-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, krQXpK3i16EL+UaHXxpFxzuFRXs5vQPGRoLrDxooh1r34HD4koArwwW5142y3Q/B zTSsIiARUPcQyE3+9TIccQ== 0000950123-95-000250.txt : 19950515 0000950123-95-000250.hdr.sgml : 19950515 ACCESSION NUMBER: 0000950123-95-000250 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950209 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: 95507191 BUSINESS ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: SUITE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136249500 MAIL ADDRESS: STREET 1: 999 THIRD AVENUE CITY: SEATTLE STATE: WA ZIP: 98104-4097 10-K405 1 BURLINGTON RESOURCES INC. 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 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, 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, 1994: $4,427,813,600 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, 1994, Shares Outstanding: 126,508,960 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....................................................................... 9 Item Three Legal Proceedings............................................................... 9 Item Four Submission of Matters to a Vote of Security Holders............................. 9 Executive Officers of the Registrant............................................ 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.................... 16 Item Nine Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................................................... 35 PART III Items Ten and Eleven Directors and Executive Officers of the Registrant and Executive Compensation... 35 Item Twelve Security Ownership of Certain Beneficial Owners and Management.................. 35 Item Thirteen Certain Relationships and Related Transactions.................................. 35 PART IV Item Fourteen Exhibits, Financial Statement Schedules and Reports on Form 8-K................. 36
3 PART I ITEMS ONE AND TWO BUSINESS AND PROPERTIES Burlington Resources Inc. ("BR") is a holding company engaged, through its principal subsidiary, Meridian Oil Inc. and its affiliated companies (together the "Company"), in the exploration, development and production of oil and gas, and related marketing activities, which include aggregation and resale of third party 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 6.6 TCFE at December 31, 1994. 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 9. GENERAL INFORMATION The Company's objective is to build long-term shareholder value by continuing to grow and enhance its asset base. To achieve this objective, the Company's strategy is to increase production, reserves, earnings and cash flow through acquisitions, development and exploration of high potential properties and application of advanced technologies. The Company is engaged in oil and gas operations located principally in the San Juan Basin, the Gulf Coast Basin, the Permian Basin, the Anadarko Basin, the Black Warrior Basin and the Williston Basin. 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. SAN JUAN BASIN. The San Juan Basin is the Company's most prolific operating area in terms of reserves and production. The San Juan Basin, located in northwest New Mexico and southwest Colorado, 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 mineral acreage in this area with over 1 million net acres under its control. The Company has an interest in over 11,000 wells and currently operates approximately 7,200 of these wells. Approximately 61 percent of the Company's reserves are located in this basin. The Company's daily net production at year end 1994 in this basin exceeded 650 MMCF of gas per day, representing approximately 60 percent of the Company's total daily gas production at year end 1994. The four significant gas producing horizons in the San Juan Basin, 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 gas which is adsorbed to the surface of coal seams. The Company has been an industry leader in the development of the Fruitland Coal formation. The Company's net coal seam production from approximately 1,200 wells exceeded 350 MMCF of gas per day at year end 1994. 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 400 miles of gathering lines and eight compressor stations to gather and treat coal seam gas in the San Juan Basin. The Company also owns and operates a fractionation plant located in McKinley County, New Mexico. 1 4 GULF COAST BASIN. The Gulf Coast Basin includes onshore and offshore oil and gas deposits along virtually all of the states bordering the Gulf of Mexico. The area encompasses about 250,000 square miles and is one of the most heavily explored oil and gas basins in the world. The complex geologic conditions and multiple prospective oil and gas formations, encountered as deep as 25,000 feet, make this an attractive area for the application of advanced technologies such as 3D seismic, computerized modeling and horizontal drilling. Offshore 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. The Company has an interest in 99 leases in offshore Federal and State waters and operates 40 of these leases. As of year end 1994, total net production attributable to offshore properties was over 110 MMCF of gas per day and 5 MBbls of oil per day. Onshore The Company's onshore activities in the Gulf Coast Basin are primarily concentrated in the Luling and Darst Creek Fields and the West Ranch area located in south Texas. The Company has been actively applying horizontal drilling technology in the Edwards formation of the Luling and Darst Creek Fields to enhance production from this mature area. During 1994, 11 horizontal wells were drilled in these fields at a net cost of approximately $3 million. As of year end 1994, net production from the Luling and Darst Creek Fields was approximately 4 MBbls of oil per day, with 43 percent of this production attributable to horizontal wells drilled since these properties were acquired in 1989. PERMIAN BASIN. The Company is an active operator in the Permian Basin, which 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 12,000 Permian Basin wells and operates over 3,000 of these wells resulting in net production at year end 1994 of approximately 17 MBbls of oil per day and 140 MMCF of gas per day. The most productive structural feature in the Permian Basin is the Central Basin Platform in which the Company controls over 158,000 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 Waddell Ranch, located 40 miles west of Midland, Texas, is the largest consolidated block of acreage in this basin in which the Company has an interest. The Company operates over 1,600 wells in the Waddell Ranch resulting in net production of approximately 4 MBbls of oil per day and 21 MMCF of gas per day at year end 1994. The Val Verde Basin is a 7,000 square mile sub-basin of the Permian Basin located about 125 miles southeast of Midland, Texas. The Company has utilized advanced reservoir stimulation technology which primarily consists of modern hydraulic fracturing techniques in the Canyon Sand trend of this basin. During 1994, the Company participated in the drilling of 50 wells at a net cost of approximately $17 million. As of year end 1994, the Company operated over 480 wells in the Canyon Sand trend with net production of approximately 50 MMCF of gas per day. Another producing area in the Permian Basin is the Delaware Sand trend located in southeast New Mexico covering approximately 2,300 square miles. The Company controls approximately 74,000 net acres within this trend. Wells in this trend typically produce from multiple horizons and the area is prospective for both oil and gas. Productive zones range in depth from 3,000 feet to 22,000 feet. The Company's 1994 activity focused on the development of oil from the Delaware Sand trend at a depth of approximately 8,500 feet. During 1994, the Company participated in the drilling of 30 Delaware Sand wells at a net cost of approximately $18 million. 2 5 The application of three dimensional ("3D") seismic technology has become an effective exploitation tool in the Permian Basin due to the complex geologic nature of this area. In 1994, over 170 square miles were surveyed for a total investment of approximately $5 million. The analysis of this data has resulted in the drilling of 10 wells including 2 horizontal wells. Additional 3D seismic data is continually being acquired in order to exploit new and existing oil and gas opportunities. ANADARKO BASIN. The Anadarko Basin, located in the western portion of Oklahoma, the Texas panhandle and southwestern Kansas, 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 520,000 net acres with the majority located in western Oklahoma. As of year end 1994, the Company operated 828 wells in this basin and total net production was over 130 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 3D 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 1994, the Company participated in the drilling of 40 wells to these formations at a net cost of approximately $23 million. BLACK WARRIOR BASIN. The Black Warrior Basin covers approximately 35,000 square miles extending across northwest Alabama and northeast Mississippi. The basin produces from both conventional and coal seam gas formations. In 1994, the Company divested nearly all of its wells and gathering systems associated with conventional producing formations in this basin. The Company's current operations are primarily concentrated on developing coal seam gas reserves. The Company controls over 138,000 net acres in the coal seam gas play near Tuscaloosa, Alabama and currently has approximately 20,000 net acres developed with 128 wells producing over 14 MMCF of gas per day at year end 1994. During 1994, the Company participated in the drilling of 52 coal seam wells in the Black Warrior Basin at a net cost of approximately $20 million. WILLISTON BASIN. The Williston Basin encompasses approximately 225,000 square miles in western North Dakota, northwest South Dakota, northeast Montana and Saskatchewan Province, Canada. The Williston Basin has 18 producing horizons ranging in depth from 4,500 feet to over 15,000 feet. The Company controls over 3 million net acres, primarily in the U.S. portion of the basin, through both mineral and leasehold interests. The Company continues its development activity in the Williston Basin of North Dakota and the adjacent Cedar Creek anticline of Montana through the use of horizontal drilling technology. During 1994, the Company participated in the completion of 34 horizontal wells in the two trends at a net cost of approximately $27 million. SECTION 29 TAX CREDITS A number of formations located within the Company's producing areas have wells that may 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, or tight sands formations. The Company estimates that the tax credit rate will range from $.52 to $1.01 per million British Thermal Unit depending on fuel source. The Company earned approximately $84 million of tax credits in 1994. 3 6 CAPITAL EXPENDITURES AND MAJOR PROJECTS The Company's capital expenditures were as follows:
YEAR ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) Oil and Gas Activities........................... $810,466 $501,191 $253,658 Plants and Pipelines............................. 36,026 33,327 49,423 Administrative................................... 35,153 18,866 12,366 -------- -------- -------- Total.................................. $881,645 $553,384 $315,447 ======== ======== ========
Capital expenditures for oil and gas activities in 1994 of $810 million include 59 percent for proved property acquisitions, 34 percent for developmental drilling and 7 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 1994 was principally in the San Juan, Gulf Coast, Permian, Anadarko, Black Warrior and Williston basins. The following table sets forth the Company's net productive and dry wells.
YEAR ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 ------ ------ ------ Productive wells: Exploratory.............................. 15.9 7.2 5.6 Development.............................. 342.2 243.7 107.3 ----- ----- ----- 358.1 250.9 112.9 ----- ----- ----- Dry wells: Exploratory.............................. 3.7 9.0 9.9 Development.............................. 13.3 11.6 8.1 ----- ----- ----- 17.0 20.6 18.0 ----- ----- ----- Total net wells.................. 375.1 271.5 130.9 ===== ===== =====
As of December 31, 1994, 18 gross wells, representing approximately 10.3 net wells, were being drilled. Acquisitions As a component of its overall growth strategy, the Company continued making acquisitions of producing properties during 1994. A total of 497 BCFE of oil and gas reserves was acquired by the Company at a cost of approximately $479 million. Approximately 50 percent of the reserves acquired during the year were in the Gulf Coast basin. Production associated with the properties acquired was approximately 125 MMCF of gas per day and 6 MBbls of oil per day at year end 1994. 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 both proved reserves as well as properties having upside potential that can be developed by the utilization of both conventional and advanced technologies. 4 7 Asset Rationalization In an effort to maintain its high quality asset base, the Company continues to divest marginal and non-strategic oil and gas properties. During 1994, the Company divested over 1,350 working interest wells comprising approximately 4 percent of the Company's working interest well inventory. In addition, the Company conveyed its working interests in certain coal seam gas wells in November 1994. The net proceeds after tax from all 1994 property divestitures were approximately $89 million. PRODUCTIVE WELLS, DEVELOPED AND UNDEVELOPED ACREAGE Working interests in productive wells, developed acreage and undeveloped leasehold acreage at December 31, 1994 were as follows:
PRODUCTIVE WELLS - -------------------------------------- OIL GAS DEVELOPED ACRES UNDEVELOPED ACRES - ----------------- ----------------- ------------------------ ------------------------ GROSS NET GROSS NET GROSS NET GROSS NET - ------- ------ ------- ------ ---------- ---------- ---------- ---------- 15,795 4,823 15,732 9,498 6,015,000 3,151,000 2,838,000 1,760,000
Included in the productive wells data are 1,221 multiple completions. 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. 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. Production and prices were as follows:
YEAR ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 ------ ------ ------ Production: Gas (MMCF per day)................................. 1,052 920 818 Oil (MBbls per day)................................ 45.6 41.9 40.6 Average sales prices: Gas per MCF........................................ $ 1.65 $ 1.87 $ 1.64 Oil per barrel..................................... 15.66 16.71 18.83 Average production costs per MCFE.................... .54 .56 .55 Depreciation, depletion and amortization rates per MCFE............................................... .62 .58 .58
In 1994, 1993 and 1992, approximately 66 percent, 69 percent and 70 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 transport a substantial portion of its future gas production through EPNG's pipeline system. 5 8 RESERVES The following table sets forth estimates by the Company's petroleum engineers of proved oil and gas reserves at December 31, 1994. These reserves have been reduced for royalty interests owned by others.
GAS OIL TOTAL (BCF) (MMBBLS) (BCFE) ------ -------- ------ Proved Developed Reserves................... 4,584 161.9 5,556 Proved Undeveloped Reserves................. 917 22.2 1,050 ----- ----- ----- Total Proved Reserves............. 5,501 184.1 6,606 ===== ===== =====
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." INTRASTATE PIPELINES AND NGLS The Company owns and operates two intrastate natural gas pipeline systems in west Texas totaling 426 miles and gathering systems in several states. Gas is sold from the Company's intrastate systems to industrial customers, electric and gas utilities, and other intrastate pipeline companies.
