 ------ ------ Net capitalized costs............................. $3,493 $3,460 ====== ======
Costs incurred for oil and gas property acquisition, exploration and development activities follow.
YEAR ENDED DECEMBER 31, ------------------------------------ 1996 1995 1994 -------- -------- -------- (IN MILLIONS) Property acquisition Unproved.................................................. $ 24 $ 39 $ 22 Proved.................................................... 87 104 479 Exploration................................................. 81 80 31 Development................................................. 327 324 278 -------- -------- -------- Total costs incurred.............................. $ 519 $ 547 $ 810 ======== ======== ========
Results of operations for oil and gas producing activities follow.
YEAR ENDED DECEMBER 31, ---------------------------------- 1996 1995 1994 -------- -------- ------ (IN MILLIONS) Net revenues................................................ $1,250 $ 826 $ 905 ------ ------ ------ Production costs............................................ 295 270 261 Exploration and leasehold impairment costs.................. 62 51 33 Operating expenses.......................................... 180 154 146 Depreciation, depletion and amortization.................... 309 332 300 Impairment of oil and gas properties........................ - 490 - ------ ------ ------ 846 1,297 740 ------ ------ ------ Operating income (loss)..................................... 404 (471) 165 Income tax provision........................................ 88 (261) (39) ------ ------ ------ Results of operations for oil and gas producing activities................................................ $ 316 $ (210) $ 204 ====== ====== ======
33 36 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, virtually all located in the United States, 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 GAS (MMBBLS) (BCF) -------- ----- PROVED DEVELOPED AND UNDEVELOPED RESERVES January 1, 1994........................................... 168.2 5,221 Revisions of previous estimates........................ (1.4) (44) Extensions, discoveries and other additions............ 20.5 407 Production............................................. (16.6) (384) Purchases of reserves in place(a)...................... 19.7 379 Sales of reserves in place(b).......................... (6.3) (78) ----- ----- December 31, 1994......................................... 184.1 5,501 Revision of previous estimates......................... 1.5 (33) Extensions, discoveries and other additions............ 23.4 533 Production............................................. (17.5) (425) Purchases of reserves in place......................... 9.3 131 Sales of reserves in place(b).......................... (3.9) (200) ----- ----- December 31, 1995......................................... 196.9 5,507 Revision of previous estimates......................... (3.3) (59) Extensions, discoveries and other additions............ 26.9 416 Production............................................. (18.7) (448) Purchases of reserves in place......................... 6.0 72 Sales of reserves in place(b).......................... (4.2) (274) ----- ----- December 31, 1996......................................... 203.6 5,214 ===== ===== PROVED DEVELOPED RESERVES January 1, 1994........................................... 149.8 4,381 December 31, 1994......................................... 161.9 4,584 December 31, 1995......................................... 168.1 4,543 December 31, 1996......................................... 174.2 4,314
- --------------- (a) Includes the reserves attributable to the purchase of Diamond Shamrock Offshore Partners Limited Partnership. (b) Includes the reserves associated with the conveyance of working interests in coal seam gas wells. 34 37 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, ---------------------- 1996 1995 -------- -------- (IN MILLIONS) Future cash inflows......................................... $ 20,816 $ 11,609 Less related future Production costs....................................... 4,343 3,451 Development costs...................................... 513 529 Income taxes........................................... 4,441 1,401 -------- -------- Future net cash flows............................. 11,519 6,228 10% annual discount for estimated timing of cash flows.... 5,724 3,044 -------- -------- Standardized measure of discounted future net cash flows................................................. $ 5,795 $ 3,184 ======== ========
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, ------------------------------ 1996 1995 1994 ------ ------ ------ (IN MILLIONS) January 1................................................... $3,184 $2,998 $3,124 ------ ------ ------ Revisions of previous estimates Changes in prices and costs............................... 4,326 (33) (350) Changes in quantities..................................... (39) (22) (20) Changes in rate of production............................. (77) 189 129 Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs..... 578 250 195 Purchases of reserves in place.............................. 119 99 251 Sales of reserves in place.................................. (176) (124) (67) Accretion of discount....................................... 376 358 363 Sales of oil and gas, net of production costs............... (955) (556) (644) Net change in income taxes.................................. (1,333) 11 (80) Other....................................................... (208) 14 97 ------ ------ ------ Net change.................................................. 2,611 186 (126) ------ ------ ------ December 31................................................. $5,795 $3,184 $2,998 ====== ====== ======
35 38 BURLINGTON RESOURCES INC. QUARTERLY FINANCIAL DATA--UNAUDITED
1996 1995 ---------------------------------- ----------------------------------------------------- 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST ------ ------ ------ ------ ----------- ----------- ----------- ----------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues......................... $ 399 $ 344 $ 295 $ 255 $ 237 $ 210 $ 211 $ 215 Operating Income (Loss)(a)....... 169 90 96 63 20 (489) - 2 Net Income (Loss)................ 110 59 48 38 23 (300) 2 (5) Earnings (Loss) per Common Share.......................... .87 .47 .38 .30 .18 (2.36) .02 (.04) Dividends Declared per Common Share.......................... .1375 .1375 .1375 .1375 .1375 .1375 .1375 .1375 Common Stock Price Range High........................... 53 1/2 47 1/8 43 1/4 40 1/4 41 1/4 42 41 1/2 40 3/4 Low............................ $44 1/8 $41 5/8 $35 1/8 $35 5/8 $ 35 1/8 $ 36 7/8 $ 36 3/4 $ 33 7/8
- --------------- (a) As a result of the divestiture program and reorganization, during the third quarter of 1996, the Company recorded a pretax charge of approximately $30 million. In 1995, as a result of the Company's adoption of SFAS No. 121, the Company recognized a non-cash, pretax charge of $490 million. 36 39 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 1997 Annual Meeting of Stockholders of Burlington Resources Inc. 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 10 of this Form 10-K. 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 1997 Annual Meeting of Stockholders and is incorporated herein by reference. ITEM THIRTEEN CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required is set forth under the caption "Election of Directors" in the Proxy Statement for the 1997 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.......................... 18 Consolidated Balance Sheet................................ 19 Consolidated Statement of Cash Flows...................... 20 Consolidated Statement of Common Stockholders' Equity..... 21 Notes to Consolidated Financial Statements................ 22 Report of Independent Accountants......................... 32 Supplemental Oil and Gas Disclosures -- Unaudited......... 33 Quarterly Financial Data -- Unaudited..................... 36 AMENDED EXHIBIT INDEX....................................... *
REPORTS ON FORM 8-K The Company filed no reports on Form 8-K in the fourth quarter. - --------------- * Included in Form 10-K filed with the Securities and Exchange Commission. 37 40 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 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 President and Chief January 16, 1997 ----------------------------------------------------- Executive Officer, and Bobby S. Shackouls Director JOHN E. HAGALE Executive Vice President and January 16, 1997 - -------------------------------------------------------- Chief Financial Officer John E. Hagale HAYS R. WARDEN Senior Vice President, January 16, 1997 - -------------------------------------------------------- Controller and Chief Hays R. Warden Accounting Officer THOMAS H. O'LEARY Chairman of the Board January 16, 1997 - -------------------------------------------------------- Thomas H. O'Leary JOHN V. BYRNE Director January 16, 1997 - -------------------------------------------------------- John V. Byrne S. PARKER GILBERT Director January 16, 1997 - -------------------------------------------------------- S. Parker Gilbert LAIRD I. GRANT Director January 16, 1997 - -------------------------------------------------------- Laird I. Grant JOHN T. LAMACCHIA Director January 16, 1997 - -------------------------------------------------------- John T. LaMacchia JAMES F. MCDONALD Director January 16, 1997 - -------------------------------------------------------- James F. McDonald DONALD M. ROBERTS Director January 16, 1997 - -------------------------------------------------------- Donald M. Roberts WALTER SCOTT, JR. Director January 16, 1997 - -------------------------------------------------------- Walter Scott, Jr. WILLIAM E. WALL Director January 16, 1997 - -------------------------------------------------------- William E. Wall
38 41 REPORT OF MANAGEMENT To the Stockholders and Directors of Burlington Resources Inc.: The accompanying financial statements have been prepared by management in conformity with generally accepted accounting principles. The fairness and integrity of these financial statements, including any judgments, estimates and selection of appropriate generally accepted accounting principles, are the responsibility of management, as is all other information presented in this Annual Report. In the opinion of management, the financial statements are fairly stated, and, to that end, the Company maintains a system of internal controls which: provides reasonable assurance that transactions are recorded properly for the preparation of financial statements; safeguards assets against loss or unauthorized use; maintains accountability for assets; and requires proper authorization and accounting for all transactions. 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. To further ensure compliance with established standards and related control procedures, the Company conducts a substantial corporate audit program. 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. The Audit Committee of the Board of Directors meets regularly with the independent certified public accountants, management, and corporate audit to review the work of each and to ensure that each is properly discharging its financial reporting and internal control responsibilities. 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 accounting controls and the quality of financial reporting. /s/ JOHN E. HAGALE John E. Hagale Executive Vice President and Chief Financial Officer /s/ HAYS R. WARDEN Hays R. Warden Senior Vice President, Controller and Chief Accounting Officer 39 42 DIRECTORS OF BURLINGTON RESOURCES INC. John V. Byrne(1) President Emeritus Oregon State University S. Parker Gilbert(2) Retired Chairman and Managing Director Morgan Stanley Group Inc. Laird I. Grant(1) President, Chief Executive Officer and Chief Investment Officer Rockefeller & Co., Inc. John T. LaMacchia(2) President and Chief Executive Officer Cincinnati Bell Inc. James F. McDonald(1) President and Chief Executive Officer Scientific-Atlanta, Inc. Thomas H. O'Leary Chairman of the Board Burlington Resources Inc. Donald M. Roberts(1) Retired Vice Chairman and Treasurer United States Trust Company of New York and U.S. Trust Corporation Walter Scott, Jr.(2) Chairman and President Peter Kiewit Sons', Inc. Bobby S. Shackouls President and Chief Executive Officer Burlington Resources Inc. William E. Wall(2) Of Counsel Siderius Lonergan (1) Audit Committee (2) Compensation and Nominating Committee CORPORATE INFORMATION PRINCIPAL CORPORATE OFFICE Burlington Resources Inc. 5051 Westheimer, Suite 1400 Houston, Texas 77056 (713) 624-9500 STOCK TRANSFER AGENT AND REGISTRAR Boston EquiServe, L.P. Shareholder Services Mail Stop: 45-02-09 P.O. Box 644 Boston, Massachusetts 02102 (617) 575-2900 STOCK EXCHANGE LISTINGS New York Stock Exchange Symbol: BR ANNUAL MEETING The Annual Meeting of Stockholders will be in Houston, Texas, on March 27, 1997. Formal notice of the meeting will be mailed in advance. Additional copies of this Annual Report are available, without charge, by writing or calling: Corporate Secretary Burlington Resources Inc. P.O. Box 4239 Houston, Texas 77210 (713) 624-9500 43 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 (Exhibit 3.1 to Form 8, filed March 1990)........ * 3.2 By-Laws of Burlington Resources Inc. as amended (Exhibit 3.2 to Form 10-K, filed February 1996).......................... * 4.1 Form of Rights Agreement dated as of December 16, 1988, 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 Preferred Stock and, as Exhibit B thereto, the form of Rights Certificate (Exhibit 1 to Form 8-A, filed December 1988)....................................................... * Amendment No. 1 to Form of Rights Agreement (Exhibit 2 to Form 8-K, filed March 1989)................................. * Amendment No. 2 to Form of Rights Agreement (Exhibit 5 to Form 8-A/A, filed October 1996)............................. * 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)................... * 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 October 9, 1996........................ +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 October 9, 1996........................ +10.5 Burlington Resources Inc. Supplemental Benefits Plan as amended and restated October 9, 1996........................ +10.6 Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary (Exhibit 10.14 to Form 8, filed February 1989)....................................................... * Amendment to Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary (Exhibit 10.14 to Form 8, filed March 1990)........................................ * Amendment to Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary (Exhibit 10.15 to Form 8, filed February 1992)..................................... * Amendment to Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary (Exhibit 10.8 to Form 10-K, filed February 1994).................................. * Amendment to Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary (Exhibit 10.10 to Form 10-K, filed February 1995).................................. *
A-1 44
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ Amendment to Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary (Exhibit 10.6 to Form 10-K, filed February 1996)............................................. * +10.7 Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls (Exhibit 10.7 to Form 10-K, filed February 1996).............................................................. * +10.8 Burlington Resources Inc. Compensation Plan for Non-Employee Directors as amended and restated October 9, 1996..................................................................... +10.9 Burlington Resources Inc. Key Executive Severance Protection Plan as amended June 8, 1989 (Exhibit 10.20 to Form 8, filed February 1992)............................................... * +10.10 Burlington Resources Inc. Retirement Savings Plan as amended (Exhibits to Form S-8, No. 2-97533, filed December 1989)................................................................ * Amendment No. 1 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.15 to Form 8, filed March 1993)......................................................................... * Amendment No. 2 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.21 to Form 8, filed February 1992)...................................................................... * Amendment No. 3 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.15 to Form 8, filed March 1993)......................................................................... * Amendment No. 4 to Burlington Resources Inc. Retirement Savings Plan (Exhibit 10.10 to Form 10-K, filed February 1996)................................................................... * +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)............................................... * 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 October 9, 1996......................................................................................... +10.18 Burlington Resources Inc. 1993 Stock Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1994)............................................................................... * +10.19 Petrotech Long Term Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1995)......... * +10.20 Burlington Resources Inc. 1994 Restricted Stock Exchange Plan (Exhibit 10.23 to Form 10-K, filed February 1995)......................................................................... *
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EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ +10.21 Burlington Resources Inc. 1997 Performance Share Unit Plan, effective December 1996.......... 10.22 $300 million Short-term Revolving Credit Agreement, dated as of July 20, 1994, between Burlington Resources Inc. and Citibank, N.A., as agent (Exhibit 10.22 to Form 10-K, filed February 1996)............................................................................... * First Amendment to Short-term Revolving Credit Agreement, dated as of July 14, 1995.......... Second Amendment to Short-term Revolving Credit Agreement, dated as of July 12, 1996......... 10.23 Second Amended and Restated $600 million Long-term Revolving Credit Agreement, dated as of July 12, 1996, between Burlington Resources Inc. and Citibank, N.A. as agent................. 11.1 Earnings (Loss) Per Share.................................................................... 12.1 Ratio of Earnings to Fixed Charges........................................................... 21.1 Subsidiaries of the Registrant............................................................... 23.1 Consent of Independent Accountants........................................................... 27.1 Financial Data Schedule...................................................................... **
- --------------- *Exhibit incorporated 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-3 EX-10.2 2 INCENTIVE COMPENSATION PLAN - 10/09/96 1 EXHIBIT 10.2 BURLINGTON RESOURCES INC. INCENTIVE COMPENSATION PLAN As Amended and Restated Effective October 9, 1996 (Originally Effective January 1, 1989) 2 BURLINGTON RESOURCES INC. INCENTIVE COMPENSATION PLAN Table of Contents
Page ---- Section 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 3 Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4 Incentive Award Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 5 Individual Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 6 Payment Of Incentive Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 7 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-i- 3 BURLINGTON RESOURCES INC. INCENTIVE COMPENSATION PLAN PREAMBLE WHEREAS, Burlington Resources Inc. (the "Company") established the Burlington Resources Inc. Incentive Compensation Plan (the "Plan") effective January 1, 1989 in order for the Company to attract and retain exceptional employees and to provide a direct incentive to the Participants to improve the profitability of the Company; and WHEREAS, the Company amended and restated the Plan effective October 1, 1994 and desires to amend and restate the Plan to effect certain changes; NOW, THEREFORE, the Company does hereby amend and restate the Plan as set forth herein, effective October 9, 1996. SECTION 1 DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1.1 Account means a Memorandum Account and/or Special Deferral Memorandum Account, as each is defined in Section 6.4. 1.2 Beneficiary means the person(s) designated by a Participant, on a form provided by the Management Committee and filed with the Company's Human Resources Department, to receive benefits from the Plan in the event of his or her death. A Participant may change 4 his or her beneficiary designation at any time. If no designated Beneficiary survives the Participant, the Beneficiary shall be the Participant's surviving spouse or, if none, his or her estate. 1.3 Board means the Board of Directors of the Company. 1.4 Common Stock means the common stock, par value $.01 per share, of the Company. 1.5 Company means Burlington Resources Inc., a Delaware corporation. 1.6 Company Stock Account means a notional subaccount of an Account credited with Phantom Stock, as provided in Section 6.5. 1.7 Compensation Committee means the Compensation and Nominating Committee of the Board. 1.8 Exchange Act means the Securities Exchange Act of 1934, as amended. 1.9 Fair Market Value means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which Common Stock was sold on such date as reported in the NYSE-Corporate Transactions by The Wall Street Journal on such date or, if no Common Stock was traded on such date, on the next preceding day on which Common Stock was so traded. 1.10 Incentive Award means the amount of a Participant's individual award granted to the Participant for a year pursuant to Section 5. 1.11 Insider means a Participant who is subject to Section 16(b) of the Exchange Act. 1.12 Interest Account means a notional subaccount of an Account credited with interest, as provided in Section 6.5. -2- 5 1.13 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. 1.14 Participant means each employee who participates in the Plan in accordance with Section 3. 1.15 Permanent Disability means the Management Committee has found, upon the basis of medical evidence satisfactory to it, that a Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in further full-time employment by the Company or a subsidiary and that such disability is reasonably expected to be permanent or long-term. 1.16 Phantom Stock means a phantom or notional share of Common Stock. A Participant shall not possess any rights of a stockholder of the Company with respect to a share of Phantom Stock, including, without limitation, rights concerning voting and dividends. A share of Phantom Stock shall be payable solely in cash under the Plan. 1.17 Plan means the Burlington Resources Inc. Incentive Compensation Plan either in its previous or present form or as amended from time to time. 1.18 S&P Account means a notional subaccount of an Account credited with units in a Standard & Poor's 500 Composite Stock Price Index or in a mutual fund selected by the Management Committee that tracks such index, as provided in Section 6.5. 1.19 Section 16(b) means Section 16(b) of the Exchange Act, and all rules promulgated thereunder. 1.20 Termination means a Participant's termination of employment with the Company and its -3- 6 subsidiaries, including by reason of death, retirement or Permanent Disability. SECTION 2 ADMINISTRATION 2.1 Management Committee. The Plan shall be administered by a management committee (the "Management Committee") consisting of such executives of the Company as the Chief Executive Officer of the Company shall designate. Subject to review by the Compensation Committee, the Management Committee shall have the complete authority and power to interpret the Plan, prescribe, amend and rescind rules relating to its administration, select eligible Participants, determine a Participant's (or Beneficiary's) right to a payment and the amount of such payment, and to take all other actions necessary or desirable for the administration of the Plan. All actions and decisions of the Management Committee shall be final and binding upon all Participants and Beneficiaries. No member of the Management Committee shall vote on any matter that pertains solely to himself or herself. 2.2 Compensation Committee. Notwithstanding anything herein to the contrary, the Compensation Committee shall have the full authority and power with respect to the Plan's administration and operation with respect to all matters relating to compliance with Section 16(b). SECTION 3 PARTICIPANTS 3.1 Participants. The Management Committee shall determine and designate the executives and other key employees of the Company and its subsidiaries who are eligible to -4- 7 receive awards under the Plan (the "Participants"). Participants will be limited to those employees who, because of their management or staff positions, have the principal responsibility for the management, direction and success of the Company as a whole or a subsidiary or a particular business unit thereof. Directors of the Company who are full-time executives of the Company shall be eligible to participate in the Plan. SECTION 4 INCENTIVE AWARD POOL 4.1 Incentive Award Pool. A memorandum account (the "Incentive Award Pool") shall be established for the Company for purposes of determining the amount of money which shall be available for Incentive Awards for each year. The Incentive Award Pool for each year shall be an amount equal to the sum total of the aggregate maximum incentive awards available for the Participants for that year. Each Participant's maximum incentive award for a particular year (the "Maximum Incentive Award") shall equal the Participant's annual salary (as defined below) multiplied by the Maximum Award Percentage (as defined below), which amount is then multiplied by the Performance Standard Percentage (as defined below) of the Company for that year. The term "annual salary" shall mean the Participant's annual salary being paid at the end of the year (or date of Termination, if applicable) exclusive of bonuses and all other items of compensation for the year. 4.2 Company Performance. At the beginning of each year, the Compensation Committee shall approve strategic and financial objectives for the Company for the year. At the end of the year, the Compensation Committee shall assess the Company's performance in -5- 8 relation to those objectives for purposes of establishing the size of the Incentive Award Pool in accordance with the following table of Performance Categories and Standard Percentages:
Company Performance Performance Category Standard Percentage -------------------- ------------------- I. Performance for the year was 100% outstanding and exceeded objectives. II. Performance for the year met or 75% exceeded objectives or was excellent in view of prevailing conditions. III. Performance for the year 50% generally met objectives or was very acceptable in view of prevailing conditions. IV. Performance for the year did not 0 to 25% meet objectives and was generally below acceptable levels.