YEAR ENDED DECEMBER 31, --------------------------- 1994 1993 1992 ---- ----- ---- (BCF) Annual intrastate natural gas throughput: Company-owned production................ 16 19 25 Third party production.................. 49 41 45 Third party gas transportation and gathering.................................. 132 139 104 --- --- --- Total.............................. 197 199 174 === ==== ===
In January 1995, the Company entered into a definitive agreement, subject to certain conditions, to sell its intrastate natural gas pipeline systems in west Texas and its underground gas storage facility for approximately $80 million. The Company expects this transaction to be completed in the first quarter of 1995. 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 12.7 MMBbls, 14.9 MMBbls and 14.5 MMBbls, for the years ended December 31, 1994, 1993 and 1992, respectively. MARKETING Marketing Strategy. In pursuit of its strategy to build long-term shareholder value in a volatile product pricing environment for domestic hydrocarbons, the Company will continue to develop premium markets for its production. In addition, the Company adds value through such activities as processing, gathering, trucking, trading, storing and transporting hydrocarbons for both itself and third parties. Financial instruments may be used from time to time in order to hedge the price of a portion of the Company's production. Wellhead Marketing. The Company's oil and gas production is sold on the spot market and under short-term contracts at market responsive prices. Substantially all of the Company's oil and gas production is sold to Meridian Oil Trading Inc. ("MOTI"), a wholly-owned marketing subsidiary of the Company. 6 9 Other Marketing. MOTI engages in various activities including the marketing of the Company's production as well as the purchase and resale of third party oil, gas and NGLs. MOTI contracts to provide oil and gas to various customers and aggregates supplies from various sources including third-party producers, marketing companies, pipelines, financial institutions and from the Company's underlying production. MOTI utilizes other hedging and trading strategies including sales in the futures market, options trading, time trades, fixed price oil and gas swaps, and the outright purchase and sale of oil and gas to third parties. 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 gas, oil 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 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. The Company operates various intrastate natural gas pipelines, gathering systems and NGL pipelines. 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 pipeline facilities by prescribing safety and operating standards. The transportation of gas in interstate commerce is regulated by the FERC pursuant to the Natural Gas Act of 1938. All of the Company's sales of gas are "deregulated". The FERC has adopted wide-ranging pipeline regulations promulgated under a rulemaking, the Order No. 636 series. These regulations are intended by the FERC to fundamentally restructure the interstate pipeline industry, and, as a result, they will have a significant impact on the transportation, marketing and, consequently, pricing of gas. These regulations have been implemented on individual pipelines but are still subject to many court challenges. These new regulations implement, on an industry-wide basis, a "straight fixed-variable" rate design, thus increasing all pipelines' demand charges for firm transportation service. The straight fixed-variable rate design methodology allows all of a pipeline's fixed costs, including an equity return and related income taxes, to be eligible for demand or reservation charge collection. The regulations permit firm shippers the opportunity to mitigate demand charge impacts by relinquishing to others, on either a permanent or temporary basis, their firm transportation entitlements at times when these firm shippers do not need some or all of their capacity for their own use. In addition, these regulations also permit the interstate pipeline companies, or their marketing affiliates, to sell gas in interstate commerce substantially free from regulation, thereby increasing the competition for gas purchasers. These regulations also allow interstate pipeline companies to collect from their customers certain significant transition costs via (i) direct billings or (ii) demand and/or usage surcharges on their transportation rates. 7 10 The Company currently holds firm and interruptible transportation capacity rights on EPNG's pipeline system, as well as the systems of other interstate and intrastate pipelines including EPNG's wholly-owned subsidiary Mojave Pipeline Company. The contracts providing firm transportation services to the Company require the payment of substantial transportation demand charges. These demand charges are paid monthly by the Company regardless of the level of utilization thereunder. The Company does not expect a materially adverse effect from the Order 636 series of regulations on the consolidated financial position or results of operations of the Company. The FERC recently issued new orders which generally deregulate the field area service activities of interstate pipeline companies. The new orders have been appealed and are subject to many court challenges. While the eventual effect of this deregulation on the Company's production cannot be predicted at this time, the Company does not expect the deregulation to 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. 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. 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 the Interior may require a lessee under a federal lease to suspend or cease operations in the affected area. Filings of Reserve Estimates With Other Agencies. During 1994, the Company filed estimates of oil and gas reserves for the year 1993 with the Department of Energy. These estimates were not materially different from the reserve data presented herein. 8 11 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, "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 1,846 and 1,729 employees at December 31, 1994 and 1993, respectively. ITEM THREE LEGAL PROCEEDINGS 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 or other proceedings cannot be predicted with certainty, management expects these matters 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 1994 no matters were submitted to a vote of security holders. 9 12 EXECUTIVE OFFICERS OF THE REGISTRANT AND PRINCIPAL SUBSIDIARY THOMAS H. O'LEARY, 60 Chairman of the Board, President and Chief Executive Officer Burlington Resources Inc. February 1993 to Present 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; President and Chief Executive Officer, January 1989 to October 1990. BOBBY S. SHACKOULS, 44 President and Chief Executive Officer Meridian Oil Inc. 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; Executive Vice President, Torch Energy Advisors, Inc., September 1988 to July 1991. JOHN E. HAGALE, 38 Senior Vice President and Chief Financial Officer Burlington Resources Inc. April 1994 to Present Executive Vice President and Chief Financial Officer Meridian Oil Inc. March 1993 to Present Vice President, Finance, Burlington Resources Inc., March 1992 to February 1993; Vice President, Taxes, Burlington Resources Inc., December 1990 to March 1992; Assistant Vice President, Taxes, Burlington Resources Inc., January 1989 to November 1990. GERALD J. SCHISSLER, 50 Senior Vice President, Law Burlington Resources Inc. December, 1993 to Present Executive Vice President, Law and Corporate Affairs Meridian Oil Inc. July 1993 to Present Consultant, June 1991 to July 1993; Senior Vice President, Law, Meridian Minerals Company, a subsidiary of Burlington Resources Inc., November 1987 to June 1991. HAROLD E. HAUNSCHILD, 44 Vice President, Human Resources Burlington Resources Inc. July 1992 to Present Executive Vice President, Human Resources and Administration Meridian Oil Inc. May 1993 to Present Assistant Vice President, Compensation and Benefits, Burlington Resources Inc., May 1988 to July 1992. C. RAY OWEN, 49 Executive Vice President and Chief Operating Officer Meridian Oil Inc. October 1994 to Present Senior Vice President, Operations, Meridian Oil, Inc., March 1993 to October 1994; Vice President, Regional Operations, Meridian Oil Inc., December 1990 to March 1993; Manager, Regional Operations, Meridian Oil Inc., July 1985 to December 1990. L. EDWARD PARKER, 48 Executive Vice President, Marketing Meridian Oil Inc. February 1993 to Present Senior Vice President, Marketing, Meridian Oil Inc., December 1990 to February 1993; Vice President, Marketing, Meridian Oil Inc., August 1988 to November 1990. 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, 1994, the number of common stockholders was 24,745. Information on common stock prices and quarterly dividends is shown on page 34. ITEM SIX SELECTED FINANCIAL DATA The selected financial data for the Company set forth below for the five years ended December 31, 1994 should be read in conjunction with the Consolidated Financial Statements.
1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) CONTINUING OPERATIONS FOR THE YEAR ENDED: Revenues(a)................................. $1,055 $1,043 $ 943 $ 813 $ 829 Operating Income............................ 175 256 240 177 216 Income from Continuing Operations........... 154 255 190 100 124 Earnings per Common Share(b)................ 1.20 1.95 1.44 .75 .87 Cash Dividends Declared per Common Share(c)................................. .55 .55 .60 .70 .70 AT YEAR END: Total Assets(d)............................. $4,809 $4,448 $4,470 $5,480 $5,250 Long-term Debt.............................. 1,309 819 1,003 1,298 529 Stockholders' Equity(d)..................... 2,568 2,608 2,406 2,907 3,024 Common Shares Outstanding................... 126.5 129.7 128.9 131.4 137.9
- --------------- (a) Revenues in 1994 include net amounts from the sale and marketing of NGLs. Prior year amounts have been reclassified to conform to current year presentation. (b) Excluding non-recurring items totaling $.47, $.24, and $.08 per share, Earnings per Common Share from Continuing Operations would have been $1.48, $1.20 and $.67 in 1993, 1992, and 1991, respectively. (c) On January 13, 1993, the Company increased its quarterly dividend rate to $.1375 per share. In July 1992, the quarterly dividend rate was reduced to $.125 per share to reflect the June 30, 1992 spin-off of EPNG to the Company's stockholders. (d) On June 30, 1992, the Company distributed its EPNG common stock to the Company's stockholders of record as of June 15, 1992. The distribution was accounted for as a $575 million non-cash dividend. 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, 1994 and 1993 was 34 and 24 percent, respectively. In May 1994, the Company issued $300 million of 7.15% Notes due May 1, 1999. The net proceeds were used for general corporate purposes, including acquisition of oil and gas properties, repayment of commercial paper and other capital expenditures. The Company had outstanding commercial paper borrowings at December 31, 1994 of $260 million at an average interest rate of 6.28 percent. In July 1994, the Company established new revolving credit facilities to replace the previous $900 million facility that was due to expire in June 1996. The new credit facilities are comprised of a $600 million revolving credit agreement that expires in July 1999 and a $300 million revolving credit agreement that expires July 1995, but is renewable annually by mutual consent. As of December 31, 1994, there were no borrowings outstanding under the credit facilities, although borrowing capacity is reduced by outstanding commercial paper. The Company had the capacity to borrow approximately $640 million under the credit facilities at December 31, 1994. In addition, the Company has $500 million of capacity under shelf registration statements filed with the Securities and Exchange Commission. During 1994, the Company repurchased 3.1 million shares of its common stock for $122 million. Since December 1988, the Company has repurchased 27.2 million shares under three 10 million share repurchase authorizations. Net cash provided by continuing operating activities for 1994 was $498 million compared to $455 million and $433 million in 1993 and 1992, respectively. The increase in 1994 compared to 1993 is primarily due to working capital changes partially offset by decreased operating income. The increase in 1993 compared to 1992 is primarily due to higher operating income and increased current utilization of non-conventional fuel tax credits. In an effort to maintain its high quality asset base, the Company continues to divest marginal and non-strategic oil and gas properties. During 1994, the Company divested 1,350 working interest wells comprising approximately 4 percent of the Company's working interest well inventory. In addition, the Company conveyed its working interests in certain coal seam gas wells in November 1994. The net proceeds after tax, from all 1994 property divestitures were approximately $89 million. The Company expects to continue divesting marginal and non-strategic properties in 1995. In January 1995, the Company entered into a definitive agreement, subject to certain conditions, to sell its intrastate natural gas pipeline systems in west Texas and its underground gas storage facility for approximately $80 million. The assets being sold contributed less than 5 percent of the Company's consolidated operating income in each of the years ended December 31, 1994, 1993 and 1992. The Company expects this transaction to be completed in the first quarter of 1995. 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. 12 15 CAPITAL EXPENDITURES AND RESOURCES Capital expenditures during 1994 totaled $882 million compared to $553 million and $315 million in 1993 and 1992, respectively. The Company spent $479 million for producing property acquisitions and $331 million on internal development and exploration during 1994 compared to $270 million and $231 million, respectively, in 1993. Capital expenditures for 1995, projected to be approximately $580 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, as needed, by external financing. The Company anticipates continued increases in gas production. The increased availability of gas will 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 and the East Coast and by increasing its traditional California market share. MARKETING Marketing Strategy. In pursuit of its strategy to build long-term shareholder value in a volatile product pricing environment for domestic hydrocarbons, the Company will continue to develop premium markets for its production. In addition, the Company adds value through such activities as processing, gathering, trucking, trading, storing and transporting hydrocarbons for both itself and third parties. Financial instruments may be used from time to time in order to hedge the price of a portion of the Company's production. Wellhead Marketing. The Company's oil and gas production is sold on the spot market and under short-term contracts at market responsive prices. Substantially all of the Company's oil and gas production is sold to MOTI, a wholly-owned marketing subsidiary of the Company. Other Marketing. MOTI engages in various activities including the marketing of the Company's production as well as the purchase and resale of third party oil, gas and NGLs. MOTI contracts to provide oil and gas to various customers and aggregates supplies from various sources including third-party producers, marketing companies, pipelines, financial institutions and from the Company's underlying production. MOTI utilizes other hedging and trading strategies including sales in the futures market, options trading, time trades, fixed price oil and gas swaps, and the outright purchase and sale of oil and gas to third parties. DIVIDENDS On January 11, 1995, the Board of Directors declared a common stock quarterly dividend of $.1375 per share, payable April 3, 1995. 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 $71 million during 1994. RESULTS OF OPERATIONS Year Ended December 31, 1994 Compared With Year Ended December 31, 1993 Income from Continuing Operations in 1994 was $154 million or $1.20 per share compared to $255 million or $1.95 per share in 1993. The 1993 results include a total of $.47 per share from gains on the sale of the Burlington Resources Coal Seam Gas Royalty Trust (the "Trust") units and the exchange of Company debt for Anadarko Petroleum Corporation ("Anadarko") common stock, and a charge to reflect the increase in the corporate income tax rate. 13 16 Revenues were $1,055 million in 1994 compared to $1,043 million in 1993. Gas sales volumes improved 14 percent to 1,052 MMCF per day and oil sales volumes improved 9 percent to 45.6 MBbls per day which increased revenues $90 million and $23 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. The revenue increases were offset by a 12 percent decline in 1994 average gas sales prices to $1.65 per MCF and a 6 percent decline in 1994 average oil sales prices to $15.66 per barrel which decreased revenues $84 million and $17 million, respectively. Costs and Expenses were $880 million in 1994 compared to $787 million in 1993. The increase was primarily due to a 13 percent improvement in 1994 production levels which increased production related expenses $84 million and a $5 million increase in exploration costs. Interest Expense was $90 million in 1994 compared to $73 million in 1993. The increase was primarily due to additional long-term debt issued in May 1994 and higher outstanding commercial paper borrowings during 1994. Other Income -- Net was $6 million in 1994 compared to $124 million in 1993. The 1993 amount includes a $108 million gain on the sale of the Trust units and a $19 million gain from the exchange of Company debt for Anadarko common stock. Income Taxes -- The effective income tax rate was a benefit of 71 percent in 1994 compared to an expense of 17 percent in 1993. Without the additional tax expense associated with the non-recurring 1993 gains from the sale of the Trust units and the exchange of Company debt for Anadarko common stock and the non-recurring portion of the 1993 tax rate increase, the 1993 effective tax rate was a benefit of 7 percent. The higher 1994 beneficial tax rate is primarily due to lower 1994 pretax income relative to the non-conventional fuel tax credits earned. Year Ended December 31, 1993 Compared With Year Ended December 31, 1992 Income from Continuing Operations in 1993 was $255 million or $1.95 per share compared to $190 million or $1.44 per share in 1992. The 1993 results include a total of $.47 per share from gains on the sale of the Trust units and the exchange of Company debt for Anadarko common stock, and a charge to reflect the increase in the corporate income tax rate. The 1992 results include a $.24 per share gain on the sale of the Company's interests in Plum Creek Timber Company, L.P. Revenues were $1,043 million in 1993 compared to $943 million in 1992. Average gas sales prices increased 14 percent in 1993 to $1.87 per MCF which increased revenues $76 million. Gas sales volumes improved 12 percent to 920 MMCF per day which increased revenues $60 million. Oil sales volumes improved 3 percent to 41.9 MBbls per day which increased revenues $8 million. Gas and oil sales volumes increased primarily due to continued development and exploration of the Company's oil and gas properties, the impact of producing property acquisitions, and operational efficiencies resulting from reduced gas gathering system pressures in the San Juan Basin. These revenue increases were partially offset by lower oil sales prices which declined 11 percent in 1993 to $16.71 per barrel and decreased revenues $33 million. In addition, there were no gas contract recoveries in 1993. The revenues for 1992 include $7 million of non-recurring gas contract recoveries. Costs and Expenses were $787 million in 1993 compared to $702 million in 1992. The increase was primarily due to a 10 percent improvement in 1993 production levels which increased production related expenses $64 million, a $13 million increase in administrative expenses and a $9 million increase in exploration costs. Interest Expense was $73 million in 1993 compared to $79 million in 1992. The decrease was primarily due to the April 1993 conversion of approximately $80 million in Company debt for Anadarko common stock and lower commercial paper borrowings. 14 17 Other Income -- Net was $124 million in 1993 compared to $57 million in 1992. The 1993 amount includes a $108 million gain on the sale of the Trust units and a $19 million gain from the exchange of Company debt for Anadarko common stock. The 1992 amount includes a $50 million gain on the sale of the Company's interests in Plum Creek Timber Company, L.P. Income Taxes -- The effective income tax rate was 17 percent in 1993 compared to 13 percent in 1992. The increase is primarily due to $16 million in additional income tax expense recognized to adjust the cumulative deferred tax liability for the new corporate income tax rate. OTHER MATTERS The Company encounters competition in its business. See "Business and Properties -- Other Matters" for further discussion of competition. 15 18 ITEM EIGHT FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, -------------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues........................................... $1,054,847 $1,043,232 $ 942,647 Costs and Expenses................................. 879,810 787,427 702,299 ---------- ---------- ---------- Operating Income................................... 175,037 255,805 240,348 Interest Expense................................... 90,291 72,799 79,196 Other Income -- Net................................ 5,523 124,432 56,887 ---------- ---------- ---------- Income from Continuing Operations Before Income Taxes..................................... 90,269 307,438 218,039 Income Tax Expense (Benefit)....................... (63,977) 52,264 28,352 ---------- ---------- ---------- Income from Continuing Operations.................. 154,246 255,174 189,687 Income from Discontinued Operations -- Net of Income Taxes..................................... -- 1,138 68,141 ---------- ---------- ---------- Net Income......................................... $ 154,246 $ 256,312 $ 257,828 ========== ========== ========== Earnings per Common Share: Continuing Operations............................ $ 1.20 $ 1.95 $ 1.44 Discontinued Operations.......................... -- .01 .51 ---------- ---------- ---------- Total............................................ $ 1.20 $ 1.96 $ 1.95 ========== ========== ==========
See accompanying Notes to Consolidated Financial Statements. 16 19 BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET
DECEMBER 31, ------------------------- 1994 1993 ---------- ---------- (IN THOUSANDS) ASSETS Current Assets: Cash and Short-term Investments................................... $ 19,898 $ 19,784 Accounts Receivable............................................... 193,825 218,361 Inventories....................................................... 35,188 23,954 Other Current Assets.............................................. 17,191 14,572 ---------- ---------- 266,102 276,671 ---------- ---------- Oil and Gas Properties (Successful Efforts Method).................. 5,689,135 5,027,312 Other Properties.................................................... 572,490 540,342 ---------- ---------- 6,261,625 5,567,654 Accumulated Depreciation, Depletion and Amortization.............. 1,904,212 1,631,941 ---------- ---------- Properties -- Net.............................................. 4,357,413 3,935,713 ---------- ---------- Other Assets........................................................ 185,095 235,336 ---------- ---------- Total Assets.............................................. $4,808,610 $4,447,720 ========= ========= LIABILITIES Current Liabilities: Accounts Payable.................................................. $ 193,819 $ 202,565 Taxes Payable..................................................... 47,080 58,372 Dividends Payable................................................. 17,434 17,916 Other Current Liabilities......................................... 3,688 20,764 ---------- ---------- 262,021 299,617 ---------- ---------- Long-term Debt...................................................... 1,309,137 819,071 ---------- ---------- Deferred Income Taxes............................................... 480,648 566,758 ---------- ---------- Other Liabilities and Deferred Credits.............................. 188,763 154,216 ---------- ---------- Commitments and Contingent Liabilities STOCKHOLDERS' EQUITY Common Stock, Par Value $.01 Per Share (Authorized 325,000,000 Shares; Issued 150,000,000 Shares)................................ 1,500 1,500 Paid-in Capital..................................................... 2,936,374 2,936,934 Retained Earnings................................................... 551,385 467,667 ---------- ---------- 3,489,259 3,406,101 Cost of Treasury Stock (1994, 23,491,040 Shares; 1993, 20,316,521 Shares)................................................ 921,218 798,043 ---------- ---------- Common Stockholders' Equity......................................... 2,568,041 2,608,058 ---------- ---------- Total Liabilities and Common Stockholders' Equity......... $4,808,610 $4,447,720 ========= =========
See accompanying Notes to Consolidated Financial Statements. 17 20 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, ---------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (IN THOUSANDS) Cash Flows From Continuing Operating Activities: Income from Continuing Operations.................. $ 154,246 $ 255,174 $ 189,687 Adjustments to Reconcile Income to Net Cash Provided By Continuing Operating Activities: Depreciation, Depletion and Amortization........ 337,421 285,258 256,003 Deferred Income Taxes........................... (86,118) 2,438 19,041 Exploration Costs............................... 32,983 28,173 19,501 Working Capital Changes: Accounts Receivable........................... 24,536 17,294 4,788 Inventories................................... (11,234) (4,940) 12,800 Other Current Assets.......................... (2,619) 69,165 (66,339) Accounts Payable.............................. (8,746) (29,198) (69,300) Taxes Payable................................. (11,292) (1,761) 46,197 Other Current Liabilities..................... (17,558) (19,062) (11,038) Gain on Sales and Other......................... 86,632 (147,130) 31,227 --------- --------- --------- Net Cash Provided By Continuing Operating Activities..................... 498,251 455,411 432,567 --------- --------- --------- Cash Flows From Continuing Investing Activities: Additions to Properties............................ (881,645) (553,384) (315,447) Proceeds from Sales and Property Dispositions...... 134,629 173,305 23,386 Other.............................................. (66,289) (4,462) (62,224) --------- --------- --------- Net Cash Used In Continuing Investing Activities..................... (813,305) (384,541) (354,285) --------- --------- --------- Cash Flows From Continuing Financing Activities: Proceeds from Long-term Financing.................. 488,596 -- 150,000 Reduction in Long-term Debt........................ -- (183,610) (645,225) Dividends Paid..................................... (71,010) (69,711) (85,489) Treasury Stock Transactions -- Net................. (123,175) 30,999 (100,285) Financing Activities with EPNG -- Net.............. -- -- 525,361 Other.............................................. 6,266 85,794 (20,032) --------- --------- --------- Net Cash Provided By (Used In) Continuing Financing Activities..................... 300,677 (136,528) (175,670) --------- --------- --------- Decrease in Cash and Short-term Investments from Continuing Operations......................... (14,377) (65,658) (97,388) Cash Provided By Discontinued Operations............. 14,491 53,713 93,618 Cash and Short-term Investments: Beginning of Year.................................. 19,784 31,729 35,499 --------- --------- --------- End of Year........................................ $ 19,898 $ 19,784 $ 31,729 ========= ========= =========
See accompanying Notes to Consolidated Financial Statements. 18 21 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
COST OF COMMON COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS' STOCK CAPITAL EARNINGS STOCK EQUITY ------ --------- --------- --------- ------------- (IN THOUSANDS) Balance, January 1, 1992............ $1,500 $2,955,723 $ 678,049 $(728,757) $2,906,515 Net Income........................ 257,828 257,828 Cash Dividends ($.60 per share)... (78,657) (78,657) Distribution of EPNG Stock........ (574,610) (574,610) Stock Purchases (3,484,200 shares)........................ (136,379) (136,379) Stock Option Activity and Other... (5,001) 36,094 31,093 ------ --------- --------- --------- ------------- Balance, December 31, 1992.......... 1,500 2,950,722 282,610 (829,042) 2,405,790 Net Income........................ 256,312 256,312 Cash Dividends ($.55 per share)... (71,255) (71,255) Stock Purchases (1,139,900 shares)........................ (45,280) (45,280) Stock Option Activity and Other... (13,788) 76,279 62,491 ------ --------- --------- --------- ------------- Balance, December 31, 1993.......... 1,500 2,936,934 467,667 (798,043) 2,608,058 Net Income........................ 154,246 154,246 Cash Dividends ($.55 per share)... (70,528) (70,528) Stock Purchases (3,139,600 shares)........................ (122,007) (122,007) Stock Option Activity and Other... (560) (1,168) (1,728) ------ --------- --------- --------- ------------- Balance, December 31, 1994.......... $1,500 $2,936,374 $ 551,385 $(921,218) $2,568,041 ========= ========= ========= ========= ============
See accompanying Notes to Consolidated Financial Statements. 19 22 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Principles of Consolidation 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. 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, the Company limits the total amount of unamortized capitalized costs to the value of future net revenues, based on current prices and costs. 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. Price Management Activities The Company uses energy-related financial instruments and physical inventory for commodity price management purposes. All of these transactions are recorded utilizing a mark-to-market methodology. The resulting change in unrealized market gains and losses is recognized currently in the Consolidated Statement of Income. Management estimates the fair value of these transactions based on independent market valuations and valuation pricing models. Hedging and Related Activities In order to mitigate the risk of market price fluctuations, futures and options transactions may be entered into as hedges of commodity prices associated with the sales and purchases of gas and oil. 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 enters into gas swap agreements in order to convert fixed price gas sales contracts to market-sensitive contracts. Gains or 20 23 losses resulting from these transactions are realized in the Company's Consolidated Statement of Income as the related physical production is delivered. 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 first become available. Reclassification The Company's 1994 revenues include amounts from the sale of NGLs, less the actual costs incurred to gather, treat, process and transport the hydrocarbons to market. To conform to current presentation, the Company reclassified $206 million and $199 million of costs and expenses to revenues for the years ended 1993 and 1992, respectively. The reclassification had no effect on operating income. Earnings per Common Share Earnings per common share is based on the weighted average number of common shares outstanding during the year. The weighted average number of common shares outstanding was 129 million, 131 million, and 132 million for the years 1994, 1993, and 1992, respectively. 2. 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 Consolidated Statement of Income includes net revenues related to marketing of third party oil, gas, NGLs and downstream trading activities of Company-owned production of approximately $32 million, $15 million and $32 million for years ended 1994, 1993 and 1992, respectively. The volumes of third party oil, gas and NGLs marketed in those years are as follows:
1994 1993 1992 ---- ---- ---- Oil (MBbls per day)..................................... 467 405 274 Gas (MMCF per day)...................................... 549 526 448 NGLs (MBbls per day).................................... 8 20 20
Price Management Activities The Company enters into contracts in the physical delivery and financial markets for oil and gas for commodity price management purposes and to allow the Company to remain at market-sensitive prices on certain contracts. Physical and financial instruments used include gas and oil futures, forwards, swaps, and option contracts as described below. These contracts may be settled with physical delivery or cash payments. These trading activities are marked-to-market and the resulting gains and losses are recognized in the Consolidated Statement of Income. The mark-to-market as of December 31, 1994 was a net loss of approximately $250,000. 21 24 Following is a summary of the financial and physical delivery instruments utilized that have been marked-to-market.