4.3 Maximum Award Percentage. The Compensation Committee shall assign a percentage of annual salary (the "Maximum Award Percentage") for the Chief Executive Officer of the Company and the Management Committee shall assign the Maximum Award Percentages applicable to all other Participants. The Maximum Award Percentages of the Participants shall be used to calculate the Incentive Award Pool, as set forth in Section 4.1. SECTION 5 INDIVIDUAL AWARDS 5.1 Chief Executive Officer. The Compensation Committee shall annually grant the Incentive Award for the Chief Executive Officer of the Company. In evaluating the Chief -6- 9 Executive Officer, the Compensation Committee shall consider the corporate objectives of the Company and his or her responsibilities and accomplishments, and such other factors as it deems appropriate. 5.2 Other Participants. The Management Committee shall annually grant the Incentive Awards to the Participants other than the Chief Executive Officer of the Company in accordance with their individual performances. In evaluating a Participant, the Management Committee shall consider the corporate objectives of the Company or a subsidiary, the Participant's responsibilities and accomplishments, and such other factors as it deems appropriate. 5.3 Incentive Award Limits. The aggregate individual Incentive Awards for the Participants may not exceed the Incentive Award Pool. A Participant's performance must be satisfactory, regardless of Company performance, before he or she may be granted an Incentive Award. 5.4 New Employee, or Retirement, Disability, Death or Termination of Employment. The Compensation Committee or the Management Committee, as applicable and in its discretion, may grant all or such portion of an Incentive Award for the year as it deems advisable to a Participant (or his Beneficiary in the case of his death) who is employed or who is promoted to an executive grade during the year, or whose employment is terminated during the year because of his or her retirement, death, permanent disability, resignation or discharge. SECTION 6 PAYMENT OF INCENTIVE AWARDS 6.1 Immediate Payment. Each Participant who has elected to receive his or her -7- 10 Incentive Award for the year currently shall be paid his or her Incentive Award in cash as soon as reasonably practicable following the date the award is made. 6.2 Voluntary Deferrals. Prior to the end of any year, each Participant may elect to have the payment of all or a portion of his or her Incentive Award for that year deferred until his or her Termination, subject to a $1,000 minimum. The election shall be irrevocable and shall be made on a form prescribed by the Management Committee or Compensation Committee, as applicable, which shall govern the amount deferred, and the form of its payment pursuant to Section 6.8 following the Participant's Termination. A Participant's deferral election shall apply only to the Incentive Award for that year. If a Participant has not made a deferral election, the Incentive Award payable to him or her for that year shall be paid pursuant to Section 6.1. 6.3 Special Deferrals. The Management Committee or Compensation Committee, as applicable, may, in its discretion, approve deferred payments ("Special Deferrals") as follows. Prior to the end of any year, each Participant may elect to have the payment of all or a portion of his or her Incentive Award for that year deferred until a date or dates specified by the Management Committee or Compensation Committee, as applicable. The Participant's election shall be irrevocable and shall be made on a form prescribed by the Management Committee or Compensation Committee, as applicable. A Participant's Special Deferral election shall apply only to the Incentive Award for that year. If a Participant has not made a Special Deferral election, the Incentive Award payable to him or her for that year shall be paid in accordance with Section 6.1. 6.4 Memorandum Accounts. Each year the Company shall establish a ledger or notional -8- 11 account (the "Memorandum Account") for each Participant who has elected to defer payment of his or her Incentive Award that year for the purpose of reflecting the Company's obligation to pay the deferred Incentive Award for such year as specified pursuant to Section 6.8; provided, however, that all Memorandum Accounts established for a Participant that are to be paid in the same manner, i.e., a lump sum, 60 installments or 120 installments, may be combined into a single Memorandum Account. Similarly, a separate Special Memorandum Account shall be established for each Special Deferral for each Participant; however, all Special Deferrals of a Participant that are to be paid at the same time and in the same manner may be combined into a single Special Memorandum Account. 6.5 Investment of Accounts. Except as provided below, each Account shall accrue interest on the deferred Incentive Award credited to such Account from the date such Incentive Award is credited to the Account through the date of its distribution (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 Management Committee. The Management Committee shall determine, in its sole discretion, the rate of interest to be credited periodically to the Interest Accounts. In lieu of investing in the Interest Account, a Participant may request that the Management Committee (or with respect to a Participant who is an Insider, the Compensation Committee) credit all or a specified percentage of his or her Incentive Award deferred for that year in Phantom Stock (the "Company Stock Account"), in the S&P Account, or in any combination of the Interest Account, Company Stock Account and/or S&P Account; however, -9- 12 the Management Committee (or the Compensation Committee, as the case may be) shall not be obligated to honor any such Participant's request. If the Management Committee (or Compensation Committee, as the case may be) elects to honor any such request, the Management Committee shall establish a separate notional subaccount(s) for such Participant under his or her Account, which shall be credited (i) with respect to the Company Stock Account, whole and fractional shares of Phantom Stock as of the date of the Incentive Award for such year, and with phantom (notional) dividends with respect to the credited 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 periodically as of the dates of the deferrals and with any notional distributions on such units, which 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 Company's Common Stock on the applicable date, unless otherwise authorized by the Management Committee (or the Compensation Committee, as the case may be). If the Management Committee (or the 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 the S&P Account, the portion of the Participant's deferral subject to the request automatically shall be held in the Interest Account. 6.6 Changes in Investment Elections. Each Participant who has an Account under the Plan may request that all or a specified percentage of his or her Account balance as of any date be reinvested in the Interest Account, Company Stock Account and/or S&P Account in such proportions as elected by the Participant; provided, however, the Management Committee (or the -10- 13 Compensation Committee, as the case may be), shall not be obligated to honor any such request. This election shall be in such form as the Management Committee (or the Compensation Committee, as the case may be) shall establish and shall comply with all requirements of the rules promulgated under Section 16(b), to the extent applicable. 6.7 Section 16(b) Rules. Notwithstanding anything in the Plan to the contrary, the Management Committee or the Compensation Committee, as the case may be, in its sole discretion, may amend the Plan in any manner it deems appropriate to ensure compliance with Section 16(b) with respect to Participants who are Insiders. 6.8 Payment of Accounts. Upon a Participant's Termination or on any Special Deferral payment date, the Company shall pay to such Participant (or to his or her Beneficiary in case of the Participant's death) an amount in cash equal to the balance then credited to his or her affected Account(s) as follows: (a) a lump sum payment; or (b) in 60 consecutive substantially equal monthly installments; or (c) in 120 consecutive substantially equal monthly installments, whichever form of payment has been elected by the Participant. However, if a Participant elects to receive the distribution of a Company Stock Account or S&P Account in installments, his or her Company Stock Account or S&P Account automatically shall be converted into an Interest Account as of the Participant's date of Termination or Special Deferral payment date, as the case may be. Payment of Accounts shall commence or be made in the month following the month in -11- 14 which the Participant's Termination or Special Deferral payment date occurs. 6.9 Acceleration of Payments. Notwithstanding a Participant's election to the contrary, the Management Committee or Compensation Committee, as applicable, in its sole discretion, may accelerate the payment of all or part of the unpaid balance of a Participant's Account(s) in the event of the Participant's Termination, or upon its determination that the Participant (or his or her Beneficiary in the case of the Participant's death) has incurred a "severe financial hardship" resulting from a sudden and unexpected illness or accident of such person or of a dependent, a loss of such person's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of such person. The Management Committee or Compensation Committee, as applicable, in making its determination of severe financial hardship may consider such factors and require such information as it deems appropriate, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of such person's assets, to the extent liquidation of such assets will not itself cause severe financial hardship. However, notwithstanding the foregoing, the Management Committee or Compensation Committee, as applicable, shall not accelerate the payment of any Company Stock Account maintained for a Participant if such acceleration would not be exempt under Section 16(b). 6.10 Payment Upon Change in Control. Notwithstanding any other provision of this Plan, in the event of a Change in Control of the Company, the maximum bonus amount attributable to the year in which the Change in Control occurs shall become fully vested and -12- 15 payable within 30 days after the date of the Change in Control. For purposes of this Plan a "Change in Control" shall be deemed to occur: (i) if any person (as such term is used in sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, (ii) upon the first purchase of the Common Stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by the Company), (iii) upon the approval by the Company's stockholders of a merger or consolidation, a sale or disposition of all or substantially all of the Company's assets or a plan of liquidation or dissolution of the Company, or (iv) if, during any period of two consecutive years, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof, unless the election or nomination for the election by the Company'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. SECTION 7 GENERAL PROVISIONS 7.1 Unfunded Obligation. The amounts to be paid to Participants pursuant to this Plan -13- 16 are unfunded obligations of the Company. The Company is not required to segregate any monies from its general funds, to create any trusts, or to make any special deposits with respect to this obligation. Title to and beneficial ownership of any investments, including trust investments, which the Company may make to fulfill this obligation shall at all times remain in the Company. Any investments and the creation or maintenance of any trust or notional accounts shall not create or constitute a trust or a fiduciary relationship between the Management Committee or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or his or her Beneficiary or his or her creditors in any assets of the Company whatsoever. The Participants (and Beneficiaries) shall have no claim against the Company for any changes in the value of any Accounts and shall be general unsecured creditors of the Company with respect to any payment due under this Plan. 7.2 Incapacity of Participant or Beneficiary. If the Management Committee finds that any Participant or Beneficiary to whom a payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is under a legal disability, any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative) at the discretion of the Management Committee, may be paid to the spouse, child, parent or brother or sister of such Participant or Beneficiary or to any person whom the Management Committee has determined has incurred expense for such Participant or Beneficiary. Any such payment shall be a complete discharge of the obligations of the Company under the provisions of the Plan. 7.3 Nonassignment. The right of a Participant or Beneficiary to the payment of any amounts under the Plan may not be assigned, transferred, pledged or encumbered in any manner -14- 17 nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process. 7.4 No Right to Continued Employment. Nothing in the Plan shall be construed to confer upon any Participant any right to continued employment with the Company or its subsidiaries, nor interfere in any way with the right of an Employer to terminate the employment of such Participant at any time without assigning any reason therefor. 7.5 Withholding Taxes. Appropriate taxes shall be withheld from the Participant's Incentive Award with respect to all deferrals made under the Plan and from all payments made to Participants and Beneficiaries pursuant to the Plan. 7.6 Termination and Amendment. The Compensation Committee may from time to time amend, suspend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated, the Compensation Committee may reinstate any or all of its provisions. The Management Committee may also amend the Plan; provided, however, it may not suspend or terminate the Plan, or substantially increase the obligations of the Company under the Plan (provided, however, the addition of new notional subaccounts for investments shall not be deemed an increase in the obligations of the Company), or expand the classification of employees who are eligible to participate in the Plan. No amendment, suspension or termination of the Plan may impair the right of a Participant or his or her Beneficiary to receive the benefit accrued hereunder prior to the effective date of such amendment, suspension or termination. 7.7 Compliance with Securities Laws. It is the intention of the Company that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the -15- 18 Exchange Act, this Plan shall be operated in compliance with Section 16(b) and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction, as the case may be, shall be deemed null and void ab initio. Notwithstanding anything in the Plan to the contrary, the Compensation Committee, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers and directors subject to Section 16(b) without so restricting, limiting or conditioning the Plan with respect to other Participants. 7.8 Applicable Law. Except to the extent preempted by applicable federal law, the Plan shall be construed and governed in accordance with the laws of the State of Texas. -16- EX-10.4 3 DEFERRED COMPENSATION PLAN - 10/09/96 1 EXHIBIT 10.4 BURLINGTON RESOURCES INC. DEFERRED COMPENSATION PLAN As Amended and Restated Effective October 9, 1996 (Originally Effective January 1, 1989) 2 BURLINGTON RESOURCES INC. DEFERRED COMPENSATION PLAN Page Section 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2 Administration . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 3 Participants . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 5 General Provisions . . . . . . . . . . . . . . . . . . . . . 11
i 3 BURLINGTON RESOURCES INC. DEFERRED COMPENSATION PLAN PREAMBLE WHEREAS, Burlington Resources Inc. (the "Company") established the Burlington Resources Inc. Deferred Compensation Plan (the "Plan") effective January 1, 1989 to permit key employees of the Company and its subsidiaries to defer all or part of their base salary, in order for the Company to attract and retain exceptional employees; and WHEREAS, the Company desires to amend and restate the Plan to effect certain changes; NOW, THEREFORE, the Company does hereby amend and restate the Plan as set forth herein, effective October 9, 1996. SECTION 1 DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1.1 Account means a Memorandum Account and/or Special Deferral Memorandum Account, as each is defined in Section 4.3. 1.2 Base Salary means the Participant's base salary being paid by the Employer for the applicable year or partial year, exclusive of bonuses and all other items of compensation for the year. 4 1.3 Beneficiary means the person(s) designated by a Participant, on a form provided by the Management Committee and filed with the Company's Human Resources Department, to receive benefits from the Plan in the event of his or her death. A Participant may change his or her beneficiary designation at any time. If no designated Beneficiary survives the Participant, the Beneficiary shall be the Participant's surviving spouse or, if none, his or her estate. 1.4 Board means the Board of Directors of the Company. 1.5 Common Stock means the common stock, par value $.01 per share, of the Company. 1.6 Company means Burlington Resources Inc., a Delaware corporation. 1.7 Company Stock Account means a notional subaccount of an Account credited with Phantom Stock, as provided in Section 4.4. 1.8 Compensation Committee means the Compensation and Nominating Committee of the Board. 1.9 Employer means the Company and its subsidiaries. 1.10 Exchange Act means the Securities Exchange Act of 1934, as amended. 1.11 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 the Company was sold on such date as reported in the NYSE-Corporate Transactions by The Wall Street Journal on such date or, if no Common Stock was traded on such date, on the next preceding day on which Common Stock was so traded. 1.12 Insider means a Participant who is subject to Section 16(b) of the Exchange Act. -2- 5 1.13 Interest Account means a notional subaccount of an Account credited with interest, as provided in Section 4.5. 1.14 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. 1.15 Participant means each employee who participates in the Plan in accordance with Section 3. 1.16 Permanent Disability means the Management Committee has found, upon the basis of medical evidence satisfactory to it, that a Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in further full-time employment by the Employer and that such disability is reasonably expected to be permanent or long-term. 1.17 Phantom Stock means a phantom or notional share of Common Stock. A Participant shall not possess any rights of a stockholder of the Company with respect to a share of Phantom Stock, including, without limitation, rights concerning voting and dividends. A share of Phantom Stock shall be payable solely in cash under the Plan. 1.18 Plan means the Burlington Resources Inc. Deferred Compensation Plan either in its previous or present form or as amended from time to time. 1.19 S&P Account means a notional subaccount of an Account credited with units in a Standard & Poor's 500 Composite Stock Price Index fund or in a mutual fund selected by the Management Committee that tracks such index, as provided in Section 4.4. 1.20 Section 16(b) means Section 16(b) of the Exchange Act, and all rules promulgated thereunder. 1.21 Termination means a Participant's termination of employment with the Employer, including by reason of death, retirement or Permanent Disability. -3- 6 SECTION 2 ADMINISTRATION 2.1 Management Committee. The Plan shall be administered by a management committee (the "Management Committee") consisting of such executives of the Company as the Chief Executive Officer of the Company shall designate. Subject to review by the Compensation Committee, the Management Committee shall have the complete authority and power to interpret the Plan, prescribe, amend and rescind rules relating to its administration, select eligible Participants, determine a Participant's (or Beneficiary's) right to a payment and the amount of such payment, and to take all other actions necessary or desirable for the administration of the Plan. All actions and decisions of the Management Committee shall be final and binding upon all Participants and Beneficiaries. No member of the Management Committee shall vote on any matter that pertains solely to himself or herself. 2.2 Compensation Committee. Notwithstanding anything herein to the contrary, the Compensation Committee shall have the full authority and power with respect to the Plan's administration and operation with respect to all matters relating to compliance with Section 16(b). -4- 7 SECTION 3 PARTICIPANTS 3.1 Participants. The Management Committee shall determine and designate the executives and other key employees of the Employer who are eligible to defer Base Salary under the Plan (the "Participants"). Participants will be limited to those employees who, because of their management or staff positions, have the principal responsibility for the management, direction and success of the Company as a whole or a subsidiary or a particular business unit thereof. Directors of the Company who are full-time executives of the Company shall be eligible to participate in the Plan. Each Participant must be a "member of a select group of management" or "highly compensated," as those terms are defined in Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended. Further, a Participant shall not be eligible to make deferrals under the Plan with respect to any year unless the Participant has also elected to make such year 401(k) contributions to the Company's qualified defined contribution plan at the highest contribution rate permitted under that plan and any reduction in his or her 401(k) contribution rate under such qualified plan prior to making the maximum 401(k) contribution for that year as permitted by the terms of the qualified plan shall result in the automatic suspension of the Participant's deferrals under this Plan for the remainder of that year. SECTION 4 BENEFITS 4.1 Voluntary Deferrals. Before January 1 of any year (or, with respect to employees who first become Participants during a year, on or before the date on which they become Participants) each Participant may elect to have the payment of all or a portion of his or her Base Salary for that year (or, if later, so much of the year as commences on the day following the date -5- 8 on which the employee becomes a Participant) deferred until his or her Termination. The election shall be irrevocable and shall be made on a form prescribed by the Management Committee, which shall govern the amount deferred, the form of its payment pursuant to Section 4.7 following the Participant's Termination, and, except as provided below, the investment of the Participant's Memorandum Account for such deferral period pending its payment. A Participant's deferral election shall apply only to Base Salary earned during that calendar year or partial year, as the case may be. If a Participant has not made a deferral election, the Base Salary payable to him or her for that year shall be paid in accordance with the Employer's normal payroll practices. 4.2 Special Deferrals. The Management Committee or Compensation Committee, as applicable, may, in its discretion, approve deferred payments ("Special Deferrals") as follows. Before January 1 of any year (or, with respect to employees who first become Participants during a year, on or before the date on which they become Participants) each Participant may elect to have the payment of all or a portion of his or her Base Salary for that year (or, if later, so much of the year as commences on the day following the date on which the employee becomes a Participant) deferred until a date or dates specified by the Management Committee. The Participant's election shall be irrevocable and shall be made on a form prescribed by the Management Committee or Compensation Committee, as applicable. A Participant's Special Deferral election shall apply only to Base Salary earned during that calendar year or partial year, as the case may be. If a Participant has not made a Special Deferral election, the Base Salary paid to him or her for that year (or partial year) shall be paid in accordance with Section 4.1. -6- 9 4.3 Memorandum Accounts. Each year the Company shall establish a ledger or notional account (the "Memorandum Account") for each Participant who has elected to defer payment of his or her Base Salary that year for the purpose of reflecting the Company's obligation to pay the deferred Base Salary for such year as specified pursuant to Section 4.7; provided, however, that all Memorandum Accounts established for a Participant that are to be paid in the same manner, i.e., a lump sum, 60 installments or 120 installments, may be combined into a single Memorandum Account. Similarly, a separate Special Memorandum Account shall be established for each Special Deferral for each Participant; however, all Special Deferrals of a Participant that are to be paid at the same time and in the same manner may be combined into a single Special Memorandum Account. 4.4 Investment of Accounts. Except as provided below, each Account shall accrue interest on the deferred Base Salary credited to such Account from the date such Base Salary is credited to the Account through the date of its distribution (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 Management Committee. The Management Committee shall determine, in its sole discretion, the rate of interest to be credited periodically to the Interest Accounts. In lieu of investing in the Interest Account, a Participant may request that the Management Committee (or with respect to a Participant who is an Insider, the Compensation Committee) credit all or a specified percentage of his or her Base Salary deferred that year in Phantom Stock (the "Company Stock Account"), in the S&P Account, or in any combination of -7- 10 the Interest Account, the Company Stock Account and/or S&P Account; however, the Management Committee (or Compensation Committee, as the case may be) shall not be obligated to honor any such Participant's request. If the Management Committee (or Compensation Committee, as the case may be) elects to honor any such request, it shall establish a separate notional subaccount(s) for such Participant under his or her Account, which shall be credited (i) with respect to the Company Stock Accounts, whole and fractional shares of Phantom Stock periodically as of the payroll dates of the deferrals in such year, 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 periodically as of the dates of the deferrals and with any notional distributions on such units, which 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 on the applicable date, unless otherwise authorized by the Management Committee (or the Compensation Committee, as the case may be). If the Management 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 deferral automatically shall be held in the Interest Account. 4.5 Changes in Investment Elections. Each Participant who has an Account under the Plan on 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; -8- 11 however, the Management Committee shall not be obligated to honor any such request. This election shall be in such form as the Management Committee (or Compensation Committee, as the case may be) shall establish and shall comply with all requirements of Section 16(b), to the extent applicable. 4.6 Section 16(b) Rules. Notwithstanding anything in the Plan to the contrary, the Management Committee or Compensation Committee, as the case may be, in its sole discretion, may amend the Plan in any manner it deems appropriate to ensure compliance with Section 16(b) with respect to Participants who are Insiders. 4.7 Payment of Accounts. Upon a Participant's Termination or on any Special Deferral payment date, the Company shall pay to such Participant (or to his or her Beneficiary in case of the Participant's death) an amount in cash equal to the balance then credited to his or her affected Account(s) as follows: (a) a lump sum payment; or (b) in 60 consecutive substantially equal monthly installments; or (c) in 120 consecutive substantially equal monthly installments, whichever form of payment has been elected by the Participant. However, if a Participant elects to receive the distribution of a Company Stock Account or S&P Account in installments, his or her Company Stock Account or S&P Account automatically shall be converted into an Interest Account as of the Participant's date of Termination or Special Deferral payment date, as the case may be. Payment of Accounts shall commence or be made in the month following the -9- 12 month in which the Participant's Termination or Special Deferral payment date occurs. 4.8 Acceleration of Payments. Notwithstanding a Participant's election to the contrary, the Management Committee or Compensation Committee, as applicable, in its sole discretion, may accelerate the payment of all or part of the unpaid balance of a Participant's Account(s) in the event of the Participant's Termination, or upon its determination that the Participant (or his or her Beneficiary in the case of the Participant's death) has incurred a "severe financial hardship" resulting from a sudden and unexpected illness or accident of such person or of a dependent, a loss of such person's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of such person. The Management Committee or Compensation Committee, as applicable, in making its determination of severe financial hardship may consider such factors and require such information as it deems appropriate, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of such person's assets, to the extent liquidation of such assets will not itself cause severe financial hardship. However, notwithstanding the foregoing, the Management Committee or Compensation Committee, as applicable, shall not accelerate the payment of any Company Stock Account maintained for a Participant if such acceleration would not be exempt under Section 16(b). SECTION 5 GENERAL PROVISIONS 5.1 Unfunded Obligation. The amounts to be paid to Participants pursuant to this -10- 13 Plan are unfunded obligations of the Company. The Company is not required to segregate any monies from its general funds, to create any trusts, or to make any special deposits with respect to this obligation. Title to and beneficial ownership of any investments, including trust investments, which the Company may make to fulfill this obligation shall at all times remain in the Company. Any investments and the creation or maintenance of any trust or notional accounts shall not create or constitute a trust or a fiduciary relationship between the Management Committee or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or his or her Beneficiary or his or her creditors in any assets of the Company whatsoever. The Participants (and Beneficiaries) shall have no claim against the Company for any changes in the value of any Accounts and shall be general unsecured creditors of the Company with respect to any payment due under this Plan. 5.2 Incapacity of Participant or Beneficiary. If the Management Committee finds that any Participant or Beneficiary to whom a payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is under a legal disability, any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative) at the discretion of the Management Committee, may be paid to the spouse, child, parent or brother or sister of such Participant or Beneficiary or to any person whom the Management Committee has determined has incurred expense for such Participant or Beneficiary. Any such payment shall be a complete discharge of the obligations of the Company under the provisions of the Plan. 5.3 Nonassignment. The right of a Participant or Beneficiary to the payment of any amounts under the Plan may not be assigned, transferred, pledged or encumbered in any manner -11- 14 nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process. 5.4 No Right to Continued Employment. Nothing in the Plan shall be construed to confer upon any Participant any right to continued employment with the Employer, nor interfere in any way with the right of the Employer to terminate the employment of such Participant at any time without assigning any reason therefor. 5.5 Withholding Taxes. Appropriate taxes shall be withheld from the Participant's Base Salary with respect to all deferrals made under the Plan and from all payments made to Participants and Beneficiaries pursuant to the Plan. 5.6 Termination and Amendment. The Compensation Committee may from time to time amend, suspend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated, the Compensation Committee may reinstate any or all of its provisions. The Management Committee may also amend the Plan; provided, however, it may not suspend or terminate the Plan, or substantially increase the obligations of the Company under the Plan (provided, however, the addition of new notional subaccounts for investments shall not be deemed an increase in the obligations of the Company), or expand the classification of employees who are eligible to participate in the Plan. No amendment, suspension or termination of the Plan may impair the right of a Participant or his or her Beneficiary to receive the benefit accrued hereunder prior to the effective date of such amendment, suspension or termination. 5.7 Compliance with Securities Laws. It is the intention of the Company that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the -12- 15 Exchange Act, this Plan shall be operated in compliance with 16(b) and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction, as the case may be, shall be deemed null and void ab initio. Notwithstanding anything in the Plan to the contrary, the Compensation Committee, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers and directors subject to Section 16(b) without so restricting, limiting or conditioning the Plan with respect to other Participants. 5.8 Applicable Law. Except to the extent preempted by applicable federal law, the Plan shall be construed and governed in accordance with the laws of the State of Texas. -13- EX-10.5 4 SUPPLEMENTAL BENEFITS PLAN - 10/09/96 1 EXHIBIT 10.5 BURLINGTON RESOURCES INC. SUPPLEMENTAL BENEFITS PLAN As Amended and Restated Effective October 9, 1996 (Originally Effective January 1, 1989) 2 BURLINGTON RESOURCES INC. SUPPLEMENTAL BENEFITS PLAN Page Section 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2 Administration . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 3 Participants . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 5 General Provisions . . . . . . . . . . . . . . . . . . . . . 11