VOLUMES MARK-TO-MARKET INSTRUMENT (MBBLS) GAIN (LOSS) - -------------------------------------------------------------------- ------- -------------- (IN THOUSANDS) Variable Priced Forward Oil Purchase Contracts...................... 34,928 $ 25,361 Variable Priced Forward Oil Sales Contracts......................... (40,010) (11,331) Oil Put Options Sold................................................ 18,190 (13,413) Oil Call Options Sold............................................... (3,470) (867) ------- --------- Total Activity............................................ 9,638 $ (250) ======= =========
A description of the market risks and nature of the Company's price management activities are as follows: Variable Priced Forward Oil Purchase and Oil Sales Contracts -- The Company enters into forward purchase and sales commitments in order to recognize locational price differences in marketing the Company's and third parties' oil. At December 31, 1994, the Company had purchase and sales commitments on oil of 35 million and 40 million barrels, respectively. These contracts are for periods of up to 5 years and have a notional contract amount of approximately $1.3 billion at December 31, 1994. While notional contract amounts are used to express the volume of transactions, the amounts at risk are substantially smaller since the pricing of these contracts is essentially at market-sensitive prices. The mark-to-market on these third party purchase and sales commitments was a net gain of approximately $14 million as of December 31, 1994. Income from these transactions for the year ended December 31, 1994, excluding the effect of the mark-to-market, was a gain of approximately $13.3 million. Oil Put Options Sold -- The Company sells oil put options and receives premiums. Oil put options give the purchaser of the put options the right to require the Company to purchase oil at various prices. At December 31, 1994, the put options had exercise prices based upon the New York Mercantile Exchange ("NYMEX") oil prices from 12 to 18 months (the "Out Month") from the date the contracts settle. These contracts settle on a monthly basis from January 1995 through May 1996. The Company is exposed to market risk to the extent that NYMEX oil Out Month prices are higher than the settlement month NYMEX prices. The spread between the put option exercise prices and current market prices ranged from $.45 per barrel to $1.14 per barrel as of December 31, 1994. The mark-to-market on these contracts as of December 31, 1994, was a net loss of $13.4 million. Income from these transactions for the year ended December 31, 1994, excluding the effect of the mark-to-market, was a loss of approximately $760,000. Oil Call Options Sold -- The Company sells oil call options and receives premiums. Oil call options give the purchaser of the call options the right to require the Company to sell oil at various prices. At December 31, 1994, the call options had exercise prices based upon the NYMEX oil prices up to 12 months from the date the contracts settle. Additionally, the Company has sold call options at market-sensitive prices with fixed locational and basis differentials. These contracts settle on a monthly basis from January 1995 through October 1995. The Company is exposed to market risk to the extent that NYMEX oil Out Month prices are lower than the settlement month NYMEX prices or when locational and basis differentials change due to market conditions. The spread between the call option exercise price and current market prices ranged from $.05 per barrel to $.35 per barrel as of December 31, 1994. The mark-to-market on these contracts as of December 31, 1994, was a net loss of approximately $870,000. Income from these transactions for the year ended December 31, 1994, excluding the effect of the mark-to-market, was a gain of approximately $1.7 million. Hedging and Related Activities Gas Swap Agreements -- These agreements require the Company and its counterparties to exchange payment streams based on the difference between fixed and market-sensitive gas prices. The 22 25 Company enters into fixed price contracts to accommodate the needs of its customers. The Company enters into gas swap agreements in order to convert some of these fixed price gas sales contracts to market-sensitive contracts, resulting in the Company effectively selling its production at market-sensitive prices. As of December 31, 1994, the Company is the fixed price payor and fixed price receiver on 52 BCF and 38 BCF of gas, respectively. These contracts are for periods of up to 6 years and all volumes are matched with the physical delivery of the Company's production. Gains and losses from these transactions are realized in the Company's Consolidated Statement of Income as physical production is delivered under the related sales contracts. Futures Contracts Sold -- The Company sells oil and gas futures contracts on the NYMEX. 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 realized income on futures transactions was a gain of approximately $1.5 million during 1994. All futures contracts were closed as of December 31, 1994. Credit and Market Risks The Company manages and controls market and counterparty risk related to its trading and price management activities through established formal internal control procedures which are reviewed on an ongoing basis. Net open positions often result from the timing of the origination of new transactions. Market risk is minimized by making various commitments which balance the risks associated with price management and trading activities. Consequently, price movements can result in losses on certain contracts which may be offset by gains on other contracts. The counterparties to these transactions consist primarily of major financial institutions, independent oil and gas producers, and independent power producers. The Company attempts to minimize credit-risk exposure to trading 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. 3. INCOME TAXES The provision (benefit) for income taxes is as follows:
YEAR ENDED DECEMBER 31, ----------------------------------------- 1994 1993 1992 --------- -------- -------- (IN THOUSANDS) Current: Federal............................................ $ 23,320 $ 39,424 $ (1,985) State.............................................. (1,179) 10,402 11,296 --------- -------- -------- 22,141 49,826 9,311 --------- -------- -------- Deferred: Federal............................................ (88,772) (14,934) 12,375 Enacted federal tax rate change.................... -- 15,558 -- State.............................................. 2,654 1,814 6,666 --------- -------- -------- (86,118) 2,438 19,041 --------- -------- -------- Total...................................... $ (63,977) $ 52,264 $ 28,352 ========= ======== ========
23 26 Reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:
YEAR ENDED DECEMBER 31, -------------------------------------- 1994 1993 1992 ------ ----- ----- Statutory rate......................................... 35.0% 35.0% 34.0% State income taxes net of federal tax benefit.......... 1.1 2.6 5.4 Tax credits............................................ (103.3) (25.0) (26.2) Enacted federal tax rate change........................ -- 5.1 -- Other.................................................. (3.7) (0.7) (0.2) ------ ----- ----- Effective rate............................... (70.9)% 17.0% 13.0% ====== ===== =====
Deferred tax liabilities (assets) consist of the following:
YEAR ENDED DECEMBER 31, -------------------------- 1994 1993 --------- --------- (IN THOUSANDS) Deferred liabilities: Excess of book over tax basis of properties..................... $ 619,908 $ 696,351 Other........................................................... 35,330 25,862 --------- --------- 655,238 722,213 --------- --------- Deferred assets: AMT credits carryover........................................... (150,374) (110,117) Financial accruals and provisions............................... (2,600) (29,057) Other........................................................... (21,616) (16,281) --------- --------- (174,590) (155,455) --------- --------- Total................................................... $ 480,648 $ 566,758 ========= =========
The above net deferred tax liabilities as of December 31, 1994 and 1993, include deferred state income tax liabilities of approximately $57 million and $54 million, respectively. As of December 31, 1994, the Alternative Minimum Tax ("AMT") credits carryover of approximately $150 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 continuing operations 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. 4. LONG-TERM DEBT Long-term Debt outstanding is as follows:
DECEMBER 31, -------------------------- 1994 1993 ---------- ---------- (IN THOUSANDS) Commercial Paper................................................... $ 259,590 $ 70,994 Notes, 7.15%, due 1999............................................. 300,000 -- Notes, 6 7/8%, due 1999............................................ 150,000 150,000 Notes, 8 1/2%, due 2001............................................ 150,000 150,000 Debentures, 9 1/8%, due 2021....................................... 150,000 150,000 Notes, 9 5/8%, due 2000............................................ 150,000 150,000 Debentures, 9 7/8%, due 2010....................................... 150,000 150,000 Other, including discounts -- net.................................. (453) (1,923) ---------- ---------- Total.................................................... $1,309,137 $ 819,071 ========== ==========
24 27 Excluding commercial paper, the Company has no debt maturities through 1998, however, $450 million is due in 1999. The Company's commercial paper borrowings at December 31, 1994 had an average interest rate of 6.28 percent. The Company and a group of banks have $600 million and $300 million Revolving Credit Facilities which expire in July 1999 and July 1995, respectively. However, the $300 million Revolving Credit Facility is renewable annually by mutual consent. Annual fees are .12 and .08 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, 1994, there were no borrowings outstanding under these credit facilities although borrowing capacity is reduced by outstanding commercial paper. The Company had the capacity to borrow approximately $640 million under the credit facilities as of December 31, 1994. In addition, the Company has $500 million of capacity under shelf registration statements filed with the Securities and Exchange Commission. 5. RESTRUCTURING From its inception in 1988 through 1993, the Company 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). In March 1992, the Company's wholly-owned subsidiary, El Paso Natural Gas Company ("EPNG"), completed an initial public offering of approximately 15 percent of its common stock and on May 13, 1992, the Company's Board of Directors approved the June 30, 1992 distribution of the EPNG common stock owned by the Company to its stockholders of record as of June 15, 1992. The distribution was accounted for as a $575 million non-cash dividend of the Company's investment in EPNG common stock. In October 1992, the Company sold substantially all of its coal properties for $80 million. In December 1993, the Company sold its majority interest in Burlington Environmental Inc. for $28 million. The Company had disposed of virtually all of its non-strategic assets as of December 31, 1993. Discontinued Operations Proceeds from dispositions of discontinued operations assets for the years ended December 31, 1994, 1993 and 1992 totaled $2 million, $62 million and $101 million, respectively. The Company realized no income from dispositions during 1994. The Company realized $1 million and $25 million of after-tax income net of $4 million and $23 million of income taxes from discontinued asset sales during 1993 and 1992, respectively. In addition, the discontinued operations of EPNG generated $43 million of after-tax income, net of $26 million of income taxes, in 1992. The effective tax rates for the discontinued operations differ from federal statutory rates primarily due to the effects of state and foreign income taxes and adjustments to prior year estimates. 6. ARRANGEMENTS WITH EPNG Transportation In 1994, 1993 and 1992, approximately 66 percent, 69 percent and 70 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 tariffs applicable to all shippers. The Company expects to transport a substantial portion of its future gas production through EPNG's pipeline system. 25 28 Other Transactions Prior to the separation from EPNG in 1992, the Company maintained a Commitment Agreement and Loan Agreements with EPNG. EPNG also participated in an intercorporate cash management arrangement with the Company. Balances under these facilities accrued interest at rates approximating short-term market rates. Interest income on borrowings has been netted against interest expense on excess cash advanced to the Company. The net amount is included in Interest Expense and totaled $169,000 for the year 1992. 7. CAPITAL STOCK The Company's 1993 Stock Incentive Plan (the "1993 Plan") succeeds the Company's 1988 Stock Option Plan (the "1988 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 restricted stock, stock options and stock appreciation rights or limited stock appreciation rights (together "SARs"). Under the 1993 Plan, options may be granted to officers and key employees at fair market value 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. Activity in the Company's stock option plans was as follows:
EXERCISE OPTIONS PRICE PER SHARE ---------- --------------- Balance, December 31, 1992........................... 4,633,829 $ 10.91 to $38.00 Granted............................................ 489,000 44.00 to 47.56 Exercised.......................................... (1,984,383) 10.91 to 34.68 Cancelled.......................................... (205,273) 31.83 to 46.44 ---------- Balance, December 31, 1993........................... 2,933,173 16.14 to 47.56 ---------- Granted............................................ 430,200 33.88 to 45.69 Exercised.......................................... (62,631) 21.54 to 38.00 Cancelled.......................................... (154,407) 31.83 to 44.00 ---------- Balance, December 31, 1994........................... 3,146,335 $ 16.14 to $47.56 ==========
At December 31, 1994, 2,722,135 options were exercisable at prices of $16.14 to $47.56 per share. At December 31, 1994, 9,209,900 shares are 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, 1994, there were 680,896 SARs outstanding related to stock options with exercise prices ranging from $21.54 to $34.68 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, 1994 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 26 29 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 $0.05 per Right. 8. 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.
DECEMBER 31, ----------------------- 1994 1993 -------- -------- (IN THOUSANDS) Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $85,599 and $89,524................................ $ 88,060 $ 91,349 ======== ======== Projected benefit obligation for service to date.................. $116,839 $127,403 Plan assets, primarily marketable equity and debt securities, at fair value......................................... (92,935) (91,467) -------- -------- Funded status of projected benefit obligation....................... 23,904 35,936 Unrecognized net loss............................................... (34,712) (47,006) Unamortized net transition obligation............................... (4,038) (4,621) -------- -------- Net prepaid pension asset........................................... $(14,846) $(15,691) ======== ========
The following information relates to the consolidated Company plans and includes amounts related to EPNG for the first six months of 1992. The Company's continuing operations pension expense was $7 million in 1992.
YEAR ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 ------- ------- -------- (IN THOUSANDS) Pension cost for the plans includes the following components: Service cost--benefits earned during the period........... $ 6,633 $ 5,503 $ 9,817 Interest cost on projected benefit obligation............. 9,395 8,926 28,757 Actual (return)/loss on plan assets....................... 409 (7,857) 7,397 Net amortization and deferred amounts..................... (4,640) 3,851 (33,225) ------- ------- -------- Net pension cost.......................................... $11,797 $10,423 $ 12,746 ======= ======= ========
27 30 The projected benefit obligation was determined using a weighted average discount rate of 8.75 percent in 1994 and 7.5 percent in 1993, 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 1994 and 1993. 9. COMMITMENTS AND CONTINGENT LIABILITIES Demand Charges The Company has entered into contracts which provide firm and interruptible transportation capacity rights on interstate and intrastate pipeline systems. These contracts, ranging in terms from 1 to 13 years, require the Company to pay transportation demand charges regardless of the amount of pipeline capacity utilized by the Company. The Company paid $51 million, $48 million and $32 million of demand charges of which $40 million, $40 million and $25 million was paid to EPNG for the years ended December 31, 1994, 1993 and 1992, respectively. Future transportation demand charge commitments at December 31, 1994, are as follows:
DEMAND YEAR ENDING DECEMBER 31, CHARGES ------------------------ -------------- (IN THOUSANDS) 1995.......................................................... $ 52,240 1996.......................................................... 46,023 1997.......................................................... 46,375 1998.......................................................... 45,058 1999.......................................................... 45,150 Thereafter.................................................... 216,809 ----------- Total.................................................... $ 451,655 ===========
Lease Obligations The Company has operating leases for office space and other property and equipment. The Company incurred lease rental expense of $17 million, $13 million and $10 million for the years ended December 31, 1994, 1993, and 1992, respectively. Future minimum annual rental commitments at December 31, 1994, are as follows:
OPERATING YEAR ENDING DECEMBER 31, LEASES ------------------------ -------------- (IN THOUSANDS) 1995.......................................................... $ 14,485 1996.......................................................... 13,845 1997.......................................................... 11,426 1998.......................................................... 10,635 1999.......................................................... 9,353 Thereafter.................................................... 88,576 ----------- Total.................................................... $ 148,320 ===========
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. 28 31 10. OTHER INFORMATION Other Income -- Net A summary of significant items included in Other Income -- Net is as follows:
YEAR ENDED DECEMBER 31, ------------------------ 1993 1992 -------- ------- (IN THOUSANDS) Gain on sale of Trust units......................... $107,800 $ - Sale of Plum Creek interests........................ - 50,500 Gain on conversion of debt.......................... 19,108 - Other -- net........................................ (2,476) 6,387 -------- ------- $124,432 $56,887 ======== =======
During 1994, there were no single significant items included in Other Income--Net. Supplemental Cash Flow Information The following is additional information concerning supplemental disclosures of cash flow activities:
YEAR ENDED DECEMBER 31, --------------------------------- 1994 1993 1992 -------- ------- -------- (IN THOUSANDS) Interest Paid............................... $ 85,599 $77,351 $ 73,702 Income Taxes Paid (Received)--Net........... 40,966 39,948 (44,931)
In April 1993, holders of the Subordinated Debentures exchanged their Debentures with a carrying value of approximately $80 million for shares of Anadarko Petroleum Corporation common stock owned by the Company. This non-cash exchange is reflected as such in the Statement of Cash Flows. In December 1992, the Company sold its interests in Plum Creek Timber Company, L.P. The proceeds included notes receivable of $70 million which were classified as Other Current Assets at December 1992 and were subsequently collected in January 1993. 29 32 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, 1994 and 1993, 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, 1994. 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, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. /s/ COOPERS & LYBRAND L.L.P. - ---------------------------- COOPERS & LYBRAND L.L.P. Houston, Texas January 11, 1995 30 33 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 consist of the following:
DECEMBER 31, ---------------------------- 1994 1993 ---------- ---------- (IN THOUSANDS) Proved properties............................................... $5,671,033 $4,985,501 Unproved properties............................................. 18,102 41,811 ---------- ---------- 5,689,135 5,027,312 Accumulated depreciation, depletion and amortization............ 1,714,098 1,455,910 ---------- ---------- Net capitalized costs................................. $3,975,037 $3,571,402 ========== ==========
Costs incurred for oil and gas property acquisition, exploration and development activities are as follows:
YEAR ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- --------- --------- (IN THOUSANDS) Property acquisition: Unproved................................................. $ 21,679 $ 10,816 $ 10,266 Proved................................................... 479,466 270,235 121,949 Exploration................................................ 30,978 17,159 11,872 Development................................................ 278,343 202,981 109,571 --------- --------- --------- Total costs incurred............................. $ 810,466 $ 501,191 $ 253,658 ========= ========= =========
The Company's 1994 net revenues from oil and gas producing activities include amounts from the sale of NGLs, less the actual costs incurred to gather, treat, process and transport the hydrocarbons to market. With respect to gas gathered and treated by affiliates, the actual costs incurred are calculated using the capital investment of the facility depreciated by its expected life, plus operating costs. Prior year amounts for 1993 and 1992 have been reclassified to conform to current year presentation.
YEAR ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 -------- -------- -------- (IN THOUSANDS) Net revenues............................................... $905,465 $897,927 $800,532 -------- -------- -------- Production costs........................................... 261,453 240,220 214,816 Exploration and impairment costs........................... 32,983 28,173 19,501 Operating expenses......................................... 145,649 135,550 118,499 Depreciation, depletion and amortization................... 299,763 248,505 223,495 -------- -------- -------- 739,848 652,448 576,311 -------- -------- -------- Operating income........................................... 165,617 245,479 224,221 Income tax provision....................................... (38,799) 26,582 26,124 -------- -------- -------- Results of operations for oil and gas producing activities............................................... $204,416 $218,897 $198,097 ======== ======== ========
31 34 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, 1992......................................................... 141.1 4,887 Revision of previous estimates....................................... 0.5 (24) Extensions, discoveries and other additions.......................... 11.4 344 Production........................................................... (14.8) (299) Purchases of reserves in place....................................... 17.7 165 Sales of reserves in place........................................... (0.4) (2) ------- ----- December 31, 1992....................................................... 155.5 5,071 Revision of previous estimates....................................... (0.9) (30) Extensions, discoveries and other additions.......................... 12.0 361 Production........................................................... (15.3) (336) Purchases of reserves in place(a).................................... 17.5 306 Sales of reserves in place(b)........................................ (0.6) (151) ------- ----- December 31, 1993....................................................... 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(c).................................... 19.7 379 Sales of reserves in place(d)........................................ (6.3) (78) ------- ----- December 31, 1994....................................................... 184.1 5,501 ======= ===== PROVED DEVELOPED RESERVES January 1, 1992......................................................... 128.1 3,951 December 31, 1992....................................................... 141.8 4,204 December 31, 1993....................................................... 149.8 4,381 December 31, 1994....................................................... 161.9 4,584
- --------------- (a) Includes the reserves attributable to the purchase of 59 percent of the Permian Basin Royalty Trust. (b) Primarily the Burlington Resources Coal Seam Gas Royalty Trust transaction. (c) Includes the reserves attributable to the purchase of Diamond Shamrock Offshore Partners Limited Partnership. (d) Includes the reserves associated with the November 1994 conveyance of working interests in coal seam gas wells. 32 35 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.