i 3 BURLINGTON RESOURCES INC. SUPPLEMENTAL BENEFITS PLAN PREAMBLE WHEREAS, Burlington Resources Inc. (the "Company") established the Burlington Resources Inc. Supplemental Benefits Plan (the "Plan") effective January 1, 1989 in order for the Company to attract and retain exceptional employees; and WHEREAS, the Company amended and restated the Plan as of October 1, 1994 and desires to amend and restate the Plan to effect certain changes; NOW, THEREFORE, the Company does hereby amend and restate the Plan as set forth herein, effective October 9, 1996. SECTION 1 DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1.1 Beneficiary means the person(s) designated by a Participant, on a form provided by the Management Committee and filed with the Company's Human Resources Department, to receive benefits from the Plan in the event of his or her death. A Participant may change his or her beneficiary designation at any time. If no designated Beneficiary survives the Participant, the Beneficiary shall be the Participant's surviving spouse or, if none, his or her estate. 1.2 Board means the Board of Directors of the Company. 4 1.3 Code means the Internal Revenue Code of 1986, as amended. 1.4 Common Stock means the common stock, par value $.01 per share, of the Company. 1.5 Company means Burlington Resources Inc., a Delaware corporation. 1.6 Company Stock Account means a notional subaccount of a Memorandum Account credited with Phantom Stock, as provided in Section 4.5. 1.7 Compensation Committee means the Compensation and Nominating Committee of the Board. 1.8 Deferred Compensation Plans means the Burlington Resources Inc. Deferred Compensation Plan, the Company's Incentive Compensation Plan and other similar plans maintained by an Employer and such additional deferred compensation plans as may be designated by the Company from time to time. 1.9 Employer means the Company and its subsidiaries. 1.10 Exchange Act means the Securities Exchange Act of 1934, as amended. 1.11 Fair Market Value means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which Common Stock was sold on such date as reported in the NYSE-Corporate Transactions by The Wall Street Journal on such date or, if no Common Stock was traded on such date, on the next preceding day on which Common Stock was so traded. 1.12 Insider means a Participant who is subject to Section 16(b) of the Exchange Act. 1.13 Interest Account means a notional subaccount of a Memorandum Account credited with interest, as provided in Section 4.5. -2- 5 1.14 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. 1.15 Participant means each employee who participates in the Plan in accordance with Section 3. 1.16 Pension Plan means the Burlington Resources Inc. Pension Plan and any pension plans maintained by an Employer. 1.17 Permanent Disability means the Management Committee has found, upon the basis of medical evidence satisfactory to it, that a Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in further full-time employment by the Employer and that such disability is reasonably expected to be permanent or long-term. 1.18 Phantom Stock means a phantom or notional share of Common Stock. A Participant shall not possess any rights of a stockholder of the Company with respect to a share of Phantom Stock, including, without limitation, rights concerning voting and dividends. A share of Phantom Stock shall be payable solely in cash under the Plan. 1.19 Plan means the Burlington Resources Inc. Supplemental Benefits Plan either in its previous or present form or as amended from time to time. 1.20 RSP means the Burlington Resources Inc. Retirement Savings Plan. 1.21 S&P Account means a notional subaccount of an Account credited with units in a Standard & Poor's 500 Composite Stock Price Index fund or in a mutual fund selected by the Management Committee that tracks such index, as provided in Section 4.5. -3- 6 1.22 Section 16(b) means Section 16(b) of the Exchange Act, and all rules promulgated thereunder. 1.23 Surviving Spouse means the person to whom surviving spouse death benefits are to be paid pursuant to the terms of the Pension Plan. 1.24 Termination means a Participant's termination of employment with the Employer, including by reason of death or retirement, but excluding by reason of Permanent Disability. SECTION 2 ADMINISTRATION 2.1 Management Committee. The Plan shall be administered by a management committee (the "Management Committee") consisting of such executives of the Company as the Chief Executive Officer of the Company shall designate. Subject to review by the Compensation Committee, the Management Committee shall have the complete authority and power to interpret the Plan, prescribe, amend and rescind rules relating to its administration, select eligible Participants, determine a Participant's (or Surviving Spouse's or Beneficiary's) right to a payment and the amount of such payment, and to take all other actions necessary or desirable for the administration of the Plan. All actions and decisions of the Management Committee shall be final and binding upon all Participants, Surviving Spouses and Beneficiaries. No member of the Management Committee shall vote on any matter that pertains solely to himself or herself. 2.2 Compensation Committee. Notwithstanding anything herein to the contrary, the Compensation Committee shall have the full authority and power with respect to the Plan's -4- 7 administration and operation with respect to all matters relating to compliance with Section 16(b). SECTION 3 PARTICIPANTS 3.1 Participants. The Management Committee shall determine and designate the executives and other key employees of the Employer who are eligible to receive benefits under the Plan (the "Participants"). Participants will be limited to those employees who, because of their management or staff positions, have the principal responsibility for the management, direction and success of the Company as a whole or a subsidiary or a particular business unit thereof. Directors of the Company who are full-time executives of the Company shall be eligible to participate in the Plan. Each Participant must be a "member of a select group of management" or "highly compensated," as those terms are defined in Section 201(2) of the Employee Retirement Income Security Act of 1974, as amended. SECTION 4 BENEFITS 4.1 Supplemental Pension Benefits. Upon a Participant's Termination, the Company shall pay or cause to be paid to such Participant (or his or her Surviving Spouse in the case of his or her death) supplemental pension benefits under this Plan which, when combined with the amounts he or she is entitled to receive under the Pension Plan, shall equal the retirement or Surviving Spouse death benefits which would have been payable to the Participant or his or her Surviving Spouse had the Pension Plan's benefit formula been applied: -5- 8 (a) without regard to any of the limitations of Section 415 of the Code, (b) by including in the Participant's compensation during the period for which the Pension Plan benefits are computed, to the extent not already done so under the Pension Plan, any amount that has not been taken into account due to (i) the limitations of Section 401(a)(17) of the Code, (ii) an elective reduction of compensation by the Participant under Section 125 or 401(k) of the Code or (iii) the deferral of compensation under a Deferred Compensation Plan, and (c) by taking into account any service granted to the Participant and any benefit formula adjustments required by an employment contract with the Employer. Supplemental pension benefits under this Section 4.1 shall be vested and nonforfeitable to the same extent that the related benefits under the Pension Plan are vested and nonforfeitable. 4.2 Supplemental RSP Benefits. Upon a Participant's Termination or Permanent Disability, the Company shall pay or cause to be paid to such Participant (or his or her Beneficiary in the case of his or her death) supplemental RSP benefits calculated as described below. The Company shall periodically determine the amount of any additional Employer matching contributions that would have been credited to a Participant's account under the RSP if his or her current election of Participant contributions had been given effect and no adjustment of such contributions had occurred due to (a) the maximum dollar limit under Section 415(c)(1)(A) of the Code on RSP annual additions, -6- 9 (b) the maximum limit under Section 401(a)(17) of the Code on the Participant's compensation taken into account under the RSP, and (c) any further reductions in the Participant's compensation taken into account under the RSP as a result of any deferrals of compensation (i) elected by the Participant pursuant to Section 125 or Section 401(k) of the Code or (ii) under a Deferred Compensation Plan. From time to time, as determined by the Management Committee, the Company shall allocate amounts equal to such additional Employer matching contributions ("Employer Matching Contributions") to a notional ledger account (the "Memorandum Account") for the Participant as of the time or times that such amounts would have been contributed to the RSP if permitted thereunder. Supplemental RSP benefits under this Section 4.2 shall be vested and nonforfeitable to the same extent that the related Employer matching contributions under the RSP are vested and nonforfeitable. 4.3 Other Supplemental Benefits. Upon a Participant's Termination or Permanent Disability, the Company shall pay or cause to be paid to such Participant (or his or her Beneficiary in the case of his or her death) other supplemental benefits as determined by the Management Committee and contained in the Participant's employment contract or other written agreement with the Employer. Other supplemental benefits under this Section 4.3 shall be vested and nonforfeitable to the extent provided in the applicable employment contract or agreement. 4.4 Determination of Lump Sum Supplemental Pension Benefit Payments. The -7- 10 amount of a lump sum payment of supplemental pension benefits to a Participant (or his or her Surviving Spouse in the event of the Participant's Termination on account of death) shall be determined by calculating the benefit according to the terms of the Pension Plan as a whole life annuity, then calculating the present value of such benefit, using the actuarial assumptions specified in the Pension Plan for determining benefits of equivalent value except, in lieu of the Pension Benefit Guaranty Corporation ("PBGC") rates for calculating lump sums specified in the Pension Plan, the interest rate shall be the immediate PBGC rate in effect on January 1 of the year in which the lump sum payment becomes payable (or such other date during such year as the Management Committee, in its sole discretion, may designate). 4.5 Investment of Accounts. Except as provided below, each Memorandum Account shall accrue interest on the phantom Employer Matching Contributions credited to such Account from such date of crediting through the date of the distribution of such account (the "Interest Account"). Such interest shall be credited to the Memorandum Account at the end of each calendar quarter or such other periods as may be determined by the Management Committee. The Management Committee shall determine, in its sole discretion, the rate of interest to be credited periodically to the Memorandum Accounts. In lieu of investing in the Interest Account, a Participant may request that the Management Committee (or, with respect to a Participant who is an Insider, the Compensation Committee) credit all or a specified percentage of his or her Employer Matching Contributions for that year in Phantom Stock (the "Company Stock Account"), in the S&P Account, or in any combination of the Interest Account, the Company Stock Account and/or the S&P Account; -8- 11 however, the Management Committee (or the Compensation Committee, as the case may be) shall not be obligated to honor any such Participant's request. If the Management Committee (or the Compensation Committee, as the case may be) elects to honor any such request, it shall establish a separate notional subaccount(s) for such Participant under his or her Memorandum Account, which shall be credited (i) with respect to the Company Stock Account, whole and fractional shares of Phantom Stock periodically as of the payroll dates as of which the Employer Matching Contributions for such year are to be credited, and phantom (notional) dividends with respect to the credited 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 periodically as of the dates of the credits and with any notional distributions on such units, which 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 on the applicable date, unless otherwise authorized by the Management Committee (or the Compensation Committee, as the case may be). If the Management Committee (or the Compensation Committee, as the case may be) chooses to not honor any such Participant's request to invest his or her Memorandum Account in the Company Stock Account or the S&P Account, the Participant's Employer Matching Contributions automatically shall be held in the Interest Account. 4.6 Changes in Investment Elections. Each Participant who has an Account under the Plan may request that all or a specified percentage of his or her Account as of any date be reinvested in the Interest Account Company Stock Account and/or the S&P Account in such -9- 12 proportions as elected by the Participant; however, the Management Committee (or the Compensation Committee, as the case may be) shall not be obligated to honor any such request. This election shall be in such form as the Management Committee (or the Compensation Committee, as the case may be) shall establish and shall comply with all requirements of Section 16(b), to the extent applicable. 4.7 Section 16(b) Rules. Notwithstanding anything in the Plan to the contrary, the Management Committee or the Compensation Committee, as the case may be, in its sole discretion, may amend the Plan in any manner it deems appropriate to ensure compliance with Section 16(b) with respect to Participants who are Insiders. 4.8 Time and Manner of Payments. Upon a Participant's Termination (and with respect to a Participant's RSP benefit, upon his or her Permanent Disability), the Company shall pay to such Participant (or to his or her Surviving Spouse or Beneficiary in case of the Participant's death) an amount in cash equal to (i) the present value of the Participant's accrued supplemental pension benefits under Section 4.1, and/or (ii) the balance then credited to his or her Memorandum Account under Section 4.2 as follows: (a) a lump sum payment; or (b) in 60 consecutive substantially equal monthly installments; or (c) in 120 consecutive substantially equal monthly installments, whichever form of payment has been elected by the Participant with respect to such benefit. However, if a Participant elects to receive the distribution of a Company Stock Account or S&P Account under Section 4.5 in installments, his or her Company Stock Account or S&P Account -10- 13 automatically shall be converted into an Interest Account as of the Participant's date of Termination or Permanent Disability, as the case may be. Payment of benefits shall commence or be made in the month following the month in which the Participant's Termination or Permanent Disability date occurs, whichever is applicable. The payment of any other supplemental benefits pursuant to an employment contract under Section 4.3 shall be made as provided in the employment contract. 4.9 Acceleration of Payments. Notwithstanding a Participant's election to the contrary, the Management Committee or Compensation Committee, as applicable, in its sole discretion, may accelerate the payment of all or part of a Participant's benefits under the Plan in the event of the Participant's Termination (or the Participant's RSP Memorandum Account benefit in the event of his or her Permanent Disability), or upon its determination that the Participant (or his or her Surviving Spouse or Beneficiary in the case of the Participant's death) has incurred a "severe financial hardship" resulting from a sudden and unexpected illness or accident of such person or of a dependent, a loss of such person's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of such person. The Management Committee or Compensation Committee, as applicable, in making its determination of severe financial hardship may consider such factors and require such information as it deems appropriate, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of such person's assets, to the extent liquidation of such assets will not itself cause severe financial hardship. However, notwithstanding the -11- 14 foregoing, the Management Committee or Compensation Committee, as applicable, shall not accelerate the payment of any Company Stock Account maintained for a Participant if such acceleration would not be exempt under Section 16(b). SECTION 5 GENERAL PROVISIONS 5.1 Unfunded Obligation. The amounts to be paid to Participants and/or their Surviving Spouses and Beneficiaries pursuant to this Plan are unfunded obligations of the Company. The Company is not required to segregate any monies from its general funds, to create any trusts, or to make any special deposits with respect to this obligation. Title to and beneficial ownership of any investments, including trust investments, which the Company may make to fulfill this obligation shall at all times remain in the Company. Any investments and the creation or maintenance of any trust or memorandum accounts shall not create or constitute a trust or a fiduciary relationship between the Management Committee or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or his or her Beneficiary or his or her creditors in any assets of the Company whatsoever. The Participants (and Beneficiaries) shall have no claim against the Company for any changes in the value of any Memorandum Account and shall be general unsecured creditors of the Company with respect to any payment due under this Plan. 5.2 Incapacity of Participant or Beneficiary. If the Management Committee finds that any Participant, Surviving Spouse or Beneficiary to whom a payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is under a legal disability, -12- 15 any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative) at the discretion of the Committee, may be paid to the spouse, child, parent or brother or sister of such Participant, Surviving Spouse or Beneficiary or to any person whom the Management Committee has determined has incurred expense for such Participant, Surviving Spouse or Beneficiary. Any such payment shall be a complete discharge of the obligations of the Company under the provisions of the Plan. 5.3 Nonassignment. The right of a Participant, Surviving Spouse or Beneficiary to the payment of any amounts under the Plan may not be assigned, transferred, pledged or encumbered in any manner nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process. 5.4 No Right to Continued Employment. Nothing in the Plan shall be construed to confer upon any Participant any right to continued employment with the Employers, nor interfere in any way with the right of an Employer to terminate the employment of such Participant at any time without assigning any reason therefor. 5.5 Withholding Taxes. Appropriate taxes shall be withheld from a Participant's compensation and all payments made to Participants, Surviving Spouses and Beneficiaries pursuant to the Plan. 5.6 Termination and Amendment. The Compensation Committee may from time to time amend, suspend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated, the Compensation Committee may reinstate any or all of its provisions. The Management Committee may also amend the Plan; provided, however, it may not suspend or -13- 16 terminate the Plan, or substantially increase the obligations of the Company under the Plan (provided, however, the addition of new notional subaccounts for investments shall not be deemed an increase in the obligations of the Company), or expand the classification of employees who are eligible to participate in the Plan. No amendment, suspension or termination of the Plan may impair the right of a Participant or his or her Surviving Spouse or Beneficiary to receive the benefits accrued hereunder prior to the effective date of such amendment, suspension or termination. If the Plan is terminated, Participants, Surviving Spouses and Beneficiaries who have accrued benefits under the Plan as of the date of termination will receive payment of such benefits at the times specified in the Plan. 5.7 Compliance with Securities Laws. It is the intention of the Company that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, this Plan shall be operated in compliance with Section 16(b), and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction, as the case may be, shall be deemed null and void ab initio. Notwithstanding anything in the Plan to the contrary, the Compensation Committee, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers and directors subject to Section 16(b) without so restricting, limiting or conditioning the Plan with respect to other Participants. 5.8 Applicable Law. Except to the extent preempted by applicable federal law, the Plan shall be construed and governed in accordance with the laws of the State of Texas. -14- EX-10.8 5 COMP. PLAN FOR NON-EMPLOYEE DIRECTORS 1 EXHIBIT 10.8 BURLINGTON RESOURCES INC. COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS As Amended and Restated Effective October 9, 1996 (Originally Approved and Adopted October 11, 1989) 2 BURLINGTON RESOURCES INC. COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS Table of Contents
Page ---- Section 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 3 Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 4 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 5 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-i- 3 BURLINGTON RESOURCES INC. COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS PREAMBLE WHEREAS, Burlington Resources Inc. (the "Company") adopted the Burlington Resources Inc. Compensation Plan For Non-Employee Directors (the "Plan") on October 11, 1989 in order for the Company to attract and retain highly qualified individuals to serve as members of the Company's Board of Directors by permitting them to defer all or part of their annual retainer and meeting fees; and WHEREAS, the Company desires to amend and restate the Plan to effect certain changes; NOW, THEREFORE, the Company does hereby amend and restate the Plan as set forth herein, effective as of October 9, 1996. SECTION 1 DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1.1 Account means a Memorandum Account as defined in Section 4.2. 1.2 Beneficiary means the person(s) designated by a Participant, on a form provided by the Management Committee and filed with the Company's Human Resources Department, to receive benefits from the Plan in the event of his or her death. A Participant may change his or her beneficiary designation at any time. If no designated Beneficiary survives the Participant, the Beneficiary shall be the Participant's surviving spouse or, if none, his or -1- 4 her estate. 1.3 Board means the Board of Directors of the Company. 1.4 Common Stock means the common stock, par value $.01 per share, of the Company. 1.5 Company means Burlington Resources Inc., a Delaware corporation. 1.6 Compensation Committee means the Compensation and Nominating Committee of the Board. 1.7 Company Stock Account means a notional subaccount of an Account credited with Phantom Stock, as provided in Section 4.3. 1.8 Compensation means, with respect to a Plan Year, the Participant's annual retainer for such Plan Year and any meeting fees for each regular and special meeting and any committee meeting attended by the Participant during the applicable Plan Year. 1.9 Exchange Act means the Securities Exchange Act of 1934, as amended. 1.10 Fair Market Value means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which Common Stock was sold on such date as reported in the NYSE-Corporate Transactions by The Wall Street Journal on such date or, if no Common Stock was traded on such date, on the next preceding day on which Common Stock was so traded. 1.11 Interest Account means a notional subaccount of an Account credited with interest, as provided in Section 4.3. 1.12 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. -2- 5 1.13 Non-Employee Director means a member of the Board who is not also an employee of the Company or a subsidiary thereof. 1.14 Participant means each Non-Employee Director who elects to participate in the Plan in accordance with Section 3. 1.15 Phantom Stock means a phantom or notional share of Common Stock. A Participant shall not possess any rights of a stockholder of the Company with respect to a share of Phantom Stock, including, without limitation, rights concerning voting and dividends. A share of Phantom Stock shall be payable solely in cash under the Plan. 1.16 Plan means the Burlington Resources Inc. Compensation Plan For Non-Employee Directors either in its previous or present form or as amended from time to time. 1.17 Plan Year means the period that begins on the day of the Company's annual stockholders' meeting and terminates on the day before the next annual stockholders' meeting. 1.18 S&P Account means a notional subaccount of an Account credited with units in a Standard & Poor's 500 Composite Stock Price Index fund or in a mutual fund selected by the Management Committee that tracks such index, as provided in Section 4.3. 1.19 Section 16(b) means Section 16(b) of the Exchange Act, and all rules promulgated thereunder. 1.20 Termination means a Participant's ceasing to be a member of the Board. SECTION 2 ADMINISTRATION 2.1 Management Committee. The Plan shall be administered by a management -3- 6 committee (the "Management Committee") consisting of such executives of the Company as the Chief Executive Officer of the Company shall designate. Subject to review by the Compensation Committee, the Management Committee shall have the complete authority and power to interpret the Plan, prescribe, amend and rescind rules relating to its administration, select eligible Participants, determine a Participant's (or Beneficiary's) right to a payment and the amount of such payment, and to take all other actions necessary or desirable for the administration of the Plan. All actions and decisions of the Management Committee shall be final and binding upon all Participants and Beneficiaries. 2.2 Compensation Committee. Notwithstanding anything herein to the contrary, the Compensation Committee shall have the full authority and power with respect to the Plan's administration and operation with respect to all matters relating to compliance with Section 16(b). SECTION 3 PARTICIPANTS 3.1 Participants. Each Plan Year each Non-Employee Director for such year shall be eligible to be a Participant. SECTION 4 BENEFITS 4.1 Voluntary Deferrals. Before each Plan Year (or, with respect to an individual who first becomes a Non-Employee Director during a Plan Year, on or before the date on which he or she becomes a Non-Employee Director), each Non-Employee Director may elect to have the -4- 7 payment of all or a portion of his or her Compensation for that Plan Year (or, if applicable, the remainder of the Plan Year) deferred until his or her Termination. The election shall be irrevocable and shall be made on a form prescribed by the Management Committee or Compensation Committee, as applicable, which shall govern the amount deferred, the form of its payment pursuant to Section 4.6 following the Participant's Termination, and, except as provided below, the investment of the Participant's Memorandum Account for such deferral period pending its payment. A Participant's deferral election shall apply only to Compensation earned during that Plan Year or partial Plan Year, as the case may be. If a Non-Employee Director has not made a deferral election with respect to a Plan Year, the Compensation payable to him or her for that Plan Year shall be paid in accordance with the Company's normal practices. 4.2 Memorandum Accounts. Each Plan Year the Company shall establish a ledger or notional account (the "Memorandum Account") for each Non-Employee Director who has elected to defer payment of all or part of his or her Compensation that Plan Year for the purpose of reflecting the Company's obligation to pay the deferred Compensation for such Plan Year as specified pursuant to Section 4.6; provided, however, that all Memorandum Accounts established for a Participant that are to be paid in the same manner, i.e., a lump sum, 60 installments or 120 installments, may be combined into a single Memorandum Account. 4.3 Investment of Accounts. Except as provided below, each Account shall accrue interest on the deferred Compensation credited to such Account from the date such Compensation is credited to the Account through the date of its distribution (the "Interest Account"). Such interest shall be credited to the Interest Account at the end of each calendar -5- 8 quarter or such other periods as may be determined by the Management Committee. The Management Committee shall determine, in its sole discretion, the rate of interest to be credited periodically to the Interest Accounts. In lieu of investing in the Interest Account, a Participant may request that the Management Committee (or Compensation Committee, as the case may be) credit all or a specified percentage of his or her Compensation deferred that Plan Year in Phantom Stock (the "Company Stock Account"), in the S&P Account or in any combination of the Interest Account, Company Stock Account and/or S&P Account; however, the Management Committee (or Compensation Committee, as the case may be) shall not be obligated to honor any such Participant's request. If the Management Committee (or Compensation Committee, as the case may be) elects to honor any such request, it shall establish a separate notional subaccount(s) for such Participant under his or her Account, which shall be credited (i) with respect to the Company Stock Account, whole and fractional shares of Phantom Stock periodically as of the dates of the deferrals in such Plan Year, 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 on the S&P Account periodically as of the dates of the deferrals in such Plan Year and with any notional distributions on such units, which 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 on the applicable date, unless otherwise authorized by the Management Committee (or, the Compensation Committee, as the case may be). If the -6- 9 Management 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 the S&P Account, the Participant's deferral automatically shall be held in the Interest Account. 4.4 Change in Investment Elections. Each Participant who has an Account under the Plan may request that all or a specified percentage of his or her Account balance as of any date be reinvested in the Interest Account, Company Stock Account and/or S&P Stock Account in such proportions as elected by the Participant; provided, however, the Management Committee (or Compensation Committee, as the case may be), shall not be obligated to honor any such request. This election shall be in such form as the Management Committee (or the Compensation Committee, as the case may be) shall establish and shall comply with all requirements of Section 16(b), to the extent applicable. 4.5 Section 16(b) Rules. Notwithstanding anything in the Plan to the contrary, the Management Committee or the Compensation Committee, as the case may be, in its sole discretion, may amend the Plan in any manner it deems appropriate to ensure compliance with Section 16(b). 4.6 Payment of Accounts. Upon a Participant's Termination, the Company shall pay to such Participant (or to his or her Beneficiary in case of the Participant's death) an amount in cash equal to the balance then credited to his or her affected Account(s) as follows: (a) a lump sum payment; or (b) in 60 consecutive substantially equal monthly installments; or (c) in 120 consecutive substantially equal monthly installments, -7- 10 whichever form of payment has been elected by the Participant. However, if a Participant elects to receive the distribution of a Company Stock Account or S&P Account in installments, his or her Company Stock Account or S&P Account automatically shall be converted into an Interest Account as of the Participant's date of Termination. Payment of Accounts shall commence or be made in the January following the year in which the Participant's Termination occurs. 4.7 Acceleration of Payments. Notwithstanding a Participant's election to the contrary, the Management Committee or Compensation Committee, as applicable, in its sole discretion, may accelerate the payment of all or part of the unpaid balance of a Participant's Account(s) in the event of the Participant's Termination, or upon its determination that the Participant (or his or her Beneficiary in the case of the Participant's death) has incurred a "severe financial hardship" resulting from a sudden and unexpected illness or accident of such person or of a dependent, a loss of such person's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of such person. The Management Committee or Compensation Committee, as applicable, in making its determination of severe financial hardship may consider such factors and require such information as it deems appropriate, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of such person's assets, to the extent liquidation of such assets will not itself cause severe financial hardship. However, notwithstanding the foregoing, the Management Committee or Compensation Committee, as applicable, shall not accelerate the payment of any Company -8- 11 Stock Account maintained for a Participant if such acceleration would not be exempt under Section 16(b). SECTION 5 GENERAL PROVISIONS 5.1 Unfunded Obligation. The amounts to be paid to Participants pursuant to this Plan are unfunded obligations of the Company. The Company is not required to segregate any monies from its general funds, to create any trusts, or to make any special deposits with respect to this obligation. Title to and beneficial ownership of any investments, including trust investments, which the Company may make to fulfill this obligation shall at all times remain in the Company. Any investments and the creation or maintenance of any trust or notional accounts shall not create or constitute a trust or a fiduciary relationship between the Management Committee or the Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or his or her Beneficiary or his or her creditors in any assets of the Company whatsoever. The Participants (and Beneficiaries) shall have no claim against the Company for any changes in the value of any Accounts and shall be general unsecured creditors of the Company with respect to any payment due under this Plan. 5.2 Incapacity of Participant or Beneficiary. If the Management Committee finds that any Participant or Beneficiary to whom a payment is payable under the Plan is unable to care for his or her affairs because of illness or accident or is under a legal disability, any payment due (unless a prior claim therefore shall have been made by a duly appointed legal representative) at the discretion of the Management Committee, may be paid to the spouse, child, parent or brother -9- 12 or sister of such Participant or Beneficiary or to any person whom the Management Committee has determined has incurred expense for such Participant or Beneficiary. Any such payment shall be a complete discharge of the obligations of the Company under the provisions of the Plan. 5.3 Nonassignment. The right of a Participant or Beneficiary to the payment of any amounts under the Plan may not be assigned, transferred, pledged or encumbered in any manner nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process. 5.4 Termination and Amendment. The Board may from time to time amend, suspend or terminate the Plan, in whole or in part, and if the Plan is suspended or terminated, the Board may reinstate any or all of its provisions. The Management Committee may also amend the Plan; provided, however, it may not suspend or terminate the Plan, or substantially increase the obligations of the Company under the Plan (provided, however, the addition of new notional subaccounts for investments shall not be deemed an increase in the obligations of the Company), or expand the classification of employees who are eligible to participate in the Plan. No amendment, suspension or termination of the Plan may impair the right of a Participant or his or her Beneficiary to receive the benefit accrued hereunder prior to the effective date of such amendment, suspension or termination. 5.5 Compliance with Securities Laws. It is the intention of the Company that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, this Plan shall be operated in compliance with Section 16(b) and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction -10- 13 shall be deemed null and void ab initio. Notwithstanding anything in the Plan to the contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use of any provision of the Plan to Participants who are officers and directors subject to Section 16(b) without so restricting, limiting or conditioning the Plan with respect to other Participants. 5.6 Applicable Law. Except to the extent preempted by applicable federal law, the Plan shall be construed and governed in accordance with the laws of the State of Texas. -11- EX-10.17 6 1992 PERFORMANCE SHARE UNIT PLAN - 10/09/96 1 EXHIBIT 10.17 BURLINGTON RESOURCES INC. 1992 PERFORMANCE SHARE UNIT PLAN As Amended and Restated Effective October 9, 1996 (Originally Effective May 13, 1992) 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 ESTABLISHMENT AND PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 3 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 4 PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE 5 PERFORMANCE SHARE UNITS AVAILABLE FOR THE PLAN . . . . . . . . . . . . . . . . . 6 ARTICLE 6 GRANT OF PERFORMANCE SHARE UNITS AND PERFORMANCE OBJECTIVES . . . . . . . . . . 6 ARTICLE 7 PAYMENT OF VESTED PERFORMANCE SHARE UNITS . . . . . . . . . . . . . . . . . . . 8 ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