YEAR ENDED DECEMBER 31, --------------------------- 1994 1993 ----------- ----------- (IN THOUSANDS) Future cash inflows.............................................. $11,628,000 $11,788,000 Less related future: Production costs............................................ 3,505,000 3,380,000 Development costs........................................... 466,000 377,000 Income taxes................................................ 1,320,000 1,403,000 ----------- ----------- Future net cash flows.................................. 6,337,000 6,628,000 10% annual discount for estimated timing of cash flows......... 3,339,000 3,504,000 ----------- ----------- Standardized measure of discounted future net cash flows.... $ 2,998,000 $ 3,124,000 =========== ===========
A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil and gas reserves is as follows:
1994 1993 1992 ---------- ---------- ---------- (IN THOUSANDS) January 1.............................................. $3,124,000 $3,138,000 $2,616,000 ---------- ---------- ---------- Revisions of previous estimates: Changes in prices and costs.......................... (350,000) (208,000) 265,000 Changes in quantities................................ (20,000) 9,000 (8,000) Changes in rate of production........................ 129,000 (105,000) 104,000 Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs................................................ 195,000 180,000 186,000 Purchases of reserves in place......................... 251,000 260,000 183,000 Sales of reserves in place............................. (67,000) (107,000) (4,000) Accretion of discount.................................. 363,000 375,000 323,000 Sales of oil and gas, net of production costs.......... (644,000) (578,000) (522,000) Net change in income taxes............................. (80,000) 91,000 (55,000) Other.................................................. 97,000 69,000 50,000 ---------- ---------- ---------- Net change............................................. (126,000) (14,000) 522,000 ---------- ---------- ---------- December 31............................................ $2,998,000 $3,124,000 $3,138,000 ========== ========== ==========
33 36 BURLINGTON RESOURCES INC. QUARTERLY FINANCIAL DATA--UNAUDITED
1994 1993 ------------------------------------- ------------------------------------ 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST ------- ------- ------ ------- ------- ------- ------ ------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues(a).......................... $ 241 $ 273 $ 266 $ 275 $ 262 $ 263 $ 267 $ 251 Operating Income..................... $ 21 $ 39 $ 46 $ 69 $ 64 $ 57 $ 69 $ 66 Income from Continuing Operations(b)...................... $ 52 $ 21 $ 33 $ 48 $ 52 $ 24 $ 134 $ 45 Discontinued Operations.............. -- -- -- -- -- -- -- 1 ------- ------- ------ ------- ------- ------- ------ ------- Net Income........................... $ 52 $ 21 $ 33 $ 48 $ 52 $ 24 $ 134 $ 46 ======= ======= ====== ======= ======= ======= ====== ======= Earnings per Common Share: Continuing Operations.............. $ .42 $ .16 $ .25 $ .37 $ .40 $ .18 $ 1.02 $ .35 Discontinued Operations............ -- -- -- -- -- -- .01 -- ------- ------- ------ ------- ------- ------- ------ ------- Earnings per Common Share............ $ .42 $ .16 $ .25 $ .37 $ .40 $ .18 $ 1.03 $ .35 ======= ======= ====== ======= ======= ======= ====== ======= Dividends Declared per Common Share.. $ .1375 $ .1375 $.1375 $ .1375 $ .1375 $ .1375 $.1375 $ .1375 ======= ======= ====== ======= ======= ======= ====== ======= Common Stock Price Range: High............................... 42 5/8 41 7/8 45 5/8 49 5/8 52 3/8 53 7/8 51 5/8 47 1/4 Low................................ 33 1/8 37 1/4 40 7/8 41 1/2 40 1/4 46 45 36 1/2
- --------------- (a) Revenues in 1994 include net amounts from the sale and marketing of NGLs. Prior year amounts have been reclassified to conform to current year presentation. (b) The effective tax rate for the fourth quarter of 1994 generated an income tax benefit primarily due to an increase in the estimated amount of non-conventional fuel tax credits earned in 1994. The increase was due to higher taxable income resulting from additional tax gains in the fourth quarter of 1994. The effective tax rate for the fourth quarter of 1993 generated an income tax benefit primarily due to adjustments of prior year estimates. In addition, the second and third quarter effective tax rates were higher than the fourth quarter rate primarily due to income taxes recorded at a 39% combined Federal and State marginal rate on non-recurring second quarter gains and the effect of the third quarter enactment of a Federal income tax rate increase. 34 37 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 1995 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 1995 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 1995 Annual Meeting of Stockholders and is incorporated herein by reference. 35 38 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................................................. 16 Consolidated Balance Sheet....................................................... 17 Consolidated Statement of Cash Flows............................................. 18 Consolidated Statement of Common Stockholders' Equity............................ 19 Notes to Consolidated Financial Statements....................................... 20 Report of Independent Accountants................................................ 30 Supplemental Oil and Gas Disclosures............................................. 31 Quarterly Financial Data......................................................... 34 AMENDED EXHIBIT INDEX................................................................. *
REPORTS ON FORM 8-K The Company filed a Form 8-K dated October 10, 1994 which announced the promotion of Bobby S. Shackouls to the office of President and Chief Executive Officer of Meridian Oil Inc., a wholly-owned subsidiary of the Company. - --------------- * Included in Form 10-K filed with the Securities and Exchange Commission. 36 39 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 /s/ THOMAS H. O'LEARY --------------------------------- Thomas H. O'Leary Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Burlington Resources Inc. and in the capacities and on the dates indicated. By /s/ THOMAS H. O'LEARY Chairman of the Board, January 11, 1995 ------------------------------------------ President and Chief Thomas H. O'Leary Executive Officer /s/ JOHN E. HAGALE Senior Vice President and January 11, 1995 ------------------------------------------ Chief Financial Officer John E. Hagale /s/ HAYS R. WARDEN Vice President, Controller January 11, 1995 ------------------------------------------ and Chief Accounting Hays R. Warden Officer /s/ JOHN V. BYRNE Director January 11, 1995 ------------------------------------------ John V. Byrne /s/ S. PARKER GILBERT Director January 11, 1995 ------------------------------------------ S. Parker Gilbert /s/ JAMES F. McDONALD Director January 11, 1995 ------------------------------------------ James F. McDonald /s/ DONALD M. ROBERTS Director January 11, 1995 ------------------------------------------ Donald M. Roberts /s/ WALTER SCOTT, JR. Director January 11, 1995 ------------------------------------------ Walter Scott, Jr. /s/ WILLIAM E. WALL Director January 11, 1995 ------------------------------------------ William E. Wall
37 40 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 8, filed March 1993)......................................................... * 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)............................................................... * 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 (Exhibit 10.5 to Form 8, filed March 1993)......................................... * 10.3 Burlington Resources Inc. Incentive Compensation Plan as amended and restated October 1, 1994.................................................. 10.4 Burlington Resources Inc. Senior Executive Survivor Benefit Plan dated as of January 1, 1989 (Exhibit 10.11 to Form 8, filed February 1989)......... * 10.5 Burlington Resources Inc. Deferred Compensation Plan dated as of January 1, 1989 (Exhibit 10.12 to Form 8, filed February 1989).................... * Amendment No. 1 to Burlington Resources Inc. Deferred Compensation Plan (Exhibit 10.12 to Form 8, filed February 1991)............................ * 10.6 Burlington Resources Inc. Deferred Compensation Plan as amended and restated October 1, 1994.................................................. 10.7 Burlington Resources Inc. Supplemental Benefits Plan as amended and restated January 1, 1990 (Exhibit 10.14 to Form 8, filed February 1992)... * 10.8 Burlington Resources Inc. Supplemental Benefits Plan as amended and restated October 1, 1994.................................................. 10.9 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)............. *
A-1 41
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- -------------------------------------------------------------------------- ------ 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)........ * Employment Contracts between Meridian Oil Inc. and George E. Howison and Bobby S. Shackouls (Exhibit 10.8 to Form 10-K, filed February 1994)....... * 10.10 Amendment to Employment Contract between Burlington Resources Inc. and Thomas H. O'Leary......................................................... Amendment to Employment Contract between Meridian Oil Inc. and Bobby S. Shackouls................................................................. 10.11 Burlington Resources Inc. Compensation Plan for Non-Employee Directors (Exhibit 10.18 to Form S-8, No. 33-33626, filed March 1990)............... * Amendment No. 1 to Burlington Resources Inc. Compensation Plan for Non- Employee Directors (Exhibit 10.19 to Form 8, filed February 1992)......... * 10.12 Burlington Resources Inc. Key Executive Severance Protection Plan as amended June 8, 1989 (Exhibit 10.20 to Form 8, filed February 1992)....... * 10.13 Burlington Resources Inc. Retirement Savings Plan (Exhibit Amendment No. 1 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)............................... * 10.14 Burlington Resources Inc. Retirement Income Plan for Directors (Exhibit 10.21 to Form 8, filed February 1991)..................................... * 10.15 Burlington Resources Inc. 1991 Director Charitable Award Plan, dated as of January 16, 1991 (Exhibit 10.22 to Form 8, filed February 1991)........... * 10.16 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)........................................... * 10.17 Burlington Resources Inc. 1992 Stock Option Plan for Non-employee Directors (Exhibit 28.1 of Form S-8, No. 33-46518, filed March 1992)...... * 10.18 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).......... * 10.19 Burlington Resources Inc. 1992 Performance Share Unit Plan (Exhibit 10.21 to Form 8, filed March 1993).............................................. * 10.20 Burlington Resources Inc. Severance Plan and Amendments No. 1 and 2 (Exhibit 10.22 to Form 8, filed March 1993)............................... * Amendments No. 3, 4 and 5 to the Burlington Resources Inc. Severance Plan (Exhibit 10.20 to Form 10-K, filed February 1994)......................... *
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EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- -------------------------------------------------------------------------- ------ 10.21 Burlington Resources Inc. 1993 Stock Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1994)................................................ * 10.22 Petrotech Long Term Incentive Plan........................................ 10.23 Burlington Resources Inc. 1994 Restricted Stock Exchange Plan............. 10.24 $300 million Short-term Revolving Credit Agreement, dated as of July 20, 1994, between Burlington Resources Inc. and Citibank, N.A., as agent...... 10.25 $600 million Long-term Revolving Credit Agreement, dated as of July 20, 1994, between Burlington Resources Inc. and Citibank, N.A. as agent....... 11.1 Earnings Per Share Computation............................................ 12.1 Ratio of Earnings to Fixed Charges........................................ 21.1 Subsidiaries of Registrant................................................ 23.1 Consent of Coopers & Lybrand.............................................. 27.1 Financial Data Schedule...................................................
- --------------- *Exhibit incorporated by reference as indicated. A-3 EX-10.3 2 INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10.3 BURLINGTON RESOURCES INC. INCENTIVE COMPENSATION PLAN As Amended and Restated Effective October 1, 1994 (Originally Effective January 1, 1989) 2 BURLINGTON RESOURCES INC. INCENTIVE COMPENSATION PLAN Table of Contents Page ---- Section 1 Definitions . . . . . . . . . . . . . . . . . . 1 Section 2 Administration . . . . . . . . . . . . . . . . . 3 Section 3 Participants . . . . . . . . . . . . . . . . . . 4 Section 4 Incentive Award Pool . . . . . . . . . . . . . . 4 Section 5 Individual Awards . . . . . . . . . . . . . . . 6 Section 6 Payment Of Incentive Awards . . . . . . . . . . 7 Section 7 General Provisions . . . . . . . . . . . . . . . 14
-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 May 1, 1990 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 1, 1994. SECTION 1 DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1.1 Account means a Memorandum Account, Special Deferral Memorandum Account, and/or an Automatic Deferral Account, as each is defined in Section 6.5. 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 4 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 Company means Burlington Resources Inc., a Delaware corporation. 1.5 Company Stock Account means a notional subaccount of an Account credited with Phantom Stock, as provided in Section 6.6. 1.6 Employer means the Company and its subsidiaries. 1.7 Fair Market Value means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which the 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 Company common stock was traded on such date, on the next preceding day on which its common stock was so traded. 1.8 Incentive Award means the amount of a Participant's individual award granted to the Participant for a year pursuant to Section 5. 1.9 Interest Account means a notional subaccount of an Account credited with interest, as provided in Section 6.6. 1.10 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. 1.11 Participant means each employee who participates in the Plan in accordance with Section 3. 1.12 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 fullCtime employment by the Employers and that such disability is reasonably expected to be permanent or long-term. -2- 5 1.13 Phantom Stock means a phantom or notional share of common stock of the Company. 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. 1.14 Plan means the Burlington Resources Inc. Incentive Compensation Plan either in its previous or present form or as amended from time to time. 1.15 Termination means a Participant's termination of employment with the Employers, 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 and Nominating Committee of the Board, 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. -3- 6 SECTION 3 PARTICIPANTS 3.1 Participants. The Management Committee shall determine and designate the executives of the Company and other key employees of the Employers who are eligible to 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 and each participating subsidiary for purposes of determining the amount of money which shall be available for Incentive Awards for each year. The Incentive Award Pool of an Employer (the Company or a participating subsidiary) for each year shall be an amount equal to the sum total of the aggregate maximum incentive awards available for its 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 his Employer for that year; provided, however, that for Participants in grade F and above who are employed by a participating subsidiary, the Maximum Incentive Award shall be the sum of (a) the Participant's annual salary multiplied by his Maximum Award Percentage, which amount is then multiplied by one-half of the subsidiary's Performance Standard Percentage for the year, plus (b) the Participant's -4- 7 annual salary multiplied by his or her Maximum Award Percentage, which amount is then multiplied by one-half of the Company's Performance Percentage for the 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/Subsidiary Performance. At the beginning of each year, the Compensation and Nominating Committee shall approve strategic and financial objectives for the Company for the year, and the Management Committee shall approve strategic and financial objectives for the participating subsidiaries for the year. At the end of the year, the same committee that approved the objectives of the Company or a participating subsidiary, as the case may be, shall assess the Company or subsidiary's performance in 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 or Subsidiary Performance Performance Category Standard Percentage --------------------- ------------------- I. Performance for the year was outstanding and exceeded objectives. 100% II. Performance for the year met or exceeded objectives or was excellent in view of prevailing conditions. 75% III. Performance for the year generally met objectives or was very acceptable in view of prevailing conditions. 50% IV. Performance for the year did not meet objectives and was generally below acceptable levels. 0 to 25%