i 3 BURLINGTON RESOURCES INC. 1992 PERFORMANCE SHARE UNIT PLAN ARTICLE 1. ESTABLISHMENT AND PURPOSE 1.1 Establishment. Burlington Resources Inc. (the "Company") hereby amends and restates the Burlington Resources Inc. 1992 Performance Share Unit Plan effective as of October 9, 1996. 1.2 Purpose. The purpose of this Plan is to provide additional incentives for the senior executives of the Company and its Subsidiaries to increase the earnings of the Company, to attract and retain senior executives whose skills are of critical importance to the Company, and to further the identity of interests of the Participants and the Company's shareholders through the reinforcement of long-term corporate strategic goals. ARTICLE 2. DEFINITIONS 2.1 Definitions. When used in this Plan, the following terms shall have the respective meanings set forth below unless the context clearly indicates otherwise: (a) Beneficiary. The person or persons to whom payments are to be paid pursuant to the terms of the Plan in the event of the Participant's death. (b) Board. The Board of Directors of the Company. (c) Cause. The Company may terminate the Participant's employment for "Cause." A termination for cause is a termination evidenced by a resolution adopted in good faith by two-thirds (2/3) of the Board that the Participant (i) willfully and continually failed to substantially perform his duties with the Company (other than a failure resulting from the Participant's incapacity due to physical or mental illness) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Participant specifying the manner in which the Participant had failed to substantially perform, or (ii) willfully engaged in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; provided, however, that no termination of the Participant's employment shall be for Cause as set forth in clause (ii) above until (x) there shall have been delivered to the Participant a copy of a written notice setting forth that the Participant was guilty of the conduct set forth in clause (ii) and specifying the particulars thereof in detail, and (y) the Participant shall have been provided an opportunity to be heard by the Board (with 1 4 the assistance of the Participant's counsel if the Participant so desires). No act, nor failure to act, on the Participant's part shall be considered "willful" unless he has acted, or failed to act, with an absence of good faith and without a reasonable belief that his action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Plan to the contrary, no failure to perform by the Participant after Notice of Termination is given by the Participant shall constitute Cause. (d) Change in Control. As used in this Plan, a Change in Control shall be deemed to occur (i) upon the Company's obtaining actual knowledge that any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities, (ii) upon the first purchase of the Company's Common Stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by the Company), (iii) upon the approval by the Company's stockholders of a merger or consolidation, a sale or disposition of all or substantially all of the Company's assets or a plan of liquidation or dissolution of the Company, or (iv) if during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election or nomination for the election by the Company'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. (e) Common Stock. The common stock of the Company, par value $.01 per share, or such other classes of share or other securities as may be applicable pursuant to the provisions of Section 5.2. (f) Company. Burlington Resources Inc. (g) Compensation Committee. The committee of the Board appointed and/or authorized by the Board to administer the Plan. (h) Exchange Act. The Securities Exchange Act of 1934, as amended. 2 5 (i) Good Reason. "Good Reason" shall mean the occurrence of any of the following events or conditions: (i) a change in the Participant's status, title, position or responsibilities (including reporting responsibilities) which, in the Participant's reasonable judgment, represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities which, in the Participant's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect him to any of such positions, except in connection with the termination of his employment for Cause, disability, as a result of his death, or by the Participant other than for Good Reason; (ii) a reduction in the Participant's annual base salary; (iii) the Company's requiring the Participant (without the consent of the Participant) to be based at any place outside a thirty-five (35) mile radius of his place of employment prior to a Change in Control, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect any material compensation or benefit plan in which the Participant was participating at the time of the Change in Control, including, but not limited to, the Company's Stock Option Plan, the Performance Share Unit Plan, the Burlington Resources Inc. Retirement Plan, the Supplemental Benefits Plans, the Incentive Compensation Plan, the Deferred Compensation Plan, and the Thrift and Profit Sharing Plan or (B) provide the Participant with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program and practice as in effect immediately prior to the Change in Control (or as in effect following the Change in Control, if greater); (v) any material breach by the Company of any provision of this Plan; or (vi) any purported termination of the Participant's employment for Cause by the Company which does not otherwise comply with the terms of this Plan. (j) Fair Market Value. As determined with respect to a Performance Share Unit, Fair Market Value shall mean the average of the closing prices of the Common Stock during the twenty (20) business days immediately preceding the Valuation Date, as 3 6 reported in the NYSE Composite Transactions by Barron's or The Wall Street Journal for such days. Notwithstanding the foregoing, Fair Market Value on the date of a Change in Control shall be equal to the greater of (i) the highest price per share of the Company's Common Stock as reported in the NYSE-Composite Transactions by The Wall Street Journal during the 60-day period ending on the date of the Change in Control, or (ii) if the Change in Control is one described in clause (ii) or (iii) of Section 2.1(c), the highest price per share paid for the Company's Common Stock in connection with such Change in control. (k) Management Committee. The committee designated pursuant to the provisions of Article 3. (l) Performance Cycle. That period commencing with January 1 of each year in which the grant of a Performance Share Unit is made and ending on December 31 of the third succeeding year or such other period as the Plan Administrator shall designate. While a new Performance Cycle will normally be initiated only every four (4) years, under unusual circumstances the Board or the Compensation Committee, in its discretion, may initiate an overlapping Performance Cycle that begins before an existing Performance Cycle has ended. (m) Performance Share Unit or Unit. The unit of award having an accounting value equal to the Fair Market Value of one share of Common Stock. (n) Permanent Disability. A Participant shall be deemed to have become permanently disabled for purposes of this Plan if the Management Committee finds, upon the basis of medical evidence satisfactory to it, that the Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in further employment by the Company or any of its Subsidiaries and that such disability will be permanent and continuous during the remainder of his life. (o) Plan Administrator. The Board or the Compensation Committee authorized pursuant to Section 3 to administer the Plan. (p) Subsidiary. A corporation or other form of business association designated by the Compensation Committee and controlled, directly or indirectly, by the Company. (q) Valuation Date. The date at the end of the Performance Cycle (or at such other time an the Plan may require or the Compensation Committee may select) that is designated by the Compensation Committee for the purpose of determining the Fair Market Value of vested Units that will be paid to the Participant or Beneficiary or credited to the Participant's Memorandum Account in accordance with Article 7. 4 7 ARTICLE 3. ADMINISTRATION Committees. The Plan shall be administered by the Plan Administrator and the Management Committee with each having the responsibilities and duties specifically assigned to it herein. The Management Committee shall consist of the Chief Executive Officer or the Company and such other senior officers as he shall designate. Subject to such review and approval or modification as the Plan Administrator deems appropriate, the Management Committee shall perform all administrative functions not expressly denied to it or reserved for the Plan Administrator under the terms of the Plan. No member of the Management Committee shall vote on any matter that pertains solely to himself or herself. With respect to grants made under the Plan to officers and directors of the Company who are subject to Section 16 of the Exchange Act, the Plan Administrator shall be constituted at all times solely of non-employee directors, as defined in the rules promulgated under Section 16(b) of the Exchange Act so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act. The Plan Administrator shall have the ultimate responsibility for granting awards, determining the vesting and value of Units, reviewing the actions of the Management Committee as it deems appropriate, and performing such other functions as are specifically assigned to it under the terms of the Plan. Nothing herein shall prevent the Plan Administrator from obtaining and approving recommendations of the Management Committee regarding matters reserved to the Plan Administrator. Notwithstanding anything herein to the contrary, the Plan Administrator shall have the full authority and power with respect to the Plan's administration and operation with respect to all matters relating to compliance with Section 16(b). ARTICLE 4. PARTICIPANTS Participants. The Plan Administrator shall select the executives of the Company and its Subsidiaries who are eligible to receive Units under the Plan (the "Participants"). Participants, in general, will be limited to the Chief Executive Officer, Executive Vice Presidents, Senior Vice Presidents and other senior executives of the Company, and the chief executive officers and other senior executives of the Subsidiaries, who because of the management or staff positions have the principal responsibility for the management direction and success of the Company as a whole or of a particular business unit thereof. Directors of the Company who are full-time executives of the Company or a subsidiary shall be eligible to participate in the Plan. Participants may be selected at the beginning of, or during, a Performance Cycle at the discretion of the Plan Administrator. 5 8 ARTICLE 5. PERFORMANCE SHARE UNITS AVAILABLE FOR THE PLAN 5.1 Performance Share Units. Subject to Section 5.2, the number of Performance Share Units which may be granted under the Plan is initially set at 1,000,000. If additional Units are needed under the Plan, after such initial number has been fully utilized and prior to the expiration of the Plan, the Plan Administrator shall authorize such additional units as it shall determine to be appropriate for awards under the Plan. Units that have been granted and are fully vested or that still may become fully vested under the terms of the Plan shall reduce the number of outstanding Units that are available for use in making future grants under the Plan. Upon expiration or termination, in whole or in part, of nonvested Units at the and of a Performance Cycle or otherwise, such expired or terminated Units shall again be available for awards under the Plan. 5.2 Recapitalization. In the event of recapitalization, stock split, stock dividend, exchanges of shares, merger, reorganization, change in the corporate structure of the Company or similar event, the Plan Administrator may make appropriate adjustments in the number of Units authorized for the Plan and, with respect to outstanding Units, the Plan Administrator may make appropriate adjustments in the number of Units. ARTICLE 6. GRANT OF PERFORMANCE SHARE UNITS AND PERFORMANCE OBJECTIVES 6.1 Grants of Units. Units may be granted to the Participants in such number and at such times during the Performance Cycle as the Plan Administrator shall determine, taking into account the duties of the respective executives, their present and potential contributions to the success of the Company or its Subsidiaries, their compensation provided by other incentive plans, their salaries, and such other factors as the Plan Administrator shall dean appropriate. Normally, however, Units will be granted only at the beginning of each Performance Cycle except in cases where a prorated. grant may be made in mid-cycle to a newly eligible Participant or a Participant whose job responsibilities have significantly changed during the cycle. 6.2 Performance Objectives. The Plan Administrator shall have the sole authority for deciding what measures of corporate performance ("Performance Targets") are appropriate for (i) judging the success of the Company and its Subsidiaries in meeting their' strategic objectives during the Performance Cycle and (ii) measuring the contribution of Participants toward such success. At the request of the Plan Administrator, the Company's Chief Executive officer shall submit his recommendations to the Plan Administrator regarding applicable Performance Targets to be adopted for the units to be awarded for each Performance Cycle, but such recommendations shall not be binding. 6 9 6.3 Vesting Schedule. (a) Vesting. The Plan Administrator shall adopt a vesting schedule which will permit from 0% to 15% of the Units granted at the beginning of the Performance Cycle to vest at the end of each of the first three years of the Performance Cycle and from 0% to 55% of the Units granted at the beginning or the Performance Cycle to vest at the and of the fourth year of the Performance Cycle. Vesting for each year will depend upon vesting guidelines established by the Plan Administrator which reflect the Company's performance in relation to the Performance Targets for the appropriate period of the Performance Cycle, provided that the Plan Administrator may, in its discretion, alter the vesting guidelines in the event of unusual circumstances. The Plan Administrator may, in its discretion, carry over to the end of the fourth year of a Performance Cycle any Units that did not vest during the first three years of the Performance Cycle because of the Company's performance in relation to the Performance Targets. Vesting with respect to Participants who begin participation or receive an additional grant of Units during the Performance Cycle will be determined by the Plan Administrator at the time of grant. (b) Determination of Performance. The annual performance rating resulting in vesting under Section 6.3(a) shall be determined by the Plan Administrator based on criteria selected by it such as relationships between actual and targeted results for Performance Targets, comparisons of relative performance by the Company and other companies chosen by the Plan Administrator, and such additional or alternative factors an the Plan Administrator may dean appropriate. (c) Other Vesting Considerations. Becoming vested in a Unit means acquiring a nonforfeitable right to receive payment for that Unit. The time and manner of such payment shall be determined under the provisions of the Plan other than this Section 6.3. Participants (or their Beneficiaries in the case or their deaths) who have retired, died, become Permanently Disabled, or who have terminated their employment, prior to the end or a Performance Cycle shall not be entitled to receive payment from the Company or its subsidiaries for any Units which were not vested as of the time they ceased active employment with the Company or its Subsidiaries. (d) Change in Control. Notwithstanding the foregoing vesting provisions, one-fourth (1/4) of all Units originally granted in the Performance Cycle shall become fully vested in the event of a Change in Control. In the event of termination of the Participant's employment within two (2) years following a Change in Control but subsequent to the year in which the Change in Control occurs, for any reason other than a) the Participant's death, b) Permanent Disability, c) Cause, or d) by the Participant without Good Reason, one-fourth (1/4) of all Units originally granted in the Performance Cycle shall become fully vested. With respect to Units granted during the-second, third or fourth years of a Performance Cycle, the Preceding provisions of this Section 6.3(d) shall be applied by substituting "one-fourth (1/4)" with "one-third (1/3)," "one-half (1/2)" 7 10 or "the entire amount," respectively. 6.4 Adjustment by Plan Administrator. The Plan Administrator may, at its discretion, change from time to time the Performance Targets and vesting schedules with respect to nonvested Units to (a) include or exclude extraordinary or nonrecurring items, (b) reflect changes in prevailing competitive or general economic conditions, (c) adjust for changes in income tax laws and regulations or accounting rules, (d) reflect changes in the Company's financial or corporate structure, as a result of a recapitalization merger, reorganization, acquisition or divestiture, and (e) to reflect other appropriate major events. 6.5 Notice to Participants. The Management Committee shall notify each Participant in writing of the grant of Units to him and the Performance Targets and vesting criteria applicable to such Units. ARTICLE 7. PAYMENT OF VESTED PERFORMANCE SHARE UNITS 7.1 Entitlement to Payment. Each Unit which has vested shall entitle the Participant or his Beneficiary to receive from the Participant's employer a lump-sum payment in cash as soon as practicable following the applicable Valuation Date. The amount of such payment shall be determined by multiplying the number of vested Units by the Fair Market Value of a share of Common Stock on the Valuation Date. For this purpose, the number of vested Units shall be the sum of the Units in which the Participant became vested during the Performance Cycle, pursuant to Section 6.3, determined (i) as of the end of the Performance Cycle in the case of a Participant who is still then an employee of the Company or a Subsidiary, or (ii) as of the end of the year prior to the Participant's death, Permanent Disability, retirement or other termination of employment (whichever is applicable) in the case of a Participant who is no longer an employee of the Company or a Subsidiary at the end of the Performance Cycle. Moreover, the Valuation Date shall correspond to the end of the Performance Cycle, except that it shall be the date of the Participant's death or Permanent Visibility if such event has occurred. Notwithstanding the foregoing, however, a Participant may receive a deferral payment in lieu of all or a portion of a lump-sun payment pursuant to an election described below in this Article 7. 7.2 Deferred Payment. Prior to the time that Units first vest pursuant to Section 6.3, the Participant may, subject to the consent of the Plan Administrator and in accordance with procedures that the Plan Administrator has approved, elect to have all or a portion (subject to a $1,000 minimum) of the lump sum payment described in Section 7.1 with respect to such vested Units deferred until his retirement, death, Permanent Disability, resignation, or other termination of employment with the Company and its subsidiaries or until any other specified time that is acceptable to the Plan Administrator. Such deferred amount shall be paid in accordance with the remainder of this Article 7 rather than as provided in Section 7.1, whereas amounts payable with respect to other Units that vest at a different time in the Performance Cycle and are not subject to a deferred payment election shall continue to be paid as a lump sum in accordance with Section 8 11 7.1. The election shall be irrevocable and shall be made on a form approved by the Plan Administrator. 7.3 Memorandum Account. The Company shall establish a ledger account (the "Memorandum Account") for each Participant who has elected to defer a payment pursuant to Section 7.2. Except as provided in Section 7.4, interest shall accrue on the deferred payment to the date of distribution, and shall be credited to the Memorandum Account (the "Interest Account") at the end or each calendar quarter or such other periods an may be determined by the Management Committee. The Management Committee shall determine the rate of interest periodically. 7.4 Investment of Accounts. In lieu of investing in the Interest Account, a Participant may request that the Management Committee (or, with respect to a Participant who is subject to Section 16(b) of the Exchange Act (an "Insider"), the Plan Administrator) credit all or a specified percentage of his or her deferred payment in Phantom Stock (the "Company Stock Account"), in the S&P Account, or in any combination of the Interest Account, Company Stock Account and/or S&P Account as elected by the Participant; however, the Management Committee (or, with respect to a Participant who is an Insider, the Plan Administrator) shall not be obligated to honor any such Participant's request. If the Management Committee (or the Plan Administrator, as the case may be) elects to honor any such request, it shall establish a separate notional subaccount(s) for such Participant under his or her Account, which shall be credited (i) with respect to the Phantom Stock Account, whole and fractional shares of Phantom Stock as of the date of the Incentive Award for such year, 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 periodically as of the dates of the deferrals and with any notional distributions on such units, which 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 Company's common stock on the applicable date, unless otherwise authorized by the Management Committee (or the Plan Administrator, as the case may be). If the Management Committee (or the Plan Administrator, 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 the S&P Account, the Participant's deferral 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 balance as of any date be reinvested in the Interest Account, Company Stock Account and/or S&P Account in such proportions as elected by the Participant; provided, however, the Management Committee (or Plan Administrator, as the case may be), shall not be obligated to honor any such request. This election shall be in such form as the Management Committee (or the Plan Administrator, as the case may be) shall establish and shall comply with all requirements of Section 16(b), to the extent applicable. 9 12 7.5 Payment of Deferred Compensation. Upon retirement, death, permanent disability, resignation or termination of employment of a participant who has elected to defer the payment in respect of any Units, the employer shall pay in cash to the Participant (or his beneficiary in the case of his death) an amount equal to the balance of his Memorandum Account, together with an investment adjustment (determined under Section 7.3) on the outstanding account balance to the date of distribution and subject to approval of the Management Committee or the Plan Administrator, as the case may be, (except that following the occurrence of a Change in Control, no such consent shall be required), as follows: (a) a lump-sum payment; (b) in 60 consecutive equal monthly installments; or (c) in 120 consecutive equal monthly installments, whichever form of payment has been elected by the Participant. However, if a Participant elects to receive the distribution of a Company Stock Account or S&P Account in installments, his or her Company Stock Account or S&P Account automatically shall be converted into an Interest Account as of the Participant's date of termination. Payment of accounts shall commence or be made in the month following the month in which the Participant's termination occurs. Payment of deferred Units shall commence or be made in the month following the Participant's retirement, death, Permanent Disability, resignation or termination of employment or any other specified time that is elected and acceptable to the Management Committee or the Plan Administrator, as the case may be. 7.6 Acceleration of Payments of Deferred Compensation. The Plan Administrator, in its discretion, may accelerate the payment of the unpaid balance of a Participant's Memorandum Account in the event or the Participant's retirement, death, Permanent Disability, resignation or termination of employment, or upon its determination that the Participant (or his Beneficiary in the case of his death) has incurred a severe financial hardship. The Plan Administrator, in making its determination, may consider such factors and require such information as it deems appropriate. 7.7 Acceleration of Payment Due to Change in Control. Upon a Change in control, the current Performance Cycle shall immediately end, and all vested Units (including Units that vest pursuant to Section 6.3(d)) shall be valued at their then Fair Market Value. Each Participant's employer (or the Company in the event that another employer does not promptly make payment) shall pay the Participant the Fair Market Value of his vested Units and also or alternatively, as the case may be, the remaining unpaid balance of his Memorandum Account. This Payment shall be made in a lump sum in lieu of any otherwise applicable form and time of payment under 10 13 the Plan and that is made within ten (10) days after the Change in Control; provided, however, that any Participant may elect prior to the occurrence of a Change in Control to have the payment in respect to all or a portion of his Units deferred until his or her retirement, death, Permanent Disability, resignation or termination of employment. A deferral election shall be revocable until the date of such a Change in Control and after the date of the Change in Control such election shall be irrevocable. A deferred election shall be made on a form prescribed by the Management Committee. All deferred payments in respect to Units shall be paid pursuant to the payment options set forth in Section 7.5. ARTICLE 8. GENERAL PROVISIONS 8.1 Unfunded Obligation. The deferred amounts to be paid to Participants as installment payments pursuant to this Plan are unfunded obligations. Neither the Company nor any Subsidiary is required to segregate any monies from its general funds, to create any trusts, or to make any special deposits with respect to this obligation. Title to and beneficial ownership of any investments including trust investments which the Company may make to fulfill this obligation shall at all times remain in the Company. Any investments and the creation or maintenance of any trust or Memorandum Accounts shall not create or constitute a trust or a fiduciary relationship between the Compensation Committee, Management Committee, the Company, or any Subsidiary and a Participant, or otherwise create any vested or beneficial interest in any Participant or his Beneficiary or his creditors in any assets of the Company or its Subsidiaries whatsoever. The Participants shall have no claim against the Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to this Plan. 8.2 Other Benefits. Grants, vesting, or payment of Performance Share Units shall not be considered as part of a Participant's salary or used for the calculation of any other pay, allowance, pension or other benefit unless otherwise permitted by other benefit plans provided by the Company or its subsidiaries, or required by law or by contractual obligations of the Company or its subsidiaries. 8.3 Beneficiary. The term "Beneficiary" shall mean the person or persons to whom payments are to be paid pursuant to the terms of the Plan in the event of the Participant's death. The designation shall be on a form provided by the Management Committee executed by the Participant (with the consent of the Participant's spouse, if required by the Management Committee for reasons of community property or otherwise), and delivered to the Management Committee. A Participant may change his or her Beneficiary designation at any time. If no Beneficiary is designated, if the designation is ineffective, or in the event the Beneficiary dies before the balance of the Memorandum Account is paid, the balance shall be paid to the Participant's spouse or if there is no surviving spouse, to his or her lineal descendants, pro rata, or if there in no surviving spouse or lineal descendants, to the Participant's estate. Notwithstanding the foregoing, however, a Participant's Beneficiary shall be determined under applicable state law if such state law does not recognize Beneficiary designations under plans of 11 14 this sort and is not preempted by laws which recognize the provisions of this Section 8.3. 8.4 Withholding Taxes. Appropriate tax withholding shall be made from payments to Participants pursuant to this Plan, or from other wages of Participants, as required under applicable law. 8.5 Nonassignment. The right of a Participant or Beneficiary to the payment of any compensation under the Plan may not be assigned, transferred, pledged or encumbered nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process. 8.6 No Right to Continued Employment or Future Grants. Nothing in the Plan shall be construed to confer upon any Participant any right to continued employment with the Company or a subsidiary, nor interfere in any way with the right of the Company or a subsidiary to terminate the employment of such Participant at any time without assigning any reasons therefor. The grant of a Unit to a Participant shall not give the Participant any right to subsequent grants of Units under the Plan. 8.7 Leaves of Absence. Leaves of absence for such periods and purpose conforming to the personnel policy of the Company, or of its Subsidiaries as applicable, shall not be deemed termination of employment. 8.8 Transfers. In the event a participant is transferred from the Company to a Subsidiary, or vice versa, or is promoted or given different responsibilities, the Units granted to him prior to such date shall not be affected. 8.9 Shareholder Rights. The grant of a Unit shall not entitle a Participant or Beneficiary to any dividend, voting or other rights as a shareholder of the Company. 8.10 Termination and Amendment. The Board or the Compensation Committee may from time to time amend, suspend or terminate the Plan in whole or in part; provided, however, no such action shall be allowed to impair the right of a Participant to receive payment with respect to Units that have vested as or such date without the consent or such Participant. The Management Committee may amend the Plan, without Board or Compensation Committee approval, to ensure that the Company may obtain any regulatory approval or to accomplish any other reasonable purpose, provided that the amendments do not materially increase the cost of the Plan to the Company and its Subsidiaries, and do not substantially alter the level or benefits under the Plan or expand the classification or employees eligible to participate in the Plan. If the Plan is suspended or terminated, the Plan Administrator may reinstate any or all of its provisions. If not sooner terminated, this Plan shall terminate on December 31, 1996. 8.11 Applicable Law. The Plan shall be construed and governed in accordance with the laws of the State of Texas, except that it shall be construed and governed in accordance with 12 15 applicable federal law in the event that such federal law preempts state law. 8.12 Compliance with Securities Laws. It is the intention of the Company that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall be operated in compliance with Section 16(b) of the Exchange Act and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction, as the case may be, shall be deemed null and void ab initio. Notwithstanding anything in the Plan to the contrary, the Board, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition the use or any provision of the Plan to Participants who are officers and directors subject to Section 16(b) of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. 8.13 Effective Date of Plan Amendment. Upon approval by the Company's Board or Directors, this amended and restated Plan shall become effective on October 9, 1996. 13 EX-10.21 7 1997 PERFORMANCE SHARE UNIT PLAN - DECEMBER 1996 1 EXHIBIT 10.21 BURLINGTON RESOURCES INC. 1997 PERFORMANCE SHARE UNIT PLAN Effective December 11, 1996 2 TABLE OF CONTENTS
Page ARTICLE 1 ESTABLISHMENT AND PURPOSE 1 ARTICLE 2 DEFINITIONS 1 ARTICLE 3 ADMINISTRATION 5 ARTICLE 4 PARTICIPANTS 5 ARTICLE 5 PERFORMANCE SHARE UNITS AVAILABLE FOR THE PLAN 6 ARTICLE 6 GRANT OF PERFORMANCE SHARE UNITS AND PERFORMANCE OBJECTIVES 6 ARTICLE 7 PAYMENT OF VESTED PERFORMANCE SHARE UNITS 8 ARTICLE 8 GENERAL PROVISIONS 11
3 BURLINGTON RESOURCES INC. 1997 PERFORMANCE SHARE UNIT PLAN ARTICLE 1. ESTABLISHMENT AND PURPOSE 1.1 Establishment. Burlington Resources Inc. (the "Company") hereby establishes the Burlington Resources Inc. 1997 Performance Share Unit Plan effective as of December 11, 1996. 1.2 Purpose. The purpose of this Plan is to provide additional incentives for the senior executives of the Company and its Subsidiaries to increase the earnings of the Company, to attract and retain senior executives whose skills are of critical importance to the Company, and to further the identity of interests of the Participants and the Company's stockholders through the reinforcement of long-term corporate strategic goals. ARTICLE 2. DEFINITIONS 2.1 Definitions. When used in this Plan, the following terms shall have the respective meanings set forth below unless the context clearly indicates otherwise: (a) Beneficiary. The person or persons to whom payments are to be paid pursuant to the terms of the Plan in the event of the Participant's death. (b) Board. The Board of Directors of the Company. (c) Cause. The Company may terminate the Participant's employment for "Cause." A termination for cause is a termination evidenced by a resolution adopted in good faith by two-thirds of the Board that the Participant (i) willfully and continually failed to substantially perform his duties with the Company (other than a failure resulting from the Participant's incapacity due to physical or mental illness) which failure continued for a period of at least thirty (30) days after a written notice of demand for substantial performance has been delivered to the Participant specifying the manner in which the Participant had failed to substantially perform, or (ii) willfully engaged in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; provided, however, that no termination of the Participant's employment shall be for Cause as set forth in clause (ii) above until (x) there shall have been delivered to the Participant a copy of a written notice -1- 4 setting forth that the Participant was guilty of the conduct set forth in clause (ii) and specifying the particulars thereof in detail, and (y) the Participant shall have been provided an opportunity to be heard by the Board (with the assistance of the Participant's counsel if the Participant so desires). No act, nor failure to act, on the Participant's part shall be considered "willful" unless he has acted, or failed to act, with an absence of good faith and without a reasonable belief that his action or failure to act was in the best interest of the Company. Notwithstanding anything contained in this Plan to the contrary, no failure to perform by the Participant after written notice of termination is given by the Participant shall constitute Cause. (d) Change in Control. As used in this Plan, a Change in Control shall be deemed to occur: (i) upon the Company's obtaining actual knowledge that any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (ii) upon the first purchase of the Company's Common Stock pursuant to a tender or exchange offer (other than a tender or exchange offer made by the Company); (iii) upon the approval by the Company's stockholders of a merger or consolidation, a sale or disposition of all or substantially all of the Company's assets or a plan of liquidation or dissolution of the Company; or (iv) if during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof, unless the election or nomination for the election by the Company'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. (e) Common Stock. The common stock of the Company, par value $.01 per share, or such other classes of share or other securities as may be applicable pursuant to the provisions of Section 5.2. (f) Company. Burlington Resources Inc. (g) Compensation Committee. The committee of the Board appointed and/or authorized by the Board to administer the Plan. -2- 5 (h) Exchange Act. The Securities Exchange Act of 1934, as amended. (i) Fair Market Value. As determined with respect to a Performance Share Unit or share of Phantom Stock, Fair Market Value shall mean the average of the closing prices of the Common Stock during the twenty (20) business days immediately preceding and including the Valuation Date, as reported in the NYSE-Composite Transactions by Barron's or The Wall Street Journal for such days; provided, however, with respect to the payment of a Company Stock Account or for purposes of effecting investment transactions with respect to the Company Stock Account pursuant to Section 7.4 (other than the initial crediting of deferred Units to the Company Stock Account following the end of a Performance Cycle), Fair Market Value shall mean the mean between the highest and lowest quoted selling prices at which Common Stock was sold on such Valuation Date as reported in the NYSE-Composite Transactions by Barron's or The Wall Street Journal on the applicable Valuation Date or, if no Common Stock was traded on such date, on the next preceding day on which Common Stock was so traded. Notwithstanding the foregoing, Fair Market Value on the date of a Change in Control shall be equal to the greater of (i) the highest price per share of the Company's Common Stock as reported in the NYSE-Composite Transactions by The Wall Street Journal during the 60-day period ending on the date of the Change in Control, or (ii) if the Change in Control is one described in clause (ii) or (iii) of Section 2.1(d), the highest price per share paid for the Company's Common Stock in connection with such Change in Control. (j) Good Reason. "Good Reason" shall mean the occurrence of any of the following events or conditions: (i) a change in the Participant's status, title, position or responsibilities (including reporting responsibilities) which, in the Participant's reasonable judgment, represents a substantial reduction of the status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Participant of any duties or responsibilities which, in the Participant's reasonable judgment, are inconsistent with such status, title, position or responsibilities; or any removal of the Participant from or failure to reappoint or reelect him to any of such positions, except in connection with the termination of his employment for Cause, Permanent Disability, as a result of his death, or by the Participant other than for Good Reason; (ii) a reduction in the Participant's annual base salary; -3- 6 (iii) the Company's requiring the Participant (without the consent of the Participant) to be based at any place outside a thirty-five (35) mile radius of his place of employment prior to a Change in Control, except for reasonably required travel on the Company's business which is not materially greater than such travel requirements prior to the Change in Control; (iv) the failure by the Company to (A) continue in effect any material compensation or benefit plan in which the Participant was participating at the time of the Change in Control, including, but not limited to, the Company's Stock Incentive Plan, the Performance Share Unit Plan, the Burlington Resources Inc. Retirement Savings Plan, the Supplemental Benefits Plans, the Incentive Compensation Plan, and the Deferred Compensation Plan or (B) provide the Participant with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program and practice as in effect immediately prior to the Change in Control (or as in effect following the Change in Control, if greater); (v) any material breach by the Company of any provision of this Plan; or (vi) any purported termination of the Participant's employment for Cause by the Company which does not otherwise comply with the terms of this Plan. (k) Management Committee. The committee designated pursuant to the provisions of Article 3. (l) Performance Cycle. That period commencing with January 1 of each year in which the grant of a Performance Share Unit is made and ending on December 31 of the third succeeding year or such other period as the Plan Administrator shall designate. The Plan Administrator, in its discretion, may initiate one or more overlapping Performance Cycles that begin before an existing Performance Cycle has ended. (m) Performance Share Unit or Unit. The unit of award having an accounting value equal to the Fair Market Value of one share of Common Stock. (n) Permanent Disability. A Participant shall be deemed to have become permanently disabled for purposes of this Plan if the Management Committee finds, upon the basis of medical evidence satisfactory to it, that the Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in further employment by the Company or any of its Subsidiaries in a position for which the Participant is reasonably qualified by reason of his education or experience and that such disability will be permanent and continuous during the remainder of his life. (o) Plan Administrator. The Board or the Compensation Committee authorized pursuant to Section 3 to administer the Plan. -4- 7 (p) Subsidiary. A corporation or other form of business association designated by the Compensation Committee and controlled, directly or indirectly, by the Company. (q) Valuation Date. The date at the end of the Performance Cycle (or at such other time as the Plan may require or the Plan Administrator may select) that is designated by the Plan Administrator for the purpose of determining the Fair Market Value of vested Units that will be paid to the Participant or Beneficiary and/or credited to the Participant's Memorandum Account in accordance with Article 7; provided, however, with respect to (1) payment of a Participant's Company Stock Account, the Valuation Date shall be the date of the Participant's termination of employment, (2) directed investment changes in a Company Stock Account, the Valuation Date shall be the date such Participant's investment direction is received by the Company, (3) phantom dividends credited to the Company Stock Account, the Valuation Date shall be the dividend payment date, and (4) a Change in Control, the Valuation Date shall be the date of the Change in Control. ARTICLE 3. ADMINISTRATION 3.1 Committees. The Plan shall be administered by the Plan Administrator and the Management Committee with each having the responsibilities and duties specifically assigned to it herein. The Management Committee shall consist of the Chief Executive Officer of the Company and/or such other senior officers as he or she shall designate. Subject to such review and approval or modification as the Plan Administrator deems appropriate, the Management Committee shall perform all administrative functions not expressly denied to it or reserved for the Plan Administrator under the terms of the Plan. No member of the Management Committee shall vote on any matter that pertains solely to himself or herself. With respect to grants made under the Plan to officers and directors of the Company who are subject to Section 16 of the Exchange Act, the Plan Administrator shall be constituted at all times solely of non-employee directors, as defined in the rules promulgated under Section 16(b) of the Exchange Act, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act. The Plan Administrator shall have the ultimate responsibility for granting awards, determining the vesting and value of Units, reviewing the actions of the Management Committee as it deems appropriate, and performing such other functions as are specifically assigned to it under the terms of the Plan. Nothing herein shall prevent the Plan -5- 8 Administrator from obtaining and approving recommendations of the Management Committee regarding matters reserved to the Plan Administrator. Notwithstanding anything herein to the contrary, the Plan Administrator shall have the full authority and power with respect to the Plan's administration and operation with respect to all matters relating to compliance with Section 16(b). ARTICLE 4. PARTICIPANTS 4.1 Participants. The Plan Administrator shall select the senior executives of the Company and its Subsidiaries who are eligible to receive Units under the Plan (the "Participants"). Participants, in general, will be limited to the Chairman of the Board, President, Chief Executive Officer, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, and other senior executives of the Company, and the chief executive officers and other senior executives of the Subsidiaries who have the principal responsibility for the management, direction and success of the Company as a whole or of a particular business unit thereof. Directors of the Company who are full-time executives of the Company or a Subsidiary shall be eligible to participate in the Plan. Participants may be selected at the beginning of, or during, a Performance Cycle at the discretion of the Plan Administrator. ARTICLE 5. PERFORMANCE SHARE UNITS AVAILABLE FOR THE PLAN 5.1 Performance Share Units. Subject to Section 5.2, the number of Performance Share Units which may be granted under the Plan is initially set at 1,000,000. If additional Units are needed under the Plan, after such initial number has been fully utilized, the Board shall authorize such additional Units as it shall determine to be appropriate for awards under the Plan. Units that have been granted and are fully vested or that still may become fully vested under the terms of the Plan shall reduce the number of outstanding Units that are available for use in making future grants under the Plan. Upon expiration or termination, in whole or in part, of nonvested Units at the end of a Performance Cycle or otherwise, such expired or terminated Units shall again be available for awards under the Plan. 5.2 Recapitalization. In the event of recapitalization, stock split, stock dividend, exchanges of shares, merger, reorganization, change in the corporate structure of the Company or similar event, the Plan Administrator may make appropriate adjustments in the number of Units authorized for the Plan and, with respect to outstanding Units, the Plan Administrator may make appropriate adjustments in the number of Units. -6- 9 ARTICLE 6. GRANT OF PERFORMANCE SHARE UNITS AND PERFORMANCE OBJECTIVES 6.1 Grants of Units. Units may be granted to the Participants in such number and at such times during the Performance Cycle as the Plan Administrator shall determine, taking into account the duties of the respective executives, their present and potential contributions to the success of the Company or its Subsidiaries, their compensation provided by other incentive plans, their salaries, and such other factors as the Plan Administrator shall deem appropriate. Normally, however, Units will be granted only at the beginning of each Performance Cycle except in cases where a prorated grant may be made in mid-cycle to a newly eligible Participant or a Participant whose job responsibilities have significantly changed during the cycle. 6.2 Performance Objectives. The Plan Administrator shall have the sole authority for deciding what measures of corporate performance ("Performance Targets") are appropriate for (i) judging the success of the Company and its Subsidiaries in meeting their strategic objectives during the Performance Cycle and (ii) measuring the contribution of Participants toward such success. At the request of the Plan Administrator, the Company's Chief Executive Officer shall submit recommendations to the Plan Administrator regarding applicable Performance Targets to be adopted for the Units to be awarded for each Performance Cycle, but such recommendations shall not be binding. 6.3 Vesting Schedule. (a) Vesting. With respect to each Performance Cycle, the Plan Administrator shall adopt a vesting schedule which will permit a designated percentage of the Units granted at the beginning of that Performance Cycle to vest at the end of each of the years in the Performance Cycle. Vesting for each year in a Performance Cycle will depend upon vesting guidelines established by the Plan Administrator which reflect the Company's performance in relation to the Performance Targets for the appropriate period of the Performance Cycle, provided that the Plan Administrator may, in its discretion, alter the vesting guidelines in the event of unusual circumstances. The Plan Administrator may, in its discretion, carry over to the end of the Performance Cycle any Units that did not vest during the prior years of the Performance Cycle because of the Company's performance in relation to the Performance Targets. The vesting schedule with respect to Participants who begin participation or receive an additional grant of Units during the Performance Cycle will be determined by the Plan Administrator at the time of grant. -7- 10 (b) Determination of Performance. The annual performance rating resulting in vesting under Section 6.3(a) shall be determined by the Plan Administrator based on criteria selected by it such as relationships between actual and targeted results for Performance Targets, comparisons of relative performance by the Company and other companies chosen by the Plan Administrator, and such additional or alternative factors as the Plan Administrator may deem appropriate. (c) Other Vesting Considerations. Becoming vested in a Unit means acquiring a nonforfeitable right to receive payment for that Unit. The time and manner of such payment shall be determined under the provisions of the Plan other than this Section 6.3. A Participant (or his or her Beneficiaries in the case of his or her death) who has retired, died, become Permanently Disabled, or who has terminated his or her employment prior to the end or a Performance Cycle, shall not be entitled to receive payment from the Company or its Subsidiaries for any Units which were not vested as of the time the Participant ceased active employment with the Company and its Subsidiaries. (d) Change in Control. Notwithstanding the foregoing vesting provisions, one-fourth (1/4) of all Units originally granted in a Performance Cycle shall become fully vested upon of a Change in Control. In the event of termination of the Participant's employment within two (2) years following a Change in Control, but subsequent to the year in which the Change in Control occurs, for any reason other than (a) death, (b) Permanent Disability, (c) Cause, or (d) by the Participant without Good Reason, an additional one-fourth (1/4) of all Units originally granted in any then continuing Performance Cycle that began prior to the Change in Control shall become fully vested. With respect to any Units granted during the second, third or fourth years of any then continuing Performance Cycle that began prior to the Change in Control, the preceding provisions of this Section 6.3(d) shall be applied by substituting "one-fourth (1/4)" with "one-third (1/3)," "one-half ( 1/2)" or "the entire amount," respectively. 6.4 Adjustment by Plan Administrator. The Plan Administrator may, at its discretion, change from time to time the Performance Targets and vesting schedules with respect to nonvested Units to (a) include or exclude extraordinary or nonrecurring items, (b) reflect changes in prevailing competitive or general economic conditions, (c) adjust for changes in income tax laws and regulations or accounting rules, (d) reflect changes in the Company's financial or corporate structure, as a result of a recapitalization merger, reorganization, acquisition or divestiture, and (e) to reflect other appropriate major events. 6.5 Notice to Participants. The Management Committee shall notify each Participant in writing of the grant of Units to him and the Performance Targets and vesting criteria applicable to such Units. -8- 11 ARTICLE 7. PAYMENT OF VESTED PERFORMANCE SHARE UNITS 7.1 Entitlement to Payment. Each Unit which has vested shall entitle the Participant or his Beneficiary to receive from the Participant's employer a lump sum payment in cash as soon as practicable following the applicable Valuation Date. The amount of such payment shall be determined by multiplying the number of vested Units by the Fair Market Value of a share of Common Stock on such Valuation Date. For this purpose, the number of vested Units shall be the sum of the Units in which the Participant became vested during the Performance Cycle, pursuant to Section 6.3, determined (i) as of the end of the Performance Cycle in the case of a Participant who is still then an employee of the Company or a Subsidiary, or (ii) as of the Participant's death, Permanent Disability, retirement or other termination of employment (whichever is applicable) in the case of a Participant who is no longer an employee of the Company or a Subsidiary at the end of the Performance Cycle. Moreover, the applicable Valuation Date shall correspond to the end of the Performance Cycle, except that it shall be the date of the Participant's death or Permanent Disability if such event has occurred prior to the end of the Performance Cycle. Notwithstanding the foregoing, however, a Participant may receive a deferred payment in lieu of all or a portion of a lump sum payment pursuant to an election described below in this Article 7. 7.2 Deferred Payment. Prior to the end of a Performance Cycle, the Participant may, subject to the consent of the Plan Administrator and in accordance with procedures that the Plan Administrator has approved, elect to have all or a portion of the lump sum payment described in Section 7.1 with respect to such vested Units deferred until his retirement, death, Permanent Disability, resignation, or other termination of employment with the Company and its Subsidiaries or until any other specified time that is acceptable to the Plan Administrator. Such deferred amount shall be paid in accordance with the remainder of this Article 7 rather than as provided in Section 7.1, whereas amounts payable with respect to other Units that vest at a different time in the Performance Cycle and are not subject to a deferred payment election shall continue to be paid as a lump sum in accordance with Section 7.1. The deferral election shall be irrevocable and shall be made on a form approved by the Plan Administrator. 7.3 Memorandum Account. The Company shall establish a ledger account (the "Memorandum Account") for each Participant who has elected to defer a payment pursuant to Section 7.2. Except as provided in Section 7.4, interest shall accrue on the deferred payment to the date of distribution, and shall be credited to the Memorandum Account at the end or each calendar quarter or such other periods as may be determined by the Management Committee (the deferred payment plus credited interest under the Memorandum Account being the "Interest Account"). The Management Committee shall determine the rate of interest periodically. -9- 12 7.4 Investment of Accounts. In lieu of investing in the Interest Account, a Participant may request that the Management Committee (or, with respect to a Participant who is subject to Section 16(b) of the Exchange Act (an "Insider"), the Plan Administrator) credit all or a specified percentage of his or her deferred payment in the Company Stock Account (as defined below), the S&P Account (as defined below), or in any combination of the Interest Account, Company Stock Account and/or S&P Account as elected by the Participant; however, the Management Committee (or, with respect to a Participant who is an Insider, the Plan Administrator) shall not be obligated to honor any such Participant's request. If the Management Committee (or the Plan Administrator, as the case may be) elects to honor any such request, it shall establish a separate subaccount(s) for such Participant under his or her Memorandum Account, which shall be credited (i) with respect to the Company Stock Account, with whole and fractional phantom shares of Common Stock ("Phantom Stock") as of the applicable date, and with phantom dividends with respect to the credited Phantom Stock, which shall be credited as being reinvested in additional shares of Phantom Stock (such credited shares of Phantom Stock being the "Company Stock Account") and (ii) with respect to the S&P Account, with whole and fractional phantom units in a Standard & Poor's 500 Composite Stock Price Index fund (or by reference to a mutual fund selected by the Management Committee that tracks such index as of the applicable date) and with any phantom distributions on such credited S&P units, which shall be credited as being reinvested in additional phantom S&P units (such credited phantom S&P units being the "S&P Account"). All credits and debits to the Company Stock Account shall be made based on the Fair Market Value per share of the Common Stock on the applicable Valuation Date, unless otherwise authorized by the Management Committee (or the Plan Administrator, as the case may be). If the Management Committee (or the Plan Administrator, as the case may be) chooses to not honor any Participant's request to invest his or her Memorandum Account in the Company Stock Account or the S&P Account, the Participant's deferral automatically shall be held in the Interest Account. Each Participant who has a Memorandum Account under the Plan may request that all or a specified percentage of his or her Memorandum Account balance as of any date be reinvested in the Interest Account, Company Stock Account and/or S&P Account in such proportions as elected by the Participant; provided, however, the Management Committee (or Plan Administrator, as the case may be), shall not be obligated to honor any such request. This election shall be in such form as the Management Committee (or the Plan Administrator, as the case may be) shall establish and shall comply with all requirements of Section 16(b), to the extent applicable. 7.5 Payment of Deferred Compensation. Upon retirement, death, Permanent Disability, resignation or termination of employment of a Participant who has elected to defer the payment in respect of any Units, the employer shall pay in cash to the Participant (or his Beneficiary in the case of his death) an amount equal to the balance of his Memorandum Account, as follows: (a) a lump sum payment, (b) in 60 consecutive equal monthly installments together with an interest adjustment (determined under Section 7.3), or -10- 13 (c) in 120 consecutive equal monthly installments together with an interest adjustment (determined under Section 7.3), whichever form of payment has been elected by the Participant. However, if a Participant elects to receive the distribution in installments, his or her Company Stock Account or S&P Account automatically shall be converted into an Interest Account as of the Participant's date of termination. Payment of a Memorandum Account shall commence or be made in the month following the Participant's retirement, death, Permanent Disability, resignation or termination of employment or any other specified time that is elected and acceptable to the Management Committee or the Plan Administrator, as the case may be. 7.6 Acceleration of Payments of Deferred Compensation. The Plan Administrator, in its discretion, may accelerate the payment of the unpaid balance of a Participant's Memorandum Account in the event of the Participant's retirement, death, Permanent Disability, resignation or termination of employment, or upon its determination that the Participant (or his Beneficiary in the case of his death) has incurred a severe financial hardship resulting from a sudden and unexpected illness or accident of such person or of a dependant, a loss of such person's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of such person. The Plan Administrator, in making its determination of severe financial hardship, may consider such factors and require such information as it deems appropriate, but, in any case, payment may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise or (ii) by liquidation of such person's assets, to the extent liquidation of such assets will not itself cause severe financial hardship. The Plan Administrator, in making its determination, may consider such factors and require such information as it deems appropriate. 7.7 Acceleration of Payment Due to Change in Control. Upon a Change in Control, all current Performance Cycles shall immediately end, and all vested Units (including Units that vest pursuant to Section 6.3(d)) and shares of Phantom Stock credited under a Company Stock Account shall be valued at their then Fair Market Value. Each Participant's employer (or the Company in the event that another employer does not promptly make payment) shall pay the Participant the Fair Market Value of his or her vested Units and the remaining unpaid balance of his Memorandum Account(s). This payment shall be made in a lump sum in lieu of any otherwise applicable form and time of payment under the Plan and shall be made within ten (10) days after the Change in Control; provided, however, that any Participant may elect prior to the occurrence of a Change in Control to have the payment in respect to all or a portion of his Units and/or Memorandum Account deferred until his or her retirement, death, Permanent Disability, resignation or termination of employment. -11- 14 A deferral election shall be revocable until the date of such a Change in Control and after the date of the Change in Control such election shall be irrevocable. A deferral election shall be made on a form prescribed by the Management Committee. All deferred payments in respect to Units shall be paid pursuant to the payment options set forth in Section 7.5. ARTICLE 8. GENERAL PROVISIONS 8.1 Unfunded Obligation. The deferred amounts to be paid to Participants pursuant to this Plan are unfunded obligations. Neither the Company nor any Subsidiary is required to segregate any monies from its general funds, to create any trusts, or to make any special deposits with respect to this obligation. Title to and beneficial ownership of any investments including trust investments which the Company may make to fulfill this obligation shall at all times remain in the Company. Any investments and the creation or maintenance of any trust or Memorandum Accounts shall not create or constitute a trust or a fiduciary relationship between the Compensation Committee, Management Committee, the Company, or any Subsidiary and a Participant, or otherwise create any vested or beneficial interest in any Participant or his Beneficiary or his creditors in any assets of the Company or its Subsidiaries whatsoever. The Participants shall have no claim against the Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to this Plan. 8.2 Other Benefits. Grants, vesting, or payment of Performance Share Units shall not be considered as part of a Participant's salary or used for the calculation of any other pay, allowance, pension or other benefit unless otherwise permitted by other benefit plans provided by the Company or its Subsidiaries, or required by law or by contractual obligations of the Company or its Subsidiaries. 8.3 Beneficiary. The term "Beneficiary" shall mean the person or persons to whom payments are to be paid pursuant to the terms of the Plan in the event of the Participant's death. The designation shall be on a form provided by the Management Committee executed by the Participant (with the consent of the Participant's spouse, if required by the Management Committee for reasons of community property or otherwise), and delivered to the Management Committee. A Participant may change his or her Beneficiary designation at any time. If no Beneficiary is designated, if the designation is ineffective, or in the event the Beneficiary dies before the balance of the Memorandum Account is paid, the balance shall be paid to the Participant's spouse or if there is no surviving spouse, to his or her lineal descendants, pro rata, or if there in no surviving spouse or lineal descendants, to the Participant's estate. Notwithstanding the foregoing, however, a Participant's Beneficiary shall be determined under applicable state law either preempts or if such state law does not recognize Beneficiary designations under plans of this sort. 8.4 Withholding of Taxes. Appropriate income and FICA tax withholdings shall be made from payments pursuant to this Plan and from other wages of Participants, as required under applicable law. -12- 15 8.5 Nonassignment. The right of a Participant or Beneficiary to the payment of any compensation under the Plan may not be assigned, transferred, pledged or encumbered nor shall such right or other interests be subject to attachment, garnishment, execution or other legal process. 8.6 No Right to Continued Employment or Future Grants. Nothing in the Plan shall be construed to confer upon any Participant any right to continued employment with the Company or a Subsidiary, nor interfere in any way with the right of the Company or a Subsidiary to terminate the employment of such Participant at any time without assigning any reasons therefor. The grant of a Unit to a Participant shall not give the Participant any right to subsequent grants of Units under the Plan. 8.7 Leaves of Absence. Leaves of absence for such periods and purpose conforming to the personnel policy of the Company, or of its Subsidiaries as applicable, shall not be deemed termination of employment. 8.8 Transfers. In the event a participant is transferred from the Company to a Subsidiary, or vice versa, or is promoted or given different responsibilities, the Units granted to him prior to such date shall not be affected. 8.9 Shareholder Rights. The grant of a Unit shall not entitle a Participant or Beneficiary to any dividend, voting or other rights as a shareholder of the Company. 8.10 Termination and Amendment. The Board or the Compensation Committee may from time to time amend, suspend or terminate the Plan in whole or in part; provided, however, no such action shall be allowed to impair the right of a Participant to receive payment with respect to Units that have vested as of such date without the consent or such Participant. The Management Committee may amend the Plan, without Board or Compensation Committee approval, to ensure that the Company may obtain any regulatory approval or to accomplish any other reasonable purpose, provided that the amendments do not materially increase the cost of the Plan to the Company and its Subsidiaries, and do not substantially alter the level of benefits under the Plan or expand the classification or employees eligible to participate in the Plan. If the Plan is suspended or terminated, the Board may reinstate any or all of its provisions. 8.11 Applicable Law. The Plan shall be construed and governed in accordance with the laws of the State of Texas, except that it shall be construed and governed in accordance with applicable federal law in the event that such federal law preempts state law. -13- 16 8.12 Compliance with Securities Laws. It is the intention of the Company that, so long as any of the Company's equity securities are registered pursuant to Section 12(b) or 12(g) of the Exchange Act, the Plan shall be operated in compliance with Section 16(b) of the Exchange Act and, if any Plan provision or transaction is found not to comply with Section 16(b), that provision or transaction, as the case may be, shall be deemed null and void ab initio. Notwithstanding anything in the Plan to the contrary, the Board or the Compensation Committee, in its absolute discretion, may bifurcate the Plan so as to restrict, limit or condition any provision of the Plan to Participants who are officers and directors subject to Section 16(b) of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. -14- EX-10.22 8 $300 MILLION SHORT-TERM REVOLVING CREDIT AGMT. 1 EXHIBIT 10.22 FIRST AMENDMENT TO SHORT-TERM REVOLVING CREDIT AGREEMENT This First Amendment to Short-Term Revolving Credit Agreement dated as of July 14, 1995 (this "Amendment") is among (i) Burlington Resources Inc., a Delaware corporation ("Borrower"), (ii) the undersigned financial institutions ("Lenders") which are parties to the Short-Term Revolving Credit Agreement dated as of July 20, 1994 ("Credit Agreement") among the Borrower, the financial institutions party thereto and Citibank, N.A., as agent ("Agent"), and (iii) the Agent. In consideration of the mutual covenants contained herein, the Borrower, the Agent and the Lenders agree as set forth herein. 1. Amendment to the Credit Agreement. Section 2.21(a) of the Credit Agreement is hereby amended by (i) deleting the reference to "60 days" set forth therein and inserting in lieu thereof a reference to "45 days", and (ii) deleting the reference to "40 days" set forth therein and inserting in lieu thereof a reference to "30 days". 2. Miscellaneous. 2.1. Amendments, Etc. No amendment or waiver of any provision of this Amendment, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless effected in accordance with Section 8.01 of the Credit Agreement. 2.2. Governing Law. This Amendment and the Credit Agreement as amended hereby shall be governed by and construed in accordance with the laws of the State of New York. 2.3. Preservation. Except as specifically modified by the terms of this Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Credit Agreement (including, without limitation, exhibits thereto) or any of the Notes remain in full force and effect. Terms used herein which are not defined herein and are defined in the Credit Agreement, as amended hereby, are used herein as defined in the Credit Agreement, as amended hereby. 2.4. Execution in Counterparts. This Amendment 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. 2.5. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on 2 such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment and to agree to the various matters set forth herein. Each Lender also acknowledges that it will, independently and without reliance upon the 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 as amended hereby. 2.6. Authority, etc. The Borrower hereby represents and warrants that (i) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) the execution, delivery and performance of this Amendment, and the performance of the Credit Agreement, as amended hereby, by the Borrower are within the power of the Borrower and have been duly authorized by all necessary corporate action, and (iii) this Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms. 2.7. Effective Date. This Amendment is effective as of July 14, 1995. 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 --------------------------- Name: Everett D. DuBois ------------------------- Title: Treasurer ------------------------ CITIBANK, N.A., as Agent By: /s/ OLIVA A. MURRAY --------------------------- Name: Oliva A. Murray ------------------------- Title: Vice President ------------------------ -2- 3 CITIBANK, N.A. By: /s/ OLIVA A. MURRAY --------------------------- Name: Oliva A. Murray ------------------------- Title: Vice President ------------------------ MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ PHILIP W. MCNEAL --------------------------- Name: Philip W. McNeal ------------------------- Title: Vice President ------------------------ NATIONSBANK OF TEXAS, N.A. By: /s/ PAUL A. SQUIRES --------------------------- Name: Paul A. Squires ------------------------- Title: Senior Vice President ------------------------ TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ SCOTT RICHARDSON --------------------------- Name: Scott Richardson ------------------------- Title: Vice President ------------------------ BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ JOHN ROBINSON --------------------------- Name: John Robinson ------------------------- Title: Managing Director ------------------------ -3- 4 THE FIRST NATIONAL BANK OF BOSTON By: /s/ RITA M. CAHILL --------------------------- Name: Rita M. Cahill ------------------------- Title: Vice President ------------------------ CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ XAVIER RATOUIS --------------------------- Name: Xavier Ratouis ------------------------- Title: Authorized Signature ------------------------ MELLON BANK, N.A. By: /s/ A. GARY CHACE --------------------------- Name: A. GARY CHACE ------------------------- Title: Senior Vice President ------------------------ TORONTO DOMINION (TEXAS), INC. By: /s/ DIANE BAILEY --------------------------- Name: Diane Bailey ------------------------- Title: Vice President ------------------------ ABN AMRO BANK N.V. By: /s/ W. BRYAN CHAPMAN --------------------------- Name: W. Bryan Chapman ------------------------- Title: Vice President ------------------------ By: /s/ MICHAEL N. OAKES --------------------------- Name: Michael N. Oakes ------------------------- Title: Vice President ------------------------ -4- 5 THE BANK OF TOKYO, LTD. By: /s/ M. YAMADA --------------------------- Name: M. Yamada ------------------------- Title: VP & Senior Manager ------------------------ FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ ANN B. RHOADS --------------------------- Name: Ann B. Rhoads ------------------------- Title: Vice President ------------------------ THE NORTHERN TRUST COMPANY By: /s/ MARTIN G. ALSTON --------------------------- Name: Martin G. Alston ------------------------- Title: Vice President ------------------------ THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY By: /s/ Harumitsu Seki --------------------------- Name: Harumitsu Seki ------------------------- Title: General Manager ------------------------ -5- 6 UNION BANK OF SWITZERLAND By: /s/ EVANS SWANN --------------------------- Name: Evans Swann ------------------------- Title: Managing Director ------------------------ By: /s/ ALFRED W. IMHOLZ --------------------------- Name: Alfred W. Imholz ------------------------- Title: Managing Director ------------------------ -6- 7 SECOND AMENDMENT TO SHORT-TERM REVOLVING CREDIT AGREEMENT This Second Amendment to Short-Term Revolving Credit Agreement dated as of July 12, 1996 (this "Amendment") is among (i) Burlington Resources Inc., a Delaware corporation ("Borrower"), (ii) the undersigned financial institutions ("Lenders") which are parties to the Short-Term Revolving Credit Agreement dated as of July 20, 1994 as amended by the First Amendment to Short-Term Revolving Credit Agreement dated as of July 14, 1995 (as so amended, the "Credit Agreement") among the Borrower, the financial institutions party thereto and Citibank, N.A., as agent for such financial institutions ("Agent"), and (iii) the Agent. In consideration of the mutual covenants contained herein, the Borrower, the Agent and the Lenders agree as set forth herein. 1. Amendments to the Credit Agreement. The Credit Agreement is hereby amended as follows: 1.1. Section 1.01. Section 1.01 of the Credit Agreement is amended by deleting each of the definitions of Eurodollar Rate Margin, Facility Fee Percentage, and Long-Term Revolving Credit Agreement and inserting in lieu thereof each of the following definitions reading in their entirety as follows: "Eurodollar Rate Margin" means 0.24% per annum. "Facility Fee Percentage" means 0.06% per annum. "Long-Term Revolving Credit Agreement" means the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 among the Borrower, the financial institutions party thereto and Citibank, N.A., as agent for such financial institutions, as it may be amended or otherwise modified from time to time. 1.2. Section 2.15(a). Section 2.15(a) of the Credit Agreement is amended by replacing the word "either" set forth immediately before clause (A) of the proviso in the second sentence of such Section with the word "both" and by replacing the word "or" set forth immediately before clause (B) of such proviso with the word "and". 1.3. Section 4.01(a). The last sentence of Section 4.01(a) of the Credit Agreement is amended to read in its entirety as follows: 8 Each Subsidiary which is, on and as of July 12, 1996, a Material Subsidiary is listed on Schedule II hereto. 