-5- 8 4.3 Maximum Award Percentage. Each participating employer (the Company or a subsidiary) shall establish the salary grades of its Participants. The Compensation and Nominating Committee shall assign a percentage of annual salary (the "Maximum Award Percentage") for the President and 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 Pools, as set forth in Section 4.1. SECTION 5 INDIVIDUAL AWARDS 5.1 President and Chief Executive Officer. The Compensation and Nominating Committee of the Board shall annually grant the Incentive Award for the President and Chief Executive Officer of the Company. In evaluating the President and Chief Executive Officer, the Compensation and Nominating 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 President and 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 Participant's Employer, 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 an Employer's Participants may not exceed that Employer's Incentive Award Pool. A Participant's performance must be satisfactory, regardless of Company or subsidiary performance, before he or she may be granted an Incentive Award. -6- 9 5.4 New Employee, or Retirement, Disability, Death or Termination of Employment. The Compensation and Nominating 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 Incentive Award for the year currently shall be paid his or her Incentive Award in cash in the month following the month in which 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, which shall govern the amount deferred, the form of its payment pursuant to Section 6.9 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 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 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 -7- 10 his or her Incentive Award for that year deferred until a date or dates specified by the Management Committee, which, with respect to any Special Deferral invested in Phantom Stock, must be more than six months after the effective date of such deferral. The Participant's election shall be irrevocable and shall be made on a form prescribed by the Management Committee. 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 Automatic Deferrals. If the Management Committee determines that all or part of the Incentive Award to be paid to a Participant pursuant to Section 6.1 would be nondeductible by the Company or a subsidiary for Federal tax purposes due to the limitations of Section 162(m) of the Internal Revenue Code, so much of the payment, if any, that would be deductible that year shall be paid to the Participant pursuant to Section 6.1 and, unless the Management Committee, in its sole discretion, directs otherwise, the balance of such Incentive Award shall be deferred automatically and credited to the Participant's Automatic Memorandum Account, which, pursuant to the Participant's election, shall be invested and payable as follows: (a) invested in the Interest Account and payable in the first year or years in which the Management Committee, in its sole discretion, determines either such payment(s) would be deductible or to forego the deduction; (b) invested in the Interest Account and payable upon the Participant's Termination; or (c) invested in the Company Stock Account and payable upon the Participant's Termination. A Participant's election must be made prior to the deferral date and, if (b) or (c) is elected, the election must also specify the form in which the Account is to be -8- 11 paid as provided in Section 6.9. If the Participant does not timely make an election with respect to an automatic deferral, he or she shall be deemed to have elected option (a) above. Automatic Memorandum Accounts are payable only in cash. 6.5 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 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 6.9; 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. In addition, a separate Automatic Memorandum Account shall be established for each automatic deferral made pursuant to Section 6.3 with respect to a Participant. 6.6 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. With respect to an election to defer (or an automatic deferral of) an Incentive Award for any year beginning after 1993, a Participant may irrevocably request that the Management Committee credit all or a specified percentage of his or -9- 12 her Incentive Award deferred for that year in shares of Phantom Stock; however, the Management Committee shall not be obligated to honor any such Participant's request. If the Management Committee elects to honor any such request, it shall establish a separate notional subaccount for such Participant under his or her Account, which shall be credited with 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 (the "Company Stock Account"). 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; provided, however, with respect to an automatic deferral pursuant to Section 6.3 that is to be invested in Phantom Stock, the number of shares of Phantom Stock credited to the Participant's Company Stock Account with respect to such automatic deferral shall be determined on the same basis as if such deferral had been the exercise of a Stock Purchase Right that year under the Company's 1993 Stock Incentive Plan. If the Management Committee chooses to not honor any Participant's request to invest his or her Account in shares of Phantom Stock, the Participant's deferral automatically shall be held in the Interest Account. 6.7 Special Phantom Stock Investment Elections. Each Participant who has an Account under the Plan on October 1, 1994 shall be given a one-time irrevocable election to request that all or a specified percentage of his or her Account balance as of that date, as elected by the Participant, be invested in the Company Stock Account; however, the Management Committee shall not be obligated to honor any such request. This election shall be in such form as the Management Committee shall establish, and must be made prior to October 1, 1994. 6.8 Change in Section 16(b) Rules. Notwithstanding anything in the Plan to the contrary, if the rules promulgated under Section 16(b) of the Securities -10- 13 Exchange Act of 1934, as amended, are amended or interpreted by the Securities and Exchange Commission to permit "insiders" to make investment changes with respect to their accounts under cash only type of plans like the Plan, the Management Committee, in its sole discretion, may amend the Plan in any manner it deems appropriate to allow Participants the ability to request, from time to time, investment changes with respect to their Account balances under the Plan and may also add additional notional subaccounts under the Plan for such other investments as the Management Committee deems appropriate to offer under the Plan. 6.9 Payment of Accounts. Except as provided below, 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 in installments, his or her Company Stock 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 which the Participant's Termination or Special Deferral payment date occurs; provided, however, if the Management Committee determines that all or part of a payment to be made to a Participant pursuant to this Section 6.9 would be nondeductible by the Company or a subsidiary for Federal tax purposes due to the limitations of Section 162(m) of the Internal Revenue Code, so much of the payment, if any, that would be deductible in the year of Termination (or Special Deferral payment date) shall be paid to the Participant immediately following his or her Termination (or Special Deferral -11- 14 payment date) and, unless the Management Committee, in its sole discretion, directs otherwise, the balance of the Account shall be paid to the Participant (i) with respect to a Termination, not later than the end of the third month of the next following year and (ii) with respect to a Special Deferral payment date, in the first year in which the Management Committee, in its sole discretion, determines either that such payment would be deductible or to forego the deduction, in each case such delayed payment being based on the value of the Account at the time of such actual payment. Notwithstanding anything in the Plan to the contrary however, each Participant who has an Account under the Plan on October 1, 1994 shall be given a one-time irrevocable election to select, within the distribution options specified above, the manner in which one or more of such Accounts is to be paid on his or her Termination; provided, however, no such distribution election shall be effective with respect to any Termination (or Special Deferral payment date) occurring prior to January 1, 1995, unless such Termination is due to the Participant's death, Permanent Disability occurring after October 1, 1994, or involuntary termination by the Company or a subsidiary (whether a termination is involuntary shall be determined by the Committee). Such distribution election shall be in such form as established by the Management Committee and must be made prior to October 1, 1994. Further, if the Management Committee determines at any time that Participants may be given the ability to change their election as to the form of distribution of their Account(s) without causing the loss of any exempt treatment to "insiders" for securities laws purposes, the Management Committee may amend the Plan to provide for such election changes as it deems appropriate. -12- 15 6.10 Acceleration of Payments. Notwithstanding a Participant's election to the contrary, the Management Committee, 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 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 shall not accelerate the payment of any Company Stock Account maintained for a Participant if such acceleration would cause the loss on any exempt treatment under the Plan for "insiders" for securities laws purposes. 6.11 Payment of Burlington Northern Inc. Deferred Incentive Awards. Incentive Awards that were deferred by a Participant under the Burlington Northern Inc. Incentive Compensation Plan, together with interest accrued thereon, shall be paid by the Company in accordance with the terms of this Plan and shall be in lieu of payment by Burlington Northern Inc. 6.12 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 -13- 16 occurs shall become fully vested and 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 (as defined in Section 7.7)) 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 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 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 -14- 17 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 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 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. -15- 18 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 and Nominating Committee of 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 Compensation and Nominating 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall be construed to meet the requirements for exemption from Section 16 of the Exchange Act and, if any Plan provision is later found to be contrary to meeting the requirements for such exemption, that provision shall be deemed null and void. Notwithstanding anything in the Plan to the contrary, the Compensation and Nominating 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 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. -16- 19 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. -17- EX-10.6 3 DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.6 BURLINGTON RESOURCES INC. DEFERRED COMPENSATION PLAN As Amended and Restated Effective October 1, 1994 (Originally Effective January 1, 1989) 2 BURLINGTON RESOURCES INC. DEFERRED COMPENSATION PLAN Table of Contents -----------------
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 1, 1994. SECTION 1 DEFINITIONS For purposes of the Plan, the following terms shall have the meanings indicated: 1.1 Account means a Memorandum Account, Special Deferral Memorandum Account, and/or an Automatic Deferral Account, as each is defined in Section 4.4. 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. 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 4 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 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 4.5. 1.7 Employer means the Company and its subsidiaries. 1.8 Fair Market Value means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which the common stock of the Company was sold on such date as reported inb the NYSE-Corporate Transactions by The Wall Street Journal on such date or, if no Company common stock was traded on such date, on the next preceding day on which its common stock was so traded. 1.9 Interest Account means a notional subaccount of an Account credited with interest, as provided in Section 4.5. 1.10 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. 1.11 Participant means each employee who participates in the Plan in accordance with Section 3. 1.12 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 Employers and that such disability is reasonably expected to be permanent or long-term. -2- 5 1.13 Phantom Stock means a phantom or notional share of common stock of the Company. 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 dividends. A share of Phantom Stock shall be payable solely in cash under the Plan. 1.14 Plan means the Burlington Resources Inc. Deferred Compensation Plan either in its previous or present form or as amended from time to time. 1.15 Termination means a Participant's termination of employment with the Employers, 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 and Nominating Committee of the Board, 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. -3- 6 SECTION 3 PARTICIPANTS 3.1 Participants. The Management Committee shall determine and designate the executives of the Company and other key employees of the Employers 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 Secuirty 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 on which the employee becomes a -4- 7 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 4.8 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 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, which, with respect to any Special Deferral invested in Phantom Stock, must be more than six months after the effective date of such deferral. The Participant's election shall be irrevocable and shall be made on a form prescribed by the Management Committee. 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. 4.3 Automatic Deferrals. If the Management Committee determines that all or part of the Base Salary to be paid to a Participant for a year would be -5- 8 nondeductible by the Company or a subsidiary for Federal tax purposes due to the limitations of Section 162(m) of the Internal Revenue Code, so much of the Base Salary that would not be deductible that year shall be deferred automatically and, unless the Management Committee, in its sole discretion, directs otherwise, credited to the Participant's Automatic Memorandum Account, which, pursuant to the Participants' election, shall be invested and payable as follows; (a) invested in the Interest Account and payable in the first year or years in which the Management Committee, in its sole discretion, determines either such payment(s) would be deductible or to forego the deduction; (b) invested in the Interest Account and payable upon the Participant's Termination; or (c) invested in the Company Stock Account and payable upon the Participant's Termination. A Participant's election must be made prior to the deferral date and, if (b) or (c) is elected, the election must also specify the form in which the Account is to be paid as provided in Section 6.9. If the Participant does not timely make an election with respect to an automatic deferral, he or she shall be deemed to have elected option (a) above. Automatic Memorandum Accounts are payable only in cash. 4.4 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 4.8; 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 -6- 9 combined into a single Special Memorandum Account. In addition, a separate Automatic Memorandum Account shall be established for each automatic deferral made pursuant to Section 4.3 with respect to a Participant. 4.5 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. With respect to an election to defer (or an automatic deferral of) Base Salary for any year beginning after 1993, a Participant may irrevocably request that the Management Committee credit all or a specified percentage of his or her Base Salary deferred that year in shares of Phantom Stock; however, the Management Committee shall not be obligated to honor any such Participant's request. If the Management Committee elects to honor any such request, it shall establish a separate notional subaccount for such Participant under his or her Account, which shall be credited with 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 (the "Company Stock Account"). 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. If the Management Committee chooses to not honor any Participant's request to invest his or her Account in shares of Phantom Stock, the Participant's deferral automatically shall be held in the Interest Account. -7- 10 4.6 Special Phantom Stock Investment Elections. Each Participant who has an Account under the Plan on October 1, 1994 (including with respect to deferrals made in 1994) shall be given a one-time irrevocable election to request that all or a specified percentage of his or her Account balances as of that date, as elected by the Participant, be invested in the Company Stock Account; however, the Management Committee shall not be obligated to honor any such request. This election shall be in such form as the Management Committee shall establish, and must be made prior to October 1, 1994. 4.7 Change in Section 16(b) Rules. Notwithstanding anything in the Plan to the countrary, if the rules promulgated under Section 16(b) of the Securities Act of 1934, as amended, are amended or interpreted by the Securities and Exchange Commission to permit "insiders" to make investment changes with respect to their accounts under cash only type of plans like the Plan, the Management Committee, in its sole discretion, may amend the Plan in any manner it deems appropriate to allow Participants the ability to request, from time to time, investment changes with respect to their future deferrals and/or their existing Account balances under the Plan and may also add additional notional subaccounts under the Plan for such other investments as the Management Committee deems appropriate to offer under the Plan. 4.8 Payment of Accounts. Except as provided below, 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, -8- 11 whichever form of payment has been elected by the Participant. However, if a Participant elects to receive the distribution of a Company Stock Account in installments, his or her Company Stock 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 which the Participant's Termination or Special Deferral payment date occurs; provided, however, if the Management Committee determines that all or part of a payment to be made to a Participant pursuant to this Section 4.8 would be nondeductible by the Company or a subsidiary for Federal tax purposes due to the limitations of Section 162(m) of the Internal Revenue Code, so much of the payment, if any, that would be deductible in the year of Termination (or Special Deferral payment date) shall be paid to the Participant immediately following his or her Termination (or Special Deferral payment date) and, unless the Management Committee, in its sole discretion, directs otherwise, the balance of the Account shall be paid to the Participant (i) with respect to a Termination, not later than the end of the third month of the next following year and (ii) with respect to a Special Deferral payment date, in the first year in which the Management Committee, in its sole discretion, determines either such payment would be deductible or to forego such deduction, in each case such delayed payment being based on the value of the Account at the time of such actual payment. Notwithstanding anything in the Plan to the contrary however, each Participant who has an Account under the Plan on October 1, 1994 shall be given a one-time irrevocable election to change, within the distribution options specified above, the manner in which one or more of such Accounts is to be paid on his or her Termination; provided, however, no such distribution election change shall be effective with respect to any Termination (or Special Deferral payment date) -9- 12 occurring prior to January 1, 1995, unless such Termination is due to the Participant's death, Permanent Disability occurring after October 1, 1994, or involuntary termination by the Company or a subsidiary (whether a termination is involuntary shall be determined by the Committee). Such distribution election change shall be in such form as established by the Management Committee and must be made prior to October 1, 1994. Further, if the Management Committee determines at any time that Participants may be given the ability to change their election as to the form of distribution of their Account(s) without causing the loss of any exempt treatment to "insiders" for securities laws purposes, the Management Committee may amend the Plan to provide for such election changes as it deems appropriate. 