1.4. Section 4.01(e). The Credit Agreement is amended by deleting Section 4.01(e) and inserting in lieu thereof the following: (e) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 1995 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, prior to July 5, 1996, to the Agent and the Lenders party to this Agreement as of July 12, 1996, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at December 31, 1995 and the consolidated results of their operations for such fiscal period, all in accordance with generally accepted accounting principles consistently applied. The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at March 31, 1996 and the related consolidated statements of income and cash flow for the three months then ended, copies of which have been furnished to the Agent and such Lenders prior to July 5, 1996, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at March 31, 1996 and the consolidated results of their operations for such fiscal period, all in accordance with generally accepted accounting principles consistently applied, and since March 31, 1996 there has been no material adverse change in such condition or operations. 1.5. Section 7.05. The Credit Agreement is amended by deleting Section 7.05 and inserting in lieu thereof the following: SECTION 7.05 INDEMNIFICATION. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE A NOTES THEN HELD BY EACH OF THEM (OR IF NO A NOTES ARE AT THE TIME OUTSTANDING OR IF ANY A 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 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 -2- 9 HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE 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 AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the 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 Agent acts in its capacity as Agent and is not reimbursed for such expenses by the Borrower. 1.6. Section 8.12. The Credit Agreement is further amended by adding immediately after Section 8.11, a new Section 8.12 reading in its entirety as follows: SECTION 8.12. WAIVER OF JURY TRIAL. THE BORROWER, THE 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. 1.7. Schedule II. Schedule II to the Credit Agreement is hereby amended and restated in its entirely by Schedule II hereto. 1.8. Change of Commitments. Effective as of July 12, 1996, the Commitment of Credit Lyonnais New York Branch ("CLNY") is hereby changed to $12,500,000 and the Commitment of Bank of Tokyo - Mitsubishi, Ltd. - Houston Agency ("BOT") is hereby changed to $21,000,000, and for purposes of Section 2.01 of the Credit Agreement and other relevant purposes such new amounts shall be deemed to be the respective amounts set forth opposite their respective names on the signature pages of the Credit Agreement. If any A Advances are outstanding on July 12, 1996, then on such date BOT will purchase from CLNY, without recourse, 17/42 of each A Advance owed to CLNY on such date, which purchased amounts will be thereafter deemed part of the corresponding A Advances of BOT. -3- 10 2. Miscellaneous. 2.1. Amendments, Etc. No amendment or waiver of any provision of this Amendment, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless effected in accordance with Section 8.01 of the Credit Agreement. 2.2. Governing Law. This Amendment and the Credit Agreement as amended hereby shall be governed by and construed in accordance with the laws of the State of New York. 2.3. Preservation. Except as specifically modified by the terms of this Amendment, all of the terms, provisions, covenants, warranties and agreements contained in the Credit Agreement (including, without limitation, exhibits thereto), any Note or any other document executed in connection therewith remain in full force and effect. Terms used herein which are not defined herein and are defined in the Credit Agreement, as amended hereby, are used herein as defined in the Credit Agreement, as amended hereby. Each reference in the Credit Agreement as amended hereby to "this Credit Agreement", "this Agreement", "herein", "hereof" or words of similar effect, and each reference in any Note or other document executed in connection therewith to the "Credit Agreement", "thereunder", "thereof" or words of similar effect, shall mean and be a reference to the Credit Agreement as amended hereby. 2.4. Execution in Counterparts. This Amendment 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 of an executed signature page to this Amendment by telecopier shall be as effective as delivery of a manually executed counterpart of this Amendment. 2.5. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Amendment and to agree to the various matters set forth herein. Each Lender also acknowledges that it will, independently and without reliance upon the 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 as amended hereby. 2.6. Authority, etc. The Borrower hereby represents and warrants that (i) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) the execution, delivery and performance of this Amendment, and the performance of the Credit Agreement, as amended hereby, by the -4- 11 Borrower are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no authorization, approval, consent, license or other action by, or notice or filing with, any governmental authority or regulatory body, do not contravene (A) the Borrower's certificate of incorporation or by-laws, (B) any applicable rule, regulation, order, writ, injunction or decree, or (C) any law or any contractual restriction binding on or affecting the Borrower, and will not result in or require the creation or imposition of any Lien on or in respect of any property of the Borrower or of any Subsidiary of the Borrower, (iii) this Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, (iv) each representation and warranty contained in Section 4.01 of the Credit Agreement as amended hereby is correct in all material respects as though made on and as of the date hereof, and (v) no event has occurred and is continuing 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. 2.7. Default. Without limiting any other event which may constitute an Event of Default, in the event that any representation or warranty set forth herein shall be incorrect in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement, as amended hereby. 2.8. Effectiveness. Following the execution of this Amendment, this Amendment will be effective as of July 12, 1996. Fees payable pursuant to Section 2.03 of the Credit Agreement, and interest payable pursuant to the Credit Agreement, shall be determined in accordance with the Credit Agreement to July 12, 1996 and shall be payable on the dates contemplated in the Credit Agreement, and fees and interest accruing on or after July 12, 1996 shall be determined and payable in accordance with the Credit Agreement, as amended hereby. IN WITNESS WHEREOF, the parties hereto have caused this Amendment 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 -------------------------- Everett D. DuBois Senior Vice President and Treasurer -5- 12 CITIBANK, N.A., as Agent By: /s/ ALAN J. BERENBAUM --------------------------- Name: Alan J. Berenbaum ------------------------- Title: Attorney-in-Fact ------------------------ CITIBANK, N.A. By: /s/ ALAN J. BERENBAUM --------------------------- Name: Alan J. Berenbaum ------------------------- Title: Attorney-in-Fact ------------------------ MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ VERNON M. FORD, JR. --------------------------- Name: Vernon M. Ford, Jr. ------------------------- Title: Vice President ------------------------ NATIONSBANK OF TEXAS, N.A. By: /s/ PAUL A. SQUIRES --------------------------- Name: Paul A. Squires ------------------------- Title: Senior Vice President ------------------------ THE CHASE MANHATTAN BANK, N.A. (formerly known as TEXAS COMMERCE BANK NATIONAL ASSOCIATION) By: /s/ LORI VETTERS --------------------------- Name: Lori Vetters ------------------------- Title: Vice President ------------------------ -6- 13 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ RICHARD D. BLUTH --------------------------- Name: Richard D. Bluth ------------------------- Title: Vice President ------------------------ THE FIRST NATIONAL BANK OF BOSTON By: /s/ GEORGE W. PASSELA --------------------------- Name: George W. Passela ------------------------- Title: Managing Director ------------------------ CREDIT LYONNAIS NEW YORK BRANCH By: /s/ JACQUES-YVES MULLIEZ --------------------------- Name: Jacques-Yves Mulliez ------------------------- Title: Senior Vice President ------------------------ MELLON BANK, N.A. By: /s/ E. MARC CUENOD, JR. --------------------------- Name: E. Marc Cuenod, Jr. ------------------------- Title: First Vice President ------------------------ TORONTO DOMINION (TEXAS), INC. By: /s/ NEVA NESBITT --------------------------- Name: Neva Nesbitt ------------------------- Title: Vice President ------------------------ -7- 14 ABN AMRO BANK N.V. By: ABN AMRO NORTH AMERICA INC., as agent By: /s/ W. BRYAN CHAPMAN --------------------------------- Name: W. Bryan Chapman ------------------------------- Title: Vice President and Director ------------------------------ By: /s/ H. GENE SHIELS --------------------------------- Name: H. Gene SHIELS ------------------------------- Title: Vice President and Director ------------------------------ THE BANK OF TOKYO - MITSUBISHI, LTD. - HOUSTON A ENCY (formerly known as THE BANK OF TOKYO, LTD.) By: /s/ J. MCINTYRE --------------------------------- Name: J. McIntyre ------------------------------- Title: Vice President ------------------------------ WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION (formerly known as FIRST INTERSTATE BANK OF TEXAS, N.A.) By: /s/ ANN M. RHOADS --------------------------------- Name: Ann M. Rhoads ------------------------------- Title: Vice President ------------------------------ THE NORTHERN TRUST COMPANY By: /s/ MERLON J. SCHUNEMAN --------------------------------- Name: Merlon J. Schuneman ------------------------------- Title: Vice President ------------------------------ -8- 15 THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY By: /s/ HATUMITSU SEID --------------------------------- Name: Hatumitsu Seid ------------------------------- Title: General Manager ------------------------------ UNION BANK OF SWITZERLAND By: /s/ EVANS SWANN --------------------------------- Name: Evans Swann ------------------------------- Title: Managing Director ------------------------------ By: /s/ J. GEORGE KUBOVE --------------------------------- Name: J. George Kubove ------------------------------- Title: Assistant Vice President ------------------------------ -9- 16 SCHEDULE II MATERIAL SUBSIDIARIES Meridian Oil Inc. EX-10.23 9 2ND AMEND. RESTATED - LONG TERM REVOL. CREDIT... 1 EXHIBIT 10.23 BURLINGTON RESOURCES INC. $600,000,000 SECOND AMENDED AND RESTATED LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of July 12, 1996 CITIBANK, N.A., as Agent 2 TABLE OF CONTENTS
Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. . . . . . . . . . . . . . . . 1 SECTION 1.02. Computation of Time Periods . . . . . . . . . . . . . 10 SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . 10 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances . . . . . . . . . . . . . . . . . . . 11 SECTION 2.02. Making the A Advances . . . . . . . . . . . . . . . . 11 SECTION 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 2.04. Reduction of the Commitments . . . . . . . . . . . . 12 SECTION 2.05. Repayment of A Advances . . . . . . . . . . . . . . . 13 SECTION 2.06. Interest on A Advances . . . . . . . . . . . . . . . 13 SECTION 2.07. Additional Interest on Eurodollar Rate Advances . . . 13 SECTION 2.08. Interest Rate Determination . . . . . . . . . . . . . 14 SECTION 2.09. Voluntary Conversion of A Advances . . . . . . . . . 15 SECTION 2.10. Prepayments . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2.11. Increased Costs . . . . . . . . . . . . . . . . . . . 16 SECTION 2.12. Increased Capital . . . . . . . . . . . . . . . . . . 16 SECTION 2.13. Illegality . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.14. Payments and Computations . . . . . . . . . . . . . . 17 SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.16. Sharing of Payments, Etc . . . . . . . . . . . . . . 20 SECTION 2.17. Evidence of Debt . . . . . . . . . . . . . . . . . . 21 SECTION 2.18. Use of Proceeds . . . . . . . . . . . . . . . . . . . 21 SECTION 2.19. The B Advances . . . . . . . . . . . . . . . . . . . 21 SECTION 2.20. Increase of Commitments . . . . . . . . . . . . . . . 24 ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 3.02. Conditions Precedent to Each A Borrowing . . . . . . 26 SECTION 3.03. Conditions Precedent to Each B Borrowing . . . . . . 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower . . . 27 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01 Affirmative Covenants . . . . . . . . . . . . . . . . 29 SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . 31 SECTION 5.03. Reporting Requirements . . . . . . . . . . . . . . . 33
3 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . 35 ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action . . . . . . . . . . . . . . 38 SECTION 7.02. Agent's Reliance, Etc . . . . . . . . . . . . . . . . 38 SECTION 7.03. Citibank and Affiliates . . . . . . . . . . . . . . . 39 SECTION 7.04. Lender Credit Decision . . . . . . . . . . . . . . . 39 SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . 39 SECTION 7.06. Successor Agent . . . . . . . . . . . . . . . . . . . 40 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . 40 SECTION 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . 40 SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . 41 SECTION 8.04. Costs and Expenses; Indemnity . . . . . . . . . . . . 41 SECTION 8.05. Right of Set-off . . . . . . . . . . . . . . . . . . 42 SECTION 8.06. Binding Effect . . . . . . . . . . . . . . . . . . . 42 SECTION 8.07. Assignments and Participations . . . . . . . . . . . 42 SECTION 8.08. Confidentiality . . . . . . . . . . . . . . . . . . . 45 SECTION 8.09. Consent to Jurisdiction . . . . . . . . . . . . . . . 46 SECTION 8.10. Governing Law . . . . . . . . . . . . . . . . . . . . 46 SECTION 8.11. Execution in Counterparts . . . . . . . . . . . . . . 47 SECTION 8.12. Waiver of Jury Trial . . . . . . . . . . . . . . . . 47
EXHIBITS Exhibit A Form of A Promissory Note Exhibit B Form of B Promissory Note Exhibit C Form of Notice of A Borrowing Exhibit D Form of Notice of B Borrowing Exhibit E Form of Assignment and Acceptance Exhibit F-1 Form of Commitment Increase Agreement Exhibit F-2 Form of New Lender Agreement Exhibit G Form of Opinion of Vice President, Law for Borrower Exhibit H Form of Opinion of Jones, Day, Reavis & Pogue, New York Counsel for Borrower Exhibit I Form of Opinion of Counsel to Citibank, N.A., as Agent Exhibit J Form of Process Agent Letter Exhibit K Form of Designation Agreement -ii- 4 SCHEDULES Schedule I -- Domestic and Eurodollar Lending Offices Schedule II -- Material Subsidiaries Schedule III -- Pricing Grid
-iii- 5 SECOND AMENDED AND RESTATED LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of July 12, 1996 BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Initial Lenders") listed on the signature pages hereof, and CITIBANK, N.A. ("Citibank") as agent (the "Agent") for the Lenders hereunder, agree as follows: PRELIMINARY STATEMENTS 1. The Borrower, the Agent and certain Lenders are parties to the Amended and Restated Long-Term Revolving Credit Agreement dated as of July 14, 1995 (the "1995 Credit Agreement"). 2. The parties hereto have agreed to amend (effective as of July 12, 1996) certain provisions of, and Exhibits to, the 1995 Credit Agreement and, as so amended, to restate it in its entirety and the Lenders and the Agent have agreed to do so on the terms and conditions set forth herein. The 1995 Credit Agreement, as so amended, is hereby being restated in its entirety for the convenience of the parties and the provisions that are not so amended shall continue. Accordingly, each reference herein or in any other document to an A Advance or a B Advance shall include each A Advance or B Advance, respectively, heretofore made under the 1995 Credit Agreement as well as each A Advance or B Advance, respectively, made from time to time under this Second Amended and Restated Long-Term Revolving Credit Agreement. Furthermore, the fees payable pursuant to Section 2.03 of the 1995 Credit Agreement, and interest payable pursuant to the 1995 Credit Agreement, shall be determined in accordance with the 1995 Credit Agreement to July 12, 1996 and shall be payable on the dates contemplated in the 1995 Credit Agreement, and fees and interest accruing on or after July 12, 1996 shall be determined and payable in accordance with this Second Amended and Restated Long-Term Revolving Credit Agreement. Inasmuch as the Commitments of Credit Lyonnais New York Branch ("CLNY") and The Bank of Tokyo - Mitsubishi, Ltd. ("BOT") are being changed from those in effect under the 1995 Credit Agreement, if any A Advances are outstanding on July 12, 1996, then on such date BOT will purchase from CLNY, without recourse, 17/42 of each A Advance owed to CLNY on such date, which purchased amounts will be thereafter deemed part of the corresponding A Advances of BOT. ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. 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. 6 "A 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 A Advances made 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. "Agreement" means the 1995 Credit Agreement (defined above), as amended and restated by this Second Amended and Restated 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 Agent as its Applicable Lending Office with respect to such B Advance. "Arranger" means Citicorp 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 Agent, in substantially the form of Exhibit E 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 Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit B hereto, evidencing the indebtedness of the Borrower to such Lender resulting from a B Advance made by such Lender. "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 highest of: (a) The rate of interest announced publicly by the Agent in the United States with respect to loans made in the United States, from time to time, as the Agent's base or prime rate as in effect for such day; (b) The sum (adjusted to the nearest 1/16 of one percent or, if there is no nearest 1/16 of one percent, to the next higher 1/16 of one percent) of (i) 1/2 of one percent per annum, plus (ii) the rate obtained by dividing (A) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average (adjusted to the basis of a year of 365 or 366 days, as the case may be) being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the previous Friday by the Agent on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by the Agent from three New York certificate of deposit dealers of recognized standing selected by the Agent, by (B) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for the Agent in respect of liabilities consisting of or including (among other liabilities) three-month U.S. dollar nonpersonal time deposits in the United States each in the amount of $100,000 or more, plus (iii) the average during such three-week period of the annual assessment rates estimated by the Agent for determining the then current annual assessment payable by the Agent to the Federal Deposit Insurance Corporation (or any successor) for insuring U.S. dollar deposits of the Agent in the United States; and (c) 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. "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 and letters of credit issued for the account of the Borrower or any consolidated Subsidiary of the Borrower, plus (iii) the sum of the preferred stock and common stockholders' equity of the Borrower. -3- 8 "Commitment" has the meaning specified in Section 2.01. "Consolidated Tangible Net Worth" means, on a consolidated basis, the excess of (i) the sum of the preferred stock and common stockholders' equity of the Borrower, over (ii) the intangible assets of the Borrower and its consolidated Subsidiaries. "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 original due date of such portion) to pay the deferred purchase price of property or services, and (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, except 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. "Designated Bidder" means (a) an Affiliate of a Lender or (b) 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 (a) or (b) above, (i) is organized under the laws of the United States or any state thereof, (ii) shall have become a party hereto pursuant to subsections (e), (f) and (g) of Section 8.07, and (iii) is not otherwise a Lender. Notwithstanding the foregoing, each Designated Bidder shall be subject to the written consent of the Borrower and the 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 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" opposite its name on Schedule I hereto or in the Assignment and Acceptance or Increase 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 Agent. "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 Agent from three Federal funds brokers of recognized standing selected by it. -4- 9 "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 Citibank so long as Citibank is the Agent hereunder, the Agent as an Eligible Assignee for purposes of this Agreement, provided that neither the Agent's nor the Borrower's approval shall be unreasonably withheld. "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" opposite its name on Schedule I hereto or in the Assignment and Acceptance or 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 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 Agent on the basis of applicable rates furnished to and received by the 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 III 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 -5- 10 so applicable) for determining the maximum reserve requirement (including, but not limited to, 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. "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 III 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 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, and (ii) any liability in connection with obligations of the Borrower or any of its consolidated Subsidiaries, including, without limitation, obligations under any conditional sales agreement or equipment lease); 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. "Increase Agreement" means an agreement entered into by the Borrower and a Lender increasing such Lender's Commitment pursuant to Section 2.20, and accepted by the Agent, in substantially the form of Exhibit F-1 hereto or an agreement entered into by the Borrower and a bank or other financial institution becoming a Lender pursuant to Section 2.20, and accepted by the Agent, in substantially the form of Exhibit F-2 hereto. "Indemnified Party" means any or all of the Lenders, the Arranger and the 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 one, two, three or six months, or, subject to availability to each Lender, nine or twelve months, in each case as the Borrower may, upon notice received by the 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, select; provided, however, that: -6- 11 (i) 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; (ii) 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; (iii) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and (iv) 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 (i) 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, an A Note, 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. "Majority Lenders" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the A 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 then owning assets (determined on a consolidated basis) that equal or exceed 5% 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. "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 -7- 12 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. "Note" means an A Note or a B Note. "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). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "Permitted Assets" means (i) hydrocarbon or other reserves (including, without limitation, proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including, without limitation, real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) the stock of any and all companies that are or become Subsidiaries of the Borrower owning assets referred to in any of the foregoing clauses. "Permitted Liens" means (a) 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; (b) 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; (c) 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; (d) 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; (e) 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 -8- 13 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; (f) 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; and (g) any Lien consisting of (i) 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, (ii) 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, (iii) 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 (iv) zoning laws and ordinances and municipal regulations. "Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture or other 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. "Process Agent" has the meaning specified in Section 8.09(a). "Reference Banks" means Citibank, Morgan Guaranty Trust Company of New York and Union Bank of Switzerland. "Register" has the meaning specified in Section 8.07(c). "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 July 20, 1994 among the Borrower, the financial institutions party thereto and Citibank, N.A., as agent for such financial institutions, as amended by the First Amendment to Short-Term Credit Agreement dated as of July 14, 1995 and by the Second Amendment to Short-Term Credit Agreement dated as of July 12, 1996, and as such credit agreement may be further amended or otherwise modified from time to time. "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. -9- 14 "Subsidiary" means, as to any Person, any corporation of which at least a majority of the outstanding stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly beneficially owned or controlled by such Person or one or more of its Subsidiaries or by such Person and one or more of the Subsidiaries of such Person. "Termination Date" means the earlier of (i) July 20, 2001 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. "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 1.02. 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 1.03. Accounting 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. -10- 15 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. 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 Increase Agreement, set forth for such Lender in the Register maintained by the 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 2.02. Making the A Advances. (a) Each A Borrowing shall be made on notice by the Borrower to the Agent (a "Notice of A Borrowing") received by the 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 C 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 Agent at its address at Citibank, 399 Park Avenue, New York, New York 10043, Reference: Burlington Resources Inc., or at such other location designated by notice from the 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 Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at Citibank, 399 Park Avenue, New York, New York, or at any account of the Borrower maintained by the Agent (or any successor Agent) designated by the Borrower and agreed to by the Agent (or such successor 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 -11- 16 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 III, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of such failure, including, without limitation, 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 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 Agent such Lender's ratable portion of such A Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such A Borrowing in accordance with subsection (a) of this Section 2.02 and the 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 Agent, such Lender and the Borrower severally agree to repay to the 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 Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the 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. SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to pay to 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 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 Agent, for its own account, such agency fees as may be separately agreed to in writing by the Borrower and the 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 Agent, for its own account, an arrangement fee in the amount and payable on the date separately agreed to in writing by the Agent and the Borrower. SECTION 2.04. Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the 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 -12- 17 reduction shall be in the aggregate amount of $20,000,000 or any whole multiple of $1,000,000 in excess thereof. SECTION 2.05. Repayment of A Advances. The Borrower shall repay to each Lender on the Termination Date the aggregate principal amount of the A Advances then owing to such Lender. SECTION 2.06. 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 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 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 2.07. 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 (other than any such additional interest accruing to a particular Lender in respect of periods prior to the 30th day preceding the date notice of such interest is given by such Lender as provided in this Section 2.07), payable on the same day or days on which interest is payable on such A Advance, at an interest rate per annum equal at all times during each Interest Period for such -13- 18 A Advance to 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. The amount of such additional interest (if any) shall be determined by each Lender, and such Lender shall furnish written notice of the amount of such additional interest to the Borrower and the Agent, which notice shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the 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 Agent for the purpose of determining any such interest rate, the Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (b) The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the 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 Agent for determining the Eurodollar Rate for any applicable A Advances, (i) the 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 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 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 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 Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. -14- 19 (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 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 2.09. Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Agent, not later than 10:00 A.M. (New York City time) on the Business Day of the proposed Conversion of Eurodollar Rate Advances to Base Rate Advances, and not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion in the case of a Conversion of Base Rate Advances to Eurodollar Rate Advances, and 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 two 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 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 Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. -15- 20 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 the Agent), pay to the 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 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 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, without limitation, 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. (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 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 Agent), the Borrower shall pay to the 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 -16- 21 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 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 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 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, without limitation, a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an affiliate) to avoid any such illegality. SECTION 2.14. Payments and Computations. (a) The Borrower shall make each payment hereunder (including, without limitation, 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 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 Agent at Citibank, 399 Park Avenue, New York, New York, Reference: Burlington Resources Inc., or at such other location designated by notice to the Borrower from the 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 Agent, shall be deemed duly made for all purposes of this Agreement and the A Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the 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 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 -17- 22 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 Agent shall make all payments hereunder and under the A 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 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 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 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 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 Agent may assume that the Borrower has made such payment in full to the Agent on such date and the 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 Agent, each Lender shall repay to the 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 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, 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 -18- 23 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 Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Borrower (or the 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 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, without limitation, 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. -19- 24 (d) On or prior to the date on which each Indemnified Party organized under the laws of a jurisdiction outside the United States executes this Agreement or otherwise becomes an "Indemnified Party" hereunder, such Indemnified Party shall provide the Borrower and the 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 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 without limitation 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 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 (i) the amount of such Lender's required repayment to (ii) 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 -20- 25 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. SECTION 2.17. Evidence of Debt. The indebtedness of the Borrower to each Lender in respect of principal of and interest on the A Advances shall be evidenced by an A Note payable to the order of such Lender and delivered hereunder by the Borrower. Notwithstanding the provisions of the A 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 A Advances and payments made from time to time hereunder and under the A Note payable to its order. In any legal action or proceeding in respect of this Agreement or such A 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, without limitation, 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) June 15, 2001, 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 Agent, by telecopy, telefax or other teletransmission, a notice of a B Borrowing (a "Notice of B Borrowing"), in substantially the form of Exhibit D 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) July 15, 2001), 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 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 Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City -21- 26 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 minimum amount and maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amounts 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 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 Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the 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 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 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 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 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 Agent notice to that effect. (iv) If the Borrower notifies the Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A) above, the 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 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 -22- 27 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 Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article III. 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 Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the 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 III and after receipt by the Agent of such funds, the Agent will make such funds available to the Borrower at the Agent's aforesaid address. Promptly after each B Borrowing the 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 Agent for the account of each Lender which has made a B Advance, or each other holder of a B 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 B 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 B 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 B Note evidencing such B Advance, subject to Section 2.06(b). (e) The indebtedness of the Borrower in respect of principal of and interest on each B Advance made to the Borrower as part of a B Borrowing shall be evidenced by a separate B Note of the Borrower payable to the order of the Lender making such B Advance. (f) Each time that the Borrower gives a Notice of B Borrowing, the Borrower shall pay to the Agent for its own account such fee as may be agreed between the Borrower and the Agent from time to time, whether or not any B Borrowing is in fact made. (g) 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). -23- 28 (h) 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 Agent. SECTION 2.20. Increase of Commitments. The Borrower shall have the right, without the consent of the Lenders or the Agent (except as contemplated in clauses (d) and (e) of this sentence), to effectuate from time to time, on any Business Day (but not on more than one Business Day in any calendar quarter) an increase in the total Commitments under this Agreement (an "Increase") by adding to this Agreement one or more banks or other financial institutions (who shall, upon completion of the requirements stated in this Section 2.20, constitute Lenders hereunder), or by allowing one or more Lenders to increase their Commitments hereunder, or both, provided that (a) no Increase in Commitments pursuant to this Section 2.20 shall result in the total Commitments exceeding $800,000,000 or shall result in the aggregate amount of the Increases in the Commitments effectuated pursuant to this Section 2.20 since the date of this Agreement exceeding $200,000,000, (b) any Increase in Commitments pursuant to this Section 2.20 shall be in the amount of $20,000,000 or an integral multiple of $1,000,000 in excess thereof, (c) on the effective date of each Increase in the Commitments pursuant to this Section 2.20, (i) the Borrower shall have outstanding public long-term senior unsecured debt securities that are rated by S&P or Moody's, (ii) either (1) the lowest such rating by Moody's shall be A3 or better or (2) the lowest such rating by S&P shall be A- or better, and (iii) no event shall have occurred and be continuing 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, (d) no Lender's Commitment amount shall be increased without the consent of such Lender, (e) each new bank or other financial institution, if any, both is acceptable to the Agent and provides a Commitment of at least $20,000,000, (f) simultaneously with each increase in the Commitment of any Lender pursuant to this Section 2.20, the Borrower will cause such Lender's "Commitment" (under and as defined in the Short-Term Revolving Credit Agreement) to be increased pursuant to Section 2.20 thereof by the same percentage as such Lender's Commitment is being increased pursuant to this Section 2.20, unless the Short- Term Revolving Credit Agreement has been terminated, (g) simultaneously with the addition of any bank or financial institution pursuant to this Section 2.20, the Borrower will cause such bank or financial institution 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 its Commitment hereunder constitutes of all Commitments hereunder, unless the Short-Term Revolving Credit Agreement has been terminated, and (h) immediately prior to, or simultaneously with, any Increase pursuant to this Section 2.20, the Borrower will prepay in accordance with the terms of this Agreement, all outstanding A Advances, if any (including, without limitation, prepayment from the proceeds of any A Borrowing from the Lenders made on the date of such Increase in accordance with this Agreement and in accordance with their respective Commitments after giving effect to such Increase). The Borrower shall give the Agent ten Business Days' notice of the Borrower's intention to effect any Increase in the total Commitments pursuant to this Section 2.20. Such notice shall specify each new bank or other financial institution, if any, the changes in amounts of Commitments that will result, if any, and such other information as is reasonably requested by the Agent. Each new bank or other financial institution, and each Lender agreeing to increase its Commitment, shall execute and deliver to the Agent an Increase Agreement, substantially in the form of Exhibit F-1 hereto or Exhibit F-2 hereto, as the case may be, pursuant to which it becomes a party hereto or increases its -24- 29 Commitment, as the case may be. In addition, the Borrower shall execute and deliver an A Note in the principal amount of the Commitment of each new bank or other financial institution, or a replacement A Note in the principal amount of the increased Commitment of each Lender agreeing to increase its Commitment, as the case may be. Such A Notes and other documents of the nature referred to in Section 3.01 shall be furnished to the Agent in form and substance as may be reasonably required by it. Upon execution and delivery of such documents, such new bank or other financial institution shall constitute a "Lender" hereunder with a Commitment as specified therein, or such Lender's Commitment shall increase as specified therein, as the case may be. Before effecting any Increase by addition of any new bank or other financial institution, the Borrower will first offer the Lenders, by notice to them, the right to participate in such Increase by increasing their respective Commitments, and each Lender electing to participate in such Increase shall have the right to participate in such Increase (by increasing its Commitment in accordance with, and subject to, this Section 2.20) on a ratable basis. ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement. This Agreement shall become effective when (i) it shall have been executed by the Borrower and the Agent, (ii) the 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 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 Agent and (except for the Notes) in sufficient copies for each Lender: (a) The A 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 date of effectiveness of this Agreement is other than the date hereof, certifying that the representations and warranties contained in Section 4.01 are true and correct as of such date of effectiveness. (d) A favorable opinion of the Borrower's Senior Vice President, Law or its Vice President, Law, in substantially the form of Exhibit G hereto. (e) A favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, in substantially the form of Exhibit H hereto. (f) A favorable opinion of Bracewell & Patterson, L.L.P., counsel for the Agent, in substantially the form of Exhibit I hereto. -25- 30 (g) A letter from the Process Agent, in substantially the form of Exhibit J hereto, agreeing to act as Process Agent and to forward forthwith all process received by it to the Borrower. SECTION 3.02. 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; (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, without limitation, 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 3.03. 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 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, but prior to such B Borrowing, the Agent shall have received a B Note executed by the Borrower payable to the order of such Lender for each of the one or more B Advances to be made by such Lender as part of such B Borrowing, in a principal amount equal to the principal amount of the B Advance to be evidenced thereby and otherwise on such terms as were agreed to for such B Advance in accordance with Section 2.19, (iii) on or before the date of such B Borrowing this Agreement shall have become effective pursuant to Section 3.01, and (iv) 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; -26- 31 (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, without limitation, 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 IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. 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 II 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 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, 1995 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 Agent and the Initial Lenders prior to the date hereof, fairly present the consolidated financial condition of the Borrower and such -27- 32 Subsidiaries as at December 31, 1995 and the consolidated results of their operations for such fiscal period, all in accordance with generally accepted accounting principles consistently applied. The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at March 31, 1996 and the related consolidated statements of income and cash flow for the three months then ended, copies of which have been furnished to the Agent and the Initial Lenders prior to the date hereof, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at March 31, 1996 and the consolidated results of their operations for such fiscal period, all in accordance with generally accepted accounting principles consistently applied, and since March 31, 1996 there has been no material adverse change in such condition or operations. (f) 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. (h) The Borrower and each Material Subsidiary have good title to their respective properties and assets, free and clear of all mortgages, liens and encumbrances, except for mortgages, liens and encumbrances (including covenants, restrictions, rights, easements and minor irregularities in title) which do not have a Material Adverse Effect or which are permitted by Section 5.02(a), and except that no representation or warranty is being made with respect to Margin Stock. (i) 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. (j) 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). (k) The statement of assets and liabilities of each Plan and the statements of changes in fund balance and in financial position, or the statement of changes in net assets available for plan benefits, for the most recent plan year for which an accountant's report with respect to such plan year has been prepared, copies of which have been furnished to the Agent, fairly present the financial condition of such Plan as at such date and the results of operations of such Plan for the plan year ended on such date. -28- 33 (l) Neither the Borrower nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan which, 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 $50,000,000. (m) 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). (n) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Advance will be used to extend credit to others (other than to any Subsidiary of the Borrower) for the purpose of purchasing or carrying Margin Stock. (o) 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. (p) 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 V COVENANTS OF THE BORROWER SECTION 5.01. 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, without limitation, 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. -29- 34 (c) Visitation Rights. At such reasonable times and intervals as the Agent or any of the Lenders (other than Designated Bidders) may desire, permit the 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 Agent or any Lender may, in addition to the other provisions of this subsection (c) and at such reasonable times and intervals as the 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 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 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. -30- 35 (g) Consolidated Tangible Net Worth. Maintain Consolidated Tangible Net Worth of not less than $1,300,000,000 at all times. (h) Subsidiary Dividends. Cause each Subsidiary to pay to the Borrower, or such Subsidiary's immediate parent company if such parent company is not the Borrower, such dividends as such Subsidiary may legally pay (giving due consideration to the rights of any minority shareholders) to the extent necessary to provide the Borrower with funds for the payment of its obligations under this Agreement and the Notes. SECTION 5.02. 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 capital stock of 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 of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) exceeding $200,000,000 at any one time; 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 date hereof 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 stock acquired after the date hereof of a corporation which has become or becomes a Subsidiary of the Borrower, 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; and D. Permitted Liens. (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, any Guaranty or, to the extent set forth in clause (1) below, any reimbursement obligation with respect to any letter of credit, unless, immediately after giving effect to such Debt, Guaranty or reimbursement obligation 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 and of letters of credit issued for the account of the Borrower and its consolidated Subsidiaries is less than 52.5% of Capitalization, provided that Debt for borrowed money either maturing within one year and evidenced -31- 36 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; and (2) with respect to any such Debt created, assumed or suffered to exist by a consolidated Subsidiary that is either a Subsidiary of the Borrower as of the date hereof or a Subsidiary of the Borrower acquired or created after the date hereof and owning a material portion of the consolidated operating assets existing at the date hereof 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 $400,000,000. (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 interest will be at least as great as its direct or indirect equity interest in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting a material portion of the book value of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, notwithstanding the foregoing, (i) assets restricted hereunder shall not include Margin Stock or inventory sold in the ordinary course of business, (ii) the Borrower or any Material Subsidiary may sell, lease or otherwise transfer the assets or capital stock of any Subsidiary that is not a Material Subsidiary as of the date of this Agreement, and (iii) the Borrower or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting a material portion of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, for purposes of this clause (iii), (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 furtherthat, no such sale, lease or other transfer shall be permitted by this clause (iii) 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 -32- 37 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 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 date hereof or any of its Subsidiaries hereafter created or acquired and owning a material portion of the consolidated operating assets existing at the date hereof 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) applicable to the stock of any Subsidiary of the Borrower the stock of 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 5.03. 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 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 (g) of Section 5.01 and 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 stocks; -33- 38 (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 stocks; (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 stockholders; (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 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 -34- 39 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 (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 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 VI EVENTS OF DEFAULT SECTION 6.01. 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 when 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 -35- 40 (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 Agent or by any Lender with a copy to the 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 of $50,000,000 or more, 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, or to permit the acceleration of, 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, without limitation, 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 of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced 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 -36- 41 process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced) 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 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; -37- 42 then, and in any such event, the 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 VII THE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the 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, without limitation, enforcement of this Agreement or collection of the Notes), the 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 Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The 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 7.02. Agent's Reliance, Etc. Neither the 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 Agent: (i) may treat the payee of any Note as the holder thereof until the 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 -38- 43 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 7.03. Citibank and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, Citibank 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 Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include Citibank in its individual capacity. Citibank 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 Citibank were not the Agent and without any duty to account therefor to the other Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the 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 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 7.05. INDEMNIFICATION. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE A NOTES THEN HELD BY EACH OF THEM (OR IF NO A NOTES ARE AT THE TIME OUTSTANDING OR IF ANY A 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 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 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 AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the 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 Agent acts in its capacity as Agent and is not reimbursed for such expenses by the Borrower. -39- 44 SECTION 7.06. Successor Agent. The 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 Agent. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Agent, then such retiring Agent may, on behalf of the Lenders, appoint a successor 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 Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article VII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. An amendment or waiver of any provision of this Agreement or the A 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, 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 III, (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 A Notes or any facility fees hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the A Notes or any facility fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the A 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 Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Agent under this Agreement or any Note. SECTION 8.02. 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 opposite its name on Schedule I hereto; if to any other Lender at its Domestic Lending Office specified in the Assignment and Acceptance or 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 Agent, in care of Citicorp North America, Inc., at 1200 Smith Street, Suite 2000, Houston, Texas 77002, Attention: Burlington Resources Inc., Account Officer, Telefax: (713) 654-2849; 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 -40- 45 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 Agent pursuant to Article II or VII shall not be effective until received by the Agent. A notice received by the Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the 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 8.03. No Waiver; Remedies. No failure on the part of any Lender or the 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 8.04. 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 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 Agent as to its rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including, without limitation, the related reasonable fees and out-of-pocket expenses of counsel for the 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 Agent and the Lenders (including reasonable counsel fees and expenses), 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 Agent), pay to the 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, without limitation, 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 AGENT, THE ARRANGER AND EACH LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT LIMITATION, FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO -41- 46 ANY ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE STOCK 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 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 AGENTS). SECTION 8.05. 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, without limitation, other rights of set-off) which such Lender may have. SECTION 8.06. 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 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 8.07. 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, without limitation, all or a portion of its Commitment, the A Advances owing to it and the A Note or A 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 B 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 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 Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any A Note or A Notes subject to such assignment and a processing and recordation fee of $3,000, -42- 47 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 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 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 Agent) an Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the 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 Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance, each Designation Agreement and each 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 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 A Note or A Notes subject -43- 48 to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit E 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 Agent in exchange for the surrendered A Note or A Notes a new A Note to the order of such Eligible Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a Commitment hereunder, a new A Note to the order of the assigning Lender in an amount equal to the Commitment retained by it hereunder. Such new A Note or A Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered A Note or A 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 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 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 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 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 Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the 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 Agent shall, if such Designation Agreement -44- 49 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, without limitation, 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, without limitation, 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 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 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, without limitation, 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. (k) Each Lender may assign to one or more Eligible Assignees any B Note or B Notes held by it. SECTION 8.08. Confidentiality. Each Lender and the 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 Affiliate's, 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 -45- 50 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 containing provisions substantially similar to those contained in this Section 8.08; provided, however, that the Borrower acknowledges that the Agent has disclosed and may continue to disclose such information as the Agent in its sole discretion determines is appropriate to the Lenders from time to time. SECTION 8.09. 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 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. The Borrower hereby irrevocably appoints CT Corporation System (the "Process Agent"), with an office on the date hereof at 1633 Broadway, New York, New York 10019, as its agent to receive on behalf of the Borrower and its property service of copies of the summons and complaint and any other process which may be served by the Agent, the Arranger, any Lender or the holder of any Note in any such action or proceeding in any aforementioned court in respect of Permitted Claims. Such service may be made by delivering a copy of such process to the Borrower by courier and by certified mail (return receipt requested), fees and postage prepaid, both (i) in care of the Process Agent at the Process Agent's above address and (ii) at the Borrower's address specified pursuant to Section 8.02, and the Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. 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 Agent to 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 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. -46- 51 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 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 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. 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 ------------------------ Everett D. DuBois Senior Vice President and Treasurer CITIBANK, N.A., as Agent By: /s/ ALAN J. BERENBAUM ------------------------ Name: Alan J. Berenbaum ---------------------- Title: Attorney-In-Fact --------------------- Commitments The Initial Lenders ----------- ------------------- CITIBANK, N.A. $60,000,000 By: /s/ ALAN J. BERENBAUM ------------------------- Name: Alan J. Berenbaum ----------------------- Title: Attorney-In-Fact ---------------------- -47- 52 Commitments - ----------- MORGAN GUARANTY TRUST COMPANY OF NEW YORK $60,000,000 By: /s/ VERNON M. FORD, JR. ------------------------- Name: Vernon M. Ford, Jr. ----------------------- Title: Vice President ---------------------- NATIONSBANK OF TEXAS, N.A. $60,000,000 By: /s/ PAUL A. SQUIRES ------------------------- Name: Paul A. Squires ----------------------- Title: Senior Vice President ---------------------- THE CHASE MANHATTAN BANK, N.A. (formerly known as TEXAS COMMERCE BANK NATIONAL ASSOCIATION) $60,000,000 By: /s/ LORI VETTERS ------------------------- Name: Lori Vetters ----------------------- Title: Vice President ---------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION $42,000,000 By: /s/ RICHARD D. BLUTH ------------------------- Name: Richard D. Bluth ----------------------- Title: Vice President ---------------------- THE FIRST NATIONAL BANK OF BOSTON $42,000,000 By: /s/ GEORGE W. PASSELA ------------------------- Name: George W. Passela ----------------------- Title: Managing Director ---------------------- -48- 53 Commitments - ----------- THE BANK OF TOKYO - MITSUBISHI, LTD. - HOUSTON AGENCY (formerly known as THE BANK OF TOKYO, LTD.) $42,000,000 By: /s/ J. McINTYRE ------------------------------ Name: J. McIntyre ---------------------------- Title: Vice President --------------------------- MELLON BANK, N.A. $42,000,000 By: /s/ E. MARC CUENOD, JR. ------------------------------ Name: E. Marc Cuenod, Jr. ---------------------------- Title: Vice President --------------------------- TORONTO DOMINION (TEXAS), INC. $42,000,000 By: /s/ NEVA NESBITT ------------------------------ Name: Neva Nesbitt ---------------------------- Title: Vice President --------------------------- ABN AMRO BANK N.V. By: ABN AMRO NORTH AMERICA INC., as agent $25,000,000 By: /s/ W. BRYAN CHAPMAN ------------------------------ Name: W. Bryan Chapman ---------------------------- Title: Vice President and Director --------------------------- By: /s/ H. GENE SHIELS ------------------------------ Name: H. Gene Shiels ---------------------------- Title: Vice President and Director --------------------------- -49- 54 Commitments - ----------- CREDIT LYONNAIS NEW YORK BRANCH $25,000,000 By: /s/ JACQUES-YVES MULLIEZ ------------------------------ Name: Jacques-Yves Mulliez ---------------------------- Title: Senior Vice President --------------------------- WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION (formerly known as FIRST INTERSTATE BANK OF TEXAS, N.A.) $25,000,000 By: /s/ ANN M. RHOADS ------------------------------ Name: Ann M. Rhoads ---------------------------- Title: Vice President --------------------------- THE NORTHERN TRUST COMPANY $25,000,000 By: /s/ MERLON J. SCHUNEMAN ------------------------------ Name: Merlon J. Schuneman ---------------------------- Title: Vice President --------------------------- THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY $25,000,000 By: /s/ HATUMITSU SEID ------------------------------ Name: Hatumitsu Seid ---------------------------- Title: General Manager --------------------------- -50- 55 Commitments - ----------- UNION BANK OF SWITZERLAND $25,000,000 By: /s/ EVANS SWANN ---------------------------- Name: Evans Swann -------------------------- Title: Managing Director ------------------------- By: /s/ J. GEORGE KUBOVE ---------------------------- Name: J. George Kubove -------------------------- Title: Assistant Vice President ------------------------- $600,000,000 Total of the Commitments ============ -51- 56 EXHIBIT A A PROMISSORY NOTE U.S. $[Amount of Lender's Dated: ___________, 19__ Commitment] FOR VALUE RECEIVED, the undersigned, Burlington Resources Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of ________________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below) the principal sum of U.S. $[amount of the Lender's Commitment in figures] or, if less, the aggregate unpaid principal amount of all A Advances (as defined below) owing to the Lender by the Borrower pursuant to the Credit Agreement (as hereinafter defined) outstanding on the Termination Date (as defined in the Credit Agreement) on the Termination Date. The Borrower promises to pay interest on the unpaid principal amount of each A Advance from the date of such A Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement. Both principal and interest are payable in lawful money of the United States of America to Citibank, N.A., as Agent, at 399 Park Avenue, New York, New York 10043, in same day funds. All A Advances made by the Lender to the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this A Promissory Note; provided, however, that any failure to make such an endorsement on such grid shall in no way impair or otherwise effect the Borrower's obligations hereunder. This A Promissory Note is one of the A Notes referred to in, and is entitled to the benefits of, the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (as may be amended or otherwise modified from time to time, the "Credit Agreement") among the Borrower, the Lender, certain other lenders parties thereto, and Citibank, N.A., as Agent for the Lender and such other lenders. The Credit Agreement, among other things, (i) provides for the making of advances pursuant to Section 2.01 thereof (the "A Advances") by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such A Advance being evidenced by this A Promissory Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of 57 certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. BURLINGTON RESOURCES INC. By: __________________________ Name: ________________________ Title: ________________________ -2- 58 ADVANCES AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------------------- Amount of Amount of Principal Paid Unpaid Principal Notation Date Advance or Prepaid Balance Made By - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
59 EXHIBIT B B PROMISSORY NOTE U.S. $_______________ Dated: __________, 19__ FOR VALUE RECEIVED, the undersigned, Burlington Resources Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of _________________ (the "Lender") for the account of its Applicable Lending Office (as defined in the Credit Agreement referred to below), on __ ______, 19__, the principal amount of U.S. $_____________. The Borrower promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at the interest rate, subject to Section 2.06(b) of the Credit Agreement, and payable on the interest payment date or dates provided below: Interest Rate: ______% per annum (calculated on the basis of a year of ___ days for the actual number of days elapsed). Interest Payment Date or Dates: _____________ _____________ . Both principal and interest are payable in lawful money of the United States of America to the account of the Lender at the office of Citibank, N.A., as Agent, at 399 Park Avenue, New York, New York 10043, in same days funds, free and clear of and without any deduction, with respect to the payee named above, for any and all present and future taxes, deductions, charges or withholdings, and all liabilities with respect thereto. This B Promissory Note is one of the B Notes referred to in, and is entitled to the benefits of, the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (as may be amended or otherwise modified from time to time, the "Credit Agreement") among the Borrower, the Lender, certain other lenders parties thereto, and Citibank, N.A., as Agent for the Lender and such other lenders. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events. This B Promissory Note is not subject to prepayment except as set forth below: [insert applicable prepayment provisions, if any] ________________________________________________________ ________________________________________________________ ________________________________________________________ The Borrower hereby waives presentment, demand, protest and notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights. 60 This B Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. BURLINGTON RESOURCES INC. By: _________________________ Name: _______________________ Title: ______________________ -2- 61 EXHIBIT C NOTICE OF A BORROWING Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below c/o Citicorp North America, Inc. 1200 Smith Street, Suite 2000 Houston, Texas 77002 [Date] Attention: Burlington Resources Inc., Account Officer Ladies and Gentlemen: The undersigned, Burlington Resources Inc., refers to the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (as may be amended or otherwise modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests an A Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such A Borrowing (the "Proposed A Borrowing") as required by Section 2.02(a) of the Credit Agreement: (i) The Business Day of the Proposed A Borrowing is ___________, 19__. (ii) The Type of A Advances comprising the Proposed A Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. (iii) The aggregate amount of the Proposed A Borrowing is $___________. (iv)(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 Proposed A 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. 62 Citibank, N.A., as Agent [Date] (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of each such date; (b) no event has occurred and is continuing, or would result from the Proposed 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, without limitation, 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 that has been approved by the Board of Directors of the Borrower. Very truly yours, BURLINGTON RESOURCES INC. By: ________________________ Title: _____________________ -2- 63 EXHIBIT D NOTICE OF B BORROWING Citibank, N.A., as Agent for the Lenders parties to the Credit Agreement referred to below 399 Park Avenue New York, New York 10043 [Date] Attention: Burlington Resources Inc., Account Officer Gentlemen: The undersigned, Burlington Resources Inc., refers to the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (as may be amended or otherwise modified from time to time, the "Credit Agreement", the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives you notice pursuant to Section 2.19 of the Credit Agreement that the undersigned hereby requests a B Borrowing under the Credit Agreement, and in that connection sets forth the terms on which such B Borrowing (the "Proposed B Borrowing") is requested to be made: (A) Date of B Borrowing ____________________ (B) Proposed Amount of B Borrowing ____________________ (C) Maturity Date ____________________ (D) Interest Rate Basis ____________________ (E) Interest Payment Date(s) ____________________ (F) Proposed Amount of B Reduction ____________________ (G) _______________________ ____________________ (H) _______________________ ____________________ The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed B 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 of the Credit Agreement is correct in all material respects as though made on and as of each such date; 64 Citibank, N.A., as Agent [Date] (b) no event has occurred and is continuing, or would result from the Proposed 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 the Credit Agreement (including, without limitation, the Proposed 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 that has been approved by the Board of Directors of the Borrower. The undersigned hereby confirms that the Proposed B Borrowing is to be made available to it in accordance with Section 2.19(a)(v) of the Credit Agreement. Very truly yours, BURLINGTON RESOURCES INC. By: ________________________ Title: _____________________ -2- 65 EXHIBIT E ASSIGNMENT AND ACCEPTANCE Dated ___________, 19__ Reference is made to the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (as may be amended or otherwise modified from time to time, the "Credit Agreement") among Burlington Resources Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank, N.A., as Agent for the Lenders (the "Agent"). Capitalized terms defined in the Credit Agreement and not defined herein are used herein as therein defined. _____________________ (the "Assignor") and ___________________ (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, 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 and B Notes) which represents the percentage interest specified on Schedule 1 of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances and B Notes), including, without limitation, such interest in the Assignor's Commitment, the A Advances owing to the Assignor, and the A 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. 