4.9 Acceleration of Payments. Notwithstanding a Participant's election to the contrary, the Management Committee, 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 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 shall not accelerate the payment of any Common Stock -10- 13 Account maintained for a Participant if such acceleration would cause the loss on any exempt treatment under the Plan for "insiders" for securities laws purposes. 4.10 Payment of Burlington Northern Inc. Deferred Base Salary. Base Salary that was deferred by a Participant under the Burlington Northern Inc. Deferred Compensation Plan, together with interest accrued thereon, shall be paid by the Company in accordance with the terms of this Plan and shall be in lieu of payment by Burlington Northern Inc. 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 Mangement 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 -11- 14 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 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 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 and Nominating Committee of 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 Compensation Committee and Nominating 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 -12- 15 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall be construed to meet the requirements for exemption from Section 16 of the Exchange Act and, if any Plan provision is later found to be contrary to meeting the requirements for such exemption, that provision shall be deemed null and void. Notwithstanding anything in the Plan to the contrary, the Compensation and Nominating 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 of the Exchange Act 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-10.8 4 SUPPLEMENTAL BENEFITS PLAN 1 EXHIBIT 10.8 BURLINGTON RESOURCES INC. SUPPLEMENTAL BENEFITS PLAN As Amended and Restated Effective October 1, 1994 (Originally Effective January 1, 1989) 2 BURLINGTON RESOURCES INC. SUPPLEMENTAL BENEFITS PLAN Table of Contents -----------------
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. 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 stated the Plan as of January 1, 1990 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 1, 1994. 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. 1.3 Code means the Internal Revenue Code of 1986, as amended. 1.4 Company means Burlington Resources Inc., a Delaware corporation. 4 1.5 Company Stock Account means a notional subaccount of a Memorandum Account credited with Phantom Stock, as provided in Section 4.5. 1.6 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. 1.7 Employer means the Company and its subsidiaries. 1.8 Fair Market Value means, as applied to a specific date, the mean between the highest and lowest quoted selling prices at which the 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 Company common stock was traded on such date, on the next preceding day on which its common stock was so traded. 1.9 Interest Account means a notional subaccount of a Memorandum Account credited with interest, as provided in Section 4.5. 1.10 Management Committee means the committee appointed pursuant to Section 2.1 to administer the Plan. 1.11 Participant means each employee who participates in the Plan in accordance with Section 3. 1.12 Pension Plan means the Burlington Resources Inc. Pension Plan and any pension plans maintained by an Employer. 1.13 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 Employers and that such disability is reasonably expected to be permanent or long-term. -2- 5 1.14 Phantom Stock means a phantom or notional share of common stock of the Company. 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. 1.15 Plan means the Burlington Resources Inc. Deferred Compensation Plan either in its previous or present form or as amended from time to time. 1.16 RSP means the Burlington Resources Inc. Retirement Savings Plan. 1.17 Surviving Spouse means the person to whom surviving spouse death benefits are to be paid pursuant to the terms of the Pension Plan. 1.18 Termination means a Participant's termination of employment with the Employers, 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 and Nominating Committee of the Company's Board of Directors, 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 -3- 6 of the Management Committee shall vote on any matter that pertains solely to himself or herself. SECTION 3 PARTICIPANTS 3.1 Participants. The Management Committee shall determine and designate the executives of the Company and other key employees of the Employers 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: (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 -4- 7 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, (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. -5- 8 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 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 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). -6- 9 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. 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. With respect to any year beginning after 1993, a Participant may irrevocably request that the Management Committee credit all or a specified percentage of his or her Employer Matching Contributions for that year in shares of Phantom Stock; however, the Management Committee shall not be obligated to honor any such Participant's request. If the Management Committee elects to honor any such request, it shall establish a separate notional subaccount for such Participant under his or her Memorandum Account, which shall be credited with 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 (the "Company Stock Account"). 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. If the Management Committee chooses to not honor any such Participant's request to invest his or her Memorandum Account in shares of Phantom Stock, the Participant's Employer Matching Contributions automatically shall be credited with interest. 4.6 Special Phantom Stock Investment Elections. Each Participant who has a Memorandum Account under the Plan on October 1, 1994 (including with -7- 10 respect to Employer Matching Contributions credited or to be credited in 1994) shall be given a one-time irrevocable election to request that all or a specified percentage of his or her Memorandum Account as of that date, as elected by the Participant, be invested in the Company Stock Account; however, the Management Committee shall not be obligated to honor any such request. This election shall be in such form as the Management Committee shall establish, and must be made prior to October 1, 1994. 4.7 Change in Section 16(b) Rules. Notwithstanding anything in the Plan to the contrary, if the rules promulgated under Section 16(b) of the Securities Exchange Act of 1934, as amended, are amended or interpreted by the Securities and Exchange Commission to permit "insiders" to make investment changes with respect to their accounts under cash only type of plans like the Plan, the Management Committee, in its sole discretion, may amend the Plan in any manner it deems appropriate to allow Participants the ability to request, from time to time, investment changes with respect to their future Employer Matching Contributions and/or their existing Memorandum Account balance under the Plan and may also add additional phantom subaccounts under the Plan for such other investments as the Management Committee deems appropriate to offer under the Plan. 4.8 Time and Manner of Payments. Except as provided below, 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, -8- 11 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 under Section 4.5 in installments, his or her Company Stock Account 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; provided, however, if the Management Committee determines that all or part of a payment to be made to a Participant pursuant to this Section 4.8 would be nondeductible by the Company or a subsidiary for Federal tax purposes due to the limitations of Section 162(m) of the Internal Revenue Code, so much of the payment, if any, that would be deductible in the year of Termination (or Permanent Disability) shall be paid to the Participant immediately following his or her Termination (or Permanent Disability date) and, unless the Management Committee, in its sole discretion, directs otherwise, the balance of the benefit shall be paid to the Participant not later than the end of the third month of the next following year, with such delayed payment being based on the value of the benefit at the time of such actual payment. Notwithstanding anything in the Plan to the contrary, each Participant who has a benefit under Section 4.1 or 4.2 of the Plan on October 1, 1994 shall be given a one-time, irrevocable election to elect, within the distribution options specified above, the manner in which his or her supplemental pension benefit and/or RSP Memorandum Account benefit are to be paid on his or her Termination or Permanent Disability; provided, however, no such election shall be effective with respect to any Termination or Permanent Disability occurring prior to January 1, 1995, unless such Termination is due to the Participant's death, Permanent Disability occurring after October 1, 1994, or involuntary termination by the -9- 12 Company or a subsidiary (whether a termination is involuntary shall be determined by the Committee). Such election shall be in such form as established by the Management Committee and must be made prior to October 1, 1994. Further, if the Management Committee determines at any time that Participants may be given the ability to change their election as to the form of distribution of their benefits without causing the loss of any exempt treatment to "insiders" for securities laws purposes, the Management Committee may amend the Plan to provide for such election changes as it deems appropriate. 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, 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 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, -10- 13 notwithstanding the foregoing, the Management Committee shall not accelerate the payment of any Company Stock Account maintained for a Participant if such acceleration would cause the loss on any exempt treatment under the Plan for "insiders" for securities laws purposes. 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, 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 -11- 14 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 and Nominating Committee of the Board of Directors of the Company 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 and Nominating 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 Surviving Spouse or -12- 15 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 Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan shall be construed to meet the requirements for exemption from Section 16 of the Exchange Act and, if any Plan provision is later found to be contrary to meeting the requirements for such exemption, that provision shall be deemed null and void. Notwithstanding anything in the Plan to the contrary, the Compensation and Nominating 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 of the Exchange Act 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-10.10 5 AMENDMENT TO EMPLOYMENT CONTRACT, MR. O'LEARY 1 EXHIBIT 10.10 [BURLINGTON RESOURCES LETTERHEAD] HAROLD E. HAUNSCHILD Vice President Human Reources December 7, 1994 Mr. Thomas H. O'Leary 5051 Westheimer Houston, Texas 77056-2124 Dear Tom: Your Employment Agreement with Burlington Resources Inc. (the "Company") is dated October 20, 1988 and was previously amended on February 22, 1989, December 6, 1991, and December 8, 1993. The Employment Agreement, as previously amended, will be referred to herein as the "Agreement". The Board of Directors of the Company (the "Board") has deemed it advisable and in the best interests of the Company and its stockholders to further amend the Agreement with respect to the matters addressed herein. Accordingly, this letter, when accepted by you in the space provided below, will amend the agreement in the following particulars: 1. Term. The term of the Agreement is hereby extended through December 15, 1996, unless sooner terminated by death, permanent disabilities or the mutual agreement of the parties. 2. Pension Benefit. The vested supplemental pension benefit described in Section 4 of the Agreement shall be calculated and paid as if you had retired on December 31, 1994, without regard to the actual date of your retirement, death or permanent disability. Such payment shall be made in one lump sum and shall be paid promptly after your retirement, death or permanent disability. 3. Enforcement. In the event that either party to the Agreement is reasonably required to bring suit to enforce any of the terms of the Agreement, as amended, the party determined to be in breach or default shall pay the reasonable attorney's fees and costs of the prevailing party. This amendatory letter agreement shall be binding upon and inure to the benefit of Thomas H. O'Leary and the Company and its successors and assigns. The term "successor" shall include, without limitation, any corporation which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the assets or business of the Company. As amended hereby, the agreement shall remain in full force and effect in accordance with its terms. 2 Mr. Thomas H. O'Leary December 7, 1994 Page 2 If this letter correctly sets forth our agreement with respect to the subject matter hereof, please sign the original and return it to me. Please retain a copy for your records. VERY TRULY YOURS, BURLINGTON RESOURCES INC. /s/ HAROLD E. HAUNSCHILD By:_____________________________ Vice President Its:____________________________ ACCEPTED AND AGREED TO this 7th day of December, 1994. /s/ THOMAS H. O'LEARY ____________________________ THOMAS H. O'LEARY EX-10.10 6 AMENDMENT TO EMPLOYMENT CONTRACT, MR. SHACKOULS 1 EXHIBIT 10.10 [BURLINGTON RESOURCES LETTERHEAD] November 8, 1994 Mr. Bobby S. Shackouls 5051 Westheimer Houston, Texas 77056-2124 Dear Bobby: The Employment Agreement for your employment with Meridian Oil Inc. (The "Company") is dated April 30, 1993 and will be referred to herein as the "Agreement". The Company has deemed it advisable and in the best interests of the Company to amend the Agreement with respect to the matters addressed herein. Accordingly, this letter, when accepted by you in the space provided below, will amend the Agreement in the following particulars: 1. Position. Effective October 10, 1994, your position will be that of President and Chief Executive Officer of the Company. 2. Base Salary. Effective October 10, 1994, you minimum salary shall be $500,000 per annum or such higher rate as may be fixed from time to time by the Compensation and Nominating Committee of the Board of Directors ("Compensation Committee") of Burlington Resources Inc. ("BR"). This amendatory letter agreement is being executed by BR on behalf of itself, the Company and each of its affiliates and, as amended hereby, the Agreement shall remain in full force and effect in accordance with its terms. 2 Mr. Bobby S. Shackouls November 8, 1994 Page 2 If this letter correctly sets forth our agreement with respect to the subject matter hereof, please sign the original and return it to me. Please retain a copy for your records. VERY TRULY YOURS, BURLINGTON RESOURCES INC. /s/ HAROLD E. HAUNSCHILD By:___________________________ Excecutive Vice President Its:__________________________ ACCEPTED AND AGREED TO this 8th day of November, 1994. /s/ BOBBY S. SHACKOULS ____________________________ BOBBY S. SHACKOULS EX-10.22 7 PETROTECH LONG TERM INCENTIVE PLAN 1 EXHIBIT 10.22 PETROTECH LONG TERM INCENTIVE PLAN 1. PURPOSE The objective of the Petrotech Long Term Incentive Plan (hereinafter referred to as "Petrotech Plan") is to attract and retain highly qualified managerial and professional oil and gas employees. 2. PLAN PARTICIPANTS The Petrotech Plan shall be limited to non-officer employees designated by the Chief Executive Officer of Meridian who, because of their position and responsibility, directly affect the success of Meridian Oil Inc.'s (hereinafter referred to as "Meridian") exploration and production activities. Those employees are hereinafter referred to as "Plan Participants". 3. ADMINISTRATION The Petrotech Plan shall be administered by the Chief Executive Officer of Meridian or such other person as the Chief Executive Officer shall designate from time to time (hereinafter referred to as the "Administrator"). The Administrator shall have the exclusive right and authority to manage and administer as well as to amend, interpret or rescind any of the terms and conditions of the Petrotech Plan. All actions taken by the Administrator shall be binding upon all Plan Participants. 4. PLAN AWARDS In July of each year the plan is in effect, an