2. 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) attaches the A Note[s] referred to in paragraph 1 above and requests that the Agent exchange such A Note[s] for a new A Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto or new A Notes payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an 66 amount equal to the Commitment retained by the Assignor under the Credit Agreement, respectively, as specified on Schedule 1 hereto. 3. 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 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 Agent) an Eligible Assignee; (v) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the 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). 4. Following the execution of this Assignment and Acceptance by the Assignor and the Assignee and the execution of its consent hereto by the Borrower, the Assignor will deliver this Assignment and Acceptance to the Agent for acceptance and recording by the Agent. The effective date of this Assignment and Acceptance shall be the date of acceptance thereof by the Agent, unless otherwise specified on Schedule 1 hereto (the "Effective Date"). 5. Upon such acceptance and recording by the 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, the Assignor 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 Effective Date pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04 of the Agreement. ________________________ (1) If the Assignee is organized under the laws of a jurisdiction outside of the United States. -2- 67 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, 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. 7. 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 hereto have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. -3- 68 Schedule 1 to Assignment and Acceptance Dated _________, 19__ Section 1. Percentage Interest: ___________% Section 2. Assignee's Commitment: $__________ Aggregate Outstanding Principal Amount of Advances owing to the Assignee: $__________ Note payable to the order of the Assignee Dated: _________, 19___ Principal amount: _______ Note payable to the order of the Assignor Dated: _________, 19___ Principal amount: _______ Section 3. Effective Date(2): _________, 19___ [NAME OF ASSIGNOR] By:___________________________ Title: [NAME OF ASSIGNEE] By:_________________________ Title: ________________________ (2) This date should be no earlier than the date of acceptance by the Agent. -4- 69 Domestic Lending Office (and address for notices): [Address] Eurodollar Lending Office: [Address] Accepted this ____ day of ____________, 19__: CITIBANK, N.A. By:______________________ Name: ___________________ Title: __________________ Consented to this __ day of __________, 19__: BURLINGTON RESOURCES INC. By:______________________ Name: ___________________ Title: __________________ -5- 70 EXHIBIT F-1 COMMITMENT INCREASE AGREEMENT This Commitment Increase Agreement dated as of ________, 19__ (this "Agreement") is by and among (i) Burlington Resources Inc., a Delaware corporation ("Borrower"), (ii) Citibank, N.A. in its capacity as Agent under the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (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, Citibank, N.A. in such capacity and the lenders party thereto, 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 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 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. New Note. The Borrower agrees to promptly execute and deliver to the Increasing Lender an A Note in the amount of its increased Commitment set forth in Section 1 above (the "New Note"), and the Increasing Lender agrees to return to the Borrower, with reasonable promptness, the A Note previously delivered to the Increasing Lender by the Borrower. Section 3. Consent. The Agent hereby consents to the increase in the Commitment of the Increasing 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 71 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 Increasing Lender acknowledges that it has, independently and without reliance upon the 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 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. (d) No Increase (as defined in Section 2.20 of the Credit Agreement) in Commitments pursuant to this Agreement results in the total Commitments of all Lenders exceeding $800,000,000 or results in the aggregate amount of all Increases in the Commitments of all Lenders effectuated pursuant to Section 2.20 of the Credit Agreement since the date of the Credit Agreement exceeding $200,000,000. No prior Increase has taken effect during the calendar quarter that includes the effective date hereof. (e) The Borrower has outstanding public long-term senior unsecured debt securities that are rated by S&P or Moody's of which the lowest such rating by Moody's is A3 or better or of which the lowest such rating by S&P is A- or better. -2- 72 (f) No event has occurred and is continuing 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. (g) Immediately prior to, or simultaneously with, the Increase in Commitment pursuant to this Agreement, the Borrower has prepaid in accordance with the terms of the Credit Agreement, all outstanding A Advances, if any. (h) Unless the Short-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the Increasing Lender's "Commitment" (under and 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. (i) 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 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 Agent with respect thereto. Section 10. Effectiveness. When, and only when, the Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Agent and the Increasing Lender, this Agreement shall become effective as of the date first written above. -3- 73 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: _______________________ AGENT: CITIBANK, N.A., as Agent By: __________________________ Name: ________________________ Title: _______________________ INCREASING LENDER: ______________________________ By: __________________________ Name: ________________________ Title: _______________________ Attachment -4- 74 EXHIBIT F-2 NEW LENDER AGREEMENT This New Lender Agreement dated as of _______, 19__ (this "Agreement") is by and among (i) Burlington Resources Inc., a Delaware corporation ("Borrower"), (ii) Citibank, N.A. in its capacity as Agent under the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (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, Citibank, N.A. in such capacity and the lenders party thereto, 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 Agent pursuant to Section 2.20 of the Credit Agreement 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 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: 75 Section 2. New Note. The Borrower agrees to promptly execute and deliver to the New Lender an A Note in the amount of its Commitment set forth in Section 1 above ("New Note"). Section 3. Consent. The 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 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 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. -2- 76 (d) No Increase (as defined in Section 2.20 of the Credit Agreement) in Commitments pursuant to this Agreement results in the total Commitments of all Lenders exceeding $800,000,000 or results in the aggregate amount of all Increases in the Commitments of all Lenders effectuated pursuant to Section 2.20 of the Credit Agreement since the date of the Credit Agreement exceeding $200,000,000. No prior Increase has taken effect during the calendar quarter that includes the effective date hereof. (e) The Borrower has outstanding public long-term senior unsecured debt securities that are rated by S&P or Moody's of which the lowest such rating by Moody's is A3 or better or of which the lowest such rating by S&P is A- or better. (f) No event has occurred and is continuing 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. (g) Immediately prior to, or simultaneously with, the Increase in Commitments pursuant to this Agreement, the Borrower has prepaid in accordance with the terms of the Credit Agreement, all outstanding A Advances, if any. (h) 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. (i) 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. (j) 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 Agent in connection with the preparation, negotiation, execution and delivery of this -3- 77 Agreement and the New Note, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Agent with respect thereto. Section 10. Effectiveness. When, and only when, the Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Agent and the New Lender, this Agreement shall become effective as of the date first written above. 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: _______________________ AGENT: CITIBANK, N.A., as Agent By: __________________________ Name: ________________________ Title: _______________________ NEW LENDER: ______________________________ By: __________________________ Name: ________________________ Title: _______________________ -4- 78 EXHIBIT G FORM OF OPINION OF SENIOR VICE PRESIDENT, LAW FOR BORROWER July 12, 1996 To each of the Lenders and the Agent Referred to Below c/o Citibank, N.A. 1200 Smith Street, Suite 2000 Houston, Texas 77002 Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.01(d) of the Second Amended and Restated Long-Term Revolving Credit Agreement, dated as of July 12, 1996 (the "Credit Agreement"), among Burlington Resources Inc., a Delaware corporation (the "Company"), the financial institutions party thereto (each a "Lender," and together the "Lenders"), and Citibank, N.A., as agent for the Lenders. 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 Company, and I, or attorneys over whom I exercise supervision, have acted as counsel for the Company 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 fifteen A Notes, executed by the Company; and (3) The other documents furnished by the Company 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 Company's ability to perform the Company'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 Company, certificates of public officials and of officers of the Company, 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 79 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 Company), 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 Company 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 Company 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 Company (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 Company of the Documents are within the Company's corporate powers and have been duly authorized by all necessary corporate action in respect of or by the Company (except to the extent that the Company 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 Company's Certificate of Incorporation or By-Laws, in each case as amended, (ii) any federal law, rule or regulation applicable to the Company (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 Company. The Documents have been duly executed and delivered on behalf of the Company. -2- 80 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 Company of the Documents, except those required in the ordinary course of business in connection with the performance by the Company 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 Company 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 Company 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 -3- 81 EXHIBIT H FORM OF OPINION OF JONES, DAY, REAVIS & POGUE, NEW YORK COUNSEL FOR BORROWER July 12, 1996 To Each of the Lenders and the Agent Referred to Below c/o Citicorp North America, Inc. 1200 Smith Street Suite 2000 Houston, Texas 77002 Re: Burlington Resources Inc. Ladies and Gentlemen: We have acted as special New York counsel for Burlington Resources Inc., a Delaware corporation (the "Borrower"), in connection with the Second Amended and Restated Long-Term Revolving Credit Agreement, dated as of July 12, 1996 (the "Long-Term Revolving Credit Agreement"), among the Borrower, the financial institutions party thereto (each a "Lender," and together the "Lenders"), and Citibank, N.A., as agent for the Lenders (in such capacity, the "Agent"). This opinion is delivered to you pursuant to Section 3.01(e) of the Long-Term Revolving Credit Agreement. All capitalized terms used herein that are defined in, or by reference in, the Long-Term Revolving 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 Long-Term Revolving Credit Agreement; and (b) A facsimile of an executed copy of each of the fifteen A Notes; and 82 (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. 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 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 Long-Term Revolving Credit Agreement and the applications of the proceeds thereof as provided in the Long-Term Revolving Credit Agreement will not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. -2- 83 The opinions set forth above are subject to the following qualifications: (A) We express no opinion as to: (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 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. -3- 84 (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 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 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 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 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 Long-Term Revolving 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. 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, as currently in effect. The opinions expressed herein are solely for the benefit of the 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 -4- 85 ANNEX A to the Opinion dated July 12, 1996 of Jones, Day, Reavis & Pogue, New York Counsel for Borrower OFFICER'S CERTIFICATE I, L. David Hanower, Senior Vice President, Law of Burlington Resources Inc., a Delaware corporation (the "Company"), hereby certify, for and on behalf of the Company, in connection with the legal opinion of Jones, Day, Reavis & Pogue delivered pursuant to the Second Amended and Restated Long-Term Revolving Credit Agreement, dated as of July 12, 1996, among the Company, the financial institutions party thereto (the "Lenders"), and Citibank, N.A., as Agent for the Lenders, that the Company does not, to the best of my knowledge and belief, engage or propose to engage in any industry or business, or own, lease or maintain any property or asset in the State of New York. IN WITNESS WHEREOF, I have executed this Certificate on the 12th day of July, 1996. ______________________________________ L. David Hanower Senior Vice President, Law -5- 86 EXHIBIT I FORM OF OPINION OF COUNSEL TO CITIBANK, N.A., AS AGENT July 12, 1996 To the Lenders listed on Annex A hereto and to Citibank, N.A., as Agent c/o Citicorp North America, Inc. 1200 Smith Street, Suite 2000 Houston, Texas 77002 Re: Burlington Resources Inc. Ladies and Gentlemen: We have acted as counsel to Citibank, N.A., individually and as Agent, in connection with the preparation, execution and delivery of the Second Amended and Restated Long-Term Revolving Credit Agreement dated as of July 12, 1996 (the "Credit Agreement") among Burlington Resources Inc. (the "Borrower") and each of you. Terms defined in the Credit Agreement are used herein as therein defined. In that connection, we have examined the following documents: (1) Counterparts of the Credit Agreement executed by the Borrower and the Agent. (2) The documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement and listed on Annex B hereto, including the opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, and the opinion of L. David Hanower, Esq., the Senior Vice President, Law of the Borrower. In our examination of the documents referred to above, we have assumed the authenticity of all such documents submitted to us as originals, the genuineness of all signatures, the due authority of the parties executing such documents, and the conformity to the originals of all such documents submitted to us as copies. We have relied as to factual matters on the documents we have examined. While we are not expressing to you any opinion or conclusion with respect to the matters covered by the opinions of Jones, Day, Reavis & Pogue and of L. David Hanower, Esq. referred 87 To the Lenders listed on Exhibit A hereto and to Citibank, N.A., as Agent July 12, 1996 Page 2 to above, we call to your attention the various qualifications and exceptions set forth in such opinions. Based on and subject to the foregoing, we are of the opinion that the documents listed on Annex B hereto are substantially responsive to the requirements of Section 3.01 of the Credit Agreement. Very truly yours, BRACEWELL & PATTERSON, L.L.P. 88 ANNEX A to the Opinion dated July 12, 1996 of Bracewell & Patterson, L.L.P. Lenders Citibank, N.A. Morgan Guaranty Trust Company of New York NationsBank of Texas, N.A. The Chase Manhattan Bank, N.A. Bank of America National Trust and Savings Association The First National Bank of Boston The Bank of Tokyo - Mitsubishi, Ltd. - Houston Agency Mellon Bank, N.A. Toronto Dominion (Texas), Inc. ABN AMRO Bank N.V. Credit Lyonnais New York Branch Wells Fargo (Texas), National Association The Northern Trust Company The Sumitomo Bank, Limited, Houston Agency Union Bank of Switzerland 89 ANNEX B to the Opinion dated July 12, 1996 of Bracewell & Patterson, L.L.P. Documents 1. The fifteen A Notes dated July 12, 1996, one such A Note payable to the order of each of the respective Lenders. 2. The opinion dated July 12, 1996 of L. David Hanower, Esq., the Senior Vice President, Law of the Borrower. 3. The opinion dated July 12, 1996 of Jones, Day, Reavis & Pogue, New York counsel to the Borrower. 4. A certified copy of the resolutions of the Board of Directors of the Borrower. 5. A certificate of the Assistant Secretary of the Borrower certifying names and true signatures of officers of the Borrower. 6. The letter from CT Corporation System dated July ____, 1996. 90 EXHIBIT J FORM OF PROCESS AGENT LETTER July 12, 1996 To each of the Lenders party to the Credit Agreement (as defined and referred to below) and to Citibank, N.A., as Agent for said Lenders c/o Citibank, N.A. 399 Park Avenue New York, NY 10043 To Burlington Resources Inc. 5051 Westheimer, Suite 1400 Houston, Texas 77056 Re: Burlington Resources Inc. Ladies and Gentlemen: Reference is made to the $600,000,000 Amended and Restated Long-Term Revolving Credit Agreement, dated as of July 14, 1995, which has been amended and restated in its entirety by the Second Amended and Restated Long-Term Revolving Credit Agreement, dated as of July 12, 1996 (as may be amended or otherwise modified from time to time, the "Credit Agreement", the capitalized terms defined therein and not defined herein being used herein as therein defined), among Burlington Resources Inc. (the "Borrower"), certain financial institutions from time to time party thereto as Lenders thereunder (the "Lenders") and Citibank, N.A., as agent (the "Agent") for the Lenders. Pursuant to Section 8.09(a) of the Credit Agreement, the Borrower has appointed the undersigned (with an office on the date hereof at 1633 Broadway, New York, New York 10019) as Process Agent to receive, on behalf of the Borrower and its property, service of copies of the summons and complaint and any other process which may be served by the Agent, the Arranger, any Lender or the holder of any Note in any action or proceeding by the Agent, the Arranger, any Lender or the holder of any Note in any New York State or Federal court sitting in New York City in respect of, but only in respect of, any claims or causes of action arising out of or relating to the Credit Agreement and the Notes issued pursuant thereto. The undersigned hereby accepts such appointment as Process Agent and agrees with each of you that (i) it will not terminate its agency as such Process Agent prior to July 20, 2001 (and hereby 91 To each of the Lenders party to the Credit Agreement (referred to below) and to Citibank, N.A., as Agent for said Lenders, and to Burlington Resources Inc. July __, 1996 Page 2 acknowledges that it has been paid in full by the Borrower for its services as Process Agent through such date), (ii) it will maintain an office in New York City through such date and will give the Agent prompt notice of any change of its address, (iii) it will perform its duties as Process Agent in accordance with Section 8.09(a) of the Credit Agreement and (iv) it will forward forthwith to the Borrower at the Borrower's address specified in Section 8.02 of the Credit Agreement copies of any summons, complaint and other process which it receives in connection with its appointment as Process Agent. This agreement shall be binding upon the undersigned and all successors of the undersigned. Very Truly Yours, CT CORPORATION SYSTEM By: __________________________ Name: ________________________ Title: _______________________ 92 EXHIBIT K DESIGNATION AGREEMENT Dated __________, 19__ Reference is made to the Second Amended and Restated Long-Term Credit Agreement dated as of July 12, 1996 (as amended or otherwise modified from time to time, the "Credit Agreement") among Burlington Resources Inc., a Delaware corporation (the "Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank, N.A., as Agent for the Lenders (the "Agent"). 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 hereby 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 warranty 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 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 Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the 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. 93 4. Following the execution of this Designation Agreement by the Designator, the Designee and the Borrower, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date of this Designation Agreement shall be the date of acceptance thereof by the Agent, unless otherwise specified on the signature page hereto (the "Effective Date"). 5. Upon such acceptance and recording by the 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(1): ____________, 19___ [NAME OF DESIGNATOR] By: _______________________ Name: _____________________ Title: ____________________ [NAME OF DESIGNEE] By: _______________________ Name: _____________________ Title: ____________________ Applicable Lending Office (and addresses for notices) [Address] ________________________ (1) This date should be no earlier than the date of acceptance by the Agent. -2- 94 BURLINGTON RESOURCES INC. By: _______________________ Name: _____________________ Title: ____________________ Accepted and Approved this ___ day of __________, 19__ CITIBANK, N.A., as Agent By: _______________________ Title: -3- 95 SCHEDULE II MATERIAL SUBSIDIARIES Meridian Oil Inc. 96 SCHEDULE III =================================================================================================================================== LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 Borrower's public long- Borrower's public long- Borrower's public long- Borrower's public long- BASIS FOR term senior unsecured term senior unsecured term senior unsecured term senior unsecured PRICING debt securities rated A debt securities rated less debt securities rated less debt securities rated less or better by S&P And than Level 1 but at least than Level 2 but at least than Level 3 but at least A2 or better by Moody's BBB+ by S&P And at BBB by S&P And at least BBB- by S&P And at least Baa1 by Moody's Baa2 by Moody's least Baa3 by Moody's - ------------------------------------------------------------------------------------------------------------------------------------ Facility Fee(1) 8.0 bps 10.0 bps 12.0 bps 14.0 bps - ------------------------------------------------------------------------------------------------------------------------------------ LIBOR Applicable 19.5 bps 20.0 bps 23.0 bps 31.0 bps Margin ==================================================================================================================================== ========================================== LEVEL 5 Borrower's public long- term senior unsecured debt securities rated lower than Level 4 OR such securities are not rated by S&P or are not rated by Moody's - ------------------------------------------ 25.0 bps - ------------------------------------------ 50.0 bps ==========================================
bps = basis points (each basis point being 1/100% per annum) 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. If either S&P or Moody's has more than one rating for public long-term senior unsecured debt securities of the Borrower, the lowest such rating shall be applicable. ________________________ (1) Payable quarterly in arrears on each Lender's Commitment irrespective of usage. 97 SCHEDULE I APPLICABLE LENDING OFFICES
Name of Bank Domestic Lending Office Eurodollar Lending Office - ------------ ----------------------- ------------------------- ABN AMRO Bank N.V. ABN AMRO Bank N.V. ABN AMRO Bank N.V. Three Riverway, Suite 1700 Three Riverway, Suite 1700 Houston, Texas 77056 Houston, Texas 77056 Attention: W. Bryan Chapman Attention: W.Bryan Chapman Telephone: (713) 964-3361 Telephone: (713) 964-3361 Telecopy: (713) 629-7533 Telecopy: (713) 629-7533 Bank of America National Bank of America National Trust and Bank of America National Trust and Trust and Savings Savings Association Savings Association Association 1850 Gateway Boulevard 1850 Gateway Boulevard Concord, California 94520 Concord, California 94520 Attention: Camille Gibby Attention: Camille Gibby Telephone: (510) 675-7759 Telephone: (510) 675-7759 Telecopy: (510) 675-7531 Telecopy: (510) 675-7531 Citibank, N.A. Citibank, N.A. Citibank, N.A. 399 Park Avenue 399 Park Avenue New York, New York 10043 New York, New York 10043 Attention: Petroleum Metals and Attention: Petroleum Metals and Mining Mining Telephone: (713) 654-2887 Telephone: (713) 654-2887 Telecopy: (212) 832-9857 Telecopy: (212) 832-9857 with a copy to: with a copy to: Citibank, N.A. Citibank, N.A. c/o Citicorp North America, Inc. c/o Citicorp North America, Inc. 1200 Smith St., 20th Floor 1200 Smith St., 20th Floor Houston, Texas 77002 Houston, Texas 77002 Attn: L. Don Miller Attn: L. Don Miller Telephone: (713) 654-2962 Telephone: (713) 654-2962 Telecopy: (713) 654-2849 Telecopy: (713) 654-2849
98
Name of Bank Domestic Lending Office Eurodollar Lending Office - ------------ ----------------------- ------------------------- Credit Lyonnais New York Credit Lyonnais New York Branch Credit Lyonnais New York Branch Branch 1301 Avenue of Americas 1301 Avenue of Americas New York, New York 10019 New York, New York 10019 Attention: Loan Servicing Attention: Loan Servicing Telephone: (212) 261-7000 Telephone: (212) 261-7000 Telecopy: (212) 459-3180 Telecopy: (212) 459-3100 with a copy to: with a copy to: Credit Lyonnais Rep Office Credit Lyonnais Rep Office 1000 Louisiana, Suite 5360 1000 Louisiana, Suite 5360 Houston, Texas 77002 Houston, Texas 77002 Attention: John M. Falbo Attention: John M. Falbo Telephone: (713) 751-0500 Telephone: (713) 751-0500 Telecopy: (713) 751-0307 Telecopy: (713) 751-0307 Wells Fargo Bank (Texas), Wells Fargo Bank (Texas), Wells Fargo Bank (Texas), National Association National Association National Association 1000 Louisiana, 3rd Floor 1000 Louisiana, 3rd Floor Houston, Texas 77002 Houston, Texas 77002 Attention: Ms. Ann Rhoads Attention: Ms. Ann Rhoads Telephone: (713) 250-4327 Telephone: (713) 250-4327 Telecopy: (713) 250-6933 Telecopy: (713) 250-6933 Mellon Bank, N.A. Mellon Bank, N.A. Mellon Bank, N.A. 3 Mellon Bank Ctr, Rm 2332 3 Mellon Bank Ctr, Rm 2332 Pittsburgh, PA. 15259 Pittsburgh, PA. 15259 Attention: Cathy Fisher Attention: Cathy Fisher Telephone: (412) 234-3698 Telephone: (412) 234-3698 Telecopy: (412) 234-5049 Telecopy: (412) 234-5049 with a copy to: with a copy to: Mellon Bank, N.A. Mellon Bank, N.A. 1100 Louisiana, Suite 3600 1100 Louisiana, Suite 3600 Houston, Texas 77002 Houston, Texas 77002 Attention: Sushim R. Shah Attention: Sushim R. Shah Telephone: (713) 759-3050 Telephone: (713) 759-3050 Telecopy: (713) 650-3409 Telecopy: (713) 650-3409
-2- 99
Name of Bank Domestic Lending Office Eurodollar Lending Office - ------------ ----------------------- ------------------------- Morgan Guaranty Trust Morgan Guaranty Trust Company of Morgan Guaranty Trust Company of Company of New York New York New York 60 Wall Street 60 Wall Street New York, New York 10036 New York, New York 10036 Attention: Vernon M. Ford, Jr. Attention: Vernon M. Ford, Jr. Telephone: (212) 648-6985 Telephone: (212) 648-6985 Telecopy: (212) 648-5023 Telecopy: (212) 648-5023 with a copy to: with a copy to: Morgan Guaranty Trust Company of Morgan Guaranty Trust Company of New York New York 60 Wall Street 60 Wall Street New York, New York 10260 New York, New York 10260 Attention: Philip McNeal Attention: Philip McNeal Telephone: (212) 648-7181 Telephone: (212) 648-7181 Telecopy: (212) 648-5023 Telecopy: (212) 648-5023 NationsBank of Texas, N.A. NationsBank of Texas, N.A. NationsBank of Texas, N.A. 901 Main Street 901 Main Street P.O. Box 830104 P.O. Box 830104 Dallas, Texas 75283-0104 Dallas, Texas 75283-0104 Attention: Kyle Spicer Attention: Kyle Spicer Telephone: (214) 871-2600 Telephone: (214) 871-2600 Telecopy: (214) 508-1285 Telecopy: (214) 508-1285 The Chase Manhattan Bank, The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A. N.A. 707 Travis St., 5-TCB-N-86 707 Travis St., 5-TCB-N-86 Houston, Texas 77002 Houston, Texas 77002 Attention: Pam Shanks Attention: Pam Shanks Telephone: (713) 216-5733 Telephone: (713) 216-5733 Telecopy: (713) 236-4117 Telecopy: (713) 236-4117 The Bank of Tokyo - The Bank of Tokyo - Mitsubishi, The Bank of Tokyo - Mitsubishi, Mitsubishi, Ltd. - Houston Ltd. Ltd. Agency 1000 Louisiana Street, Suite 2800 1000 Louisiana Street, Suite 2800 Houston, Texas 77002-5216 Houston, Texas 77002-5216 Attn: John M. McIntyre Attn: John M. McIntyre Telephone: (713) 655-3845 Telephone: (713) 655-3845 Telecopy: (713) 655-3855 Telecopy: (713) 655-3855 The First National Bank of The First National Bank of Boston The First National Bank of Boston Boston 100 Federal Street, Mailstop 100 Federal Street, Mailstop 01-08-02 01-08-02 Boston, Massachusetts 02110 Boston, Massachusetts 02110 Attention: Douglas Novitch Attention: Douglas Novitch Telephone: (617) 434-4843 Telephone: (617) 434-4843 Telecopy: (617) 434-3652 Telecopy: (617) 434-3652
-3- 100
Name of Bank Domestic Lending Office Eurodollar Lending Office - ------------ ----------------------- ------------------------- The Northern Trust The Northern Trust Company The Northern Trust Company Company 50 S. LaSalle Street 50 S. LaSalle Street Chicago, Illinois 60675 Chicago, Illinois 60675 Attention: John Fumagalli Attention: John Fumagalli Telephone: (312) 444-5051 Telephone: (312) 444-5051 Telecopy: (312) 630-1566 Telecopy (312) 630-1566 The Sumitomo Bank, The Sumitomo Bank, Limited, The Sumitomo Bank, Limited, Limited, Houston Agency Houston Agency Houston Agency NationsBank Center NationsBank Center 700 Louisiana, Suite 1750 700 Louisiana, Suite 1750 Houston, Texas 77002 Houston, Texas 77002 Attn: William McKown, III Attn: William McKown, III Telephone: (713) 759-0136 Telephone: (713) 759-0136 Telecopy: (713) 759-0020 Telecopy: (713) 759-0020 Toronto Dominion Toronto Dominion (Texas), Inc. Toronto Dominion (Texas), Inc. (Texas), Inc. 909 Fannin Street 909 Fannin Street Houston, Texas 77010 Houston, Texas 77010 Attention: Neva Nesbitt Attention: Neva Nesbitt Telephone: (713) 653-8261 Telephone: (713) 653-8261 Telecopy: (713) 951-9921 Telecopy: (713) 951-9921 Union Bank of Switzerland Union Bank of Switzerland Union Bank of Switzerland 299 Park Avenue 299 Park Avenue New York, New York 10171 New York, New York 10171 Attention: James Broadus Attention: James Broadus Telephone: (212) 821-3227 Telephone: (212) 821-3227 Telecopy: (212) 821-3891 Telecopy: (212) 821-3891 with a copy to: with a copy to: Union Bank of Switzerland Union Bank of Switzerland 1100 Louisiana, Suite 4500 1100 Louisiana, Suite 4500 Houston, Texas 77005 Houston, Texas 77005 Attention: Evans Swann Attention: Evans Swann Telephone: (713) 655-6500 Telephone: (713) 655-6500 Telecopy: (713) 655-6555 Telecopy: (713) 655-6555
-4- EX-11.1 10 EARNINGS (LOSS) PER SHARE 1 EXHIBIT 11.1 BURLINGTON RESOURCES INC. EARNINGS (LOSS) PER SHARE
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- 1996 1995 1994 ---------------------- -------------------- ---------------------- EARNINGS SHARES LOSS SHARES EARNINGS SHARES -------- ----------- ------ ----------- -------- ----------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Primary earnings (loss) per common share Net earnings (loss) available for common stock and weighted average common shares outstanding............. $ 255 125,606,895 $ (280) 126,553,144 $ 154 128,405,706 Stock options assumed exercised-net........... - 595,209 - 482,243 - 628,371 ----- ----------- ------ ----------- ----- ----------- Total net earnings (loss) and primary common shares.................. $ 255 126,202,104 $ (280) 127,035,387 $ 154 129,034,077 ===== =========== ====== =========== ===== =========== Primary earnings (loss) per common share............ $2.02 $(2.20) $1.20 ===== ====== ===== Fully diluted earnings (loss) per common share Net earnings (loss) available for common stock and weighted average common shares outstanding............. $ 255 125,606,895 $ (280) 126,553,144 $ 154 128,405,706 Stock options assumed exercised-net........... - 945,424 - 550,806 - 628,371 ----- ----------- ------ ----------- ----- ----------- Total net earnings (loss) and fully diluted common shares.................. $ 255 126,552,319 $ (280) 127,103,950 $ 154 129,034,077 ===== =========== ====== =========== ===== =========== Fully diluted earnings (loss) per common share................... $2.02 $(2.20) $1.20 ===== ====== =====
EX-12.1 11 RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 BURLINGTON RESOURCES INC. RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ----------------------------------------- 1996 1995 1994 1993 1992 ------ ----- ------ ------ ------ (IN MILLIONS, EXCEPT RATIO AMOUNTS) Earnings Income (Loss) Before Income Taxes.......................... $ 307 $(577) $ 90 $ 307 $ 218 Add Interest and fixed charges................... 113 109 90 73 79 Portion of rent under long-term operating leases representative of an interest factor..................................... 6 5 5 5 4 ------ ----- ------ ------ ------ Total Earnings Available for Fixed Charges...... $ 426 $(463) $ 185 $ 385 $ 301 ====== ===== ====== ====== ====== Fixed Charges Interest and fixed charges...................... $ 113 $ 109 $ 90 $ 73 $ 79 Portion of rent under long-term operating leases representative of an interest factor......... 6 5 5 5 4 Capitalized interest............................ 3 3 1 3 3 ------ ----- ------ ------ ------ Total Fixed Charges............................. $ 122 $ 117 $ 96 $ 81 $ 86 ====== ===== ====== ====== ====== Ratio of Earnings to Fixed Charges(1)............. 3.49x - 1.92x 4.79x 3.49x
- --------------- (1) Total Earnings Available for Fixed Charges in 1995 are inadequate to cover Total Fixed Charges in the amount of approximately $580 million. EX-21.1 12 SUBSIDIARIES OF 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 Hydrocarbons Inc. (formerly known as Meridian Oil Hydrocarbons Inc.)........................... Delaware 100% Burlington Resources Oil & Gas Company (formerly known as Meridian Oil Inc.)........................................ Delaware 100% Burlington Resources Trading Inc. (formerly known as Meridian Oil Trading Inc.)................................ Delaware 100% Glacier Park Company........................................ Delaware 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 13 CONSENT OF COOPERS & LYBRAND L.L.P. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Burlington Resources Inc. 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 and 333-02029) and on Form S-3 (Registration Nos. 33-50077 and 33-54477) of our report dated January 15, 1997, on our audits of the consolidated financial statements of Burlington Resources Inc. as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, which report is included in this 1996 Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. February 12, 1997 Houston, Texas EX-27.1 14 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS DEC-31-1996 DEC-31-1996 68 0 338 0 18 442 6,328 2,548 4,316 368 0 0 0 2 2,331 4,316 1,293 1,293 875 875 (2) 0 113 307 52 255 0 0 0 255 2.02 2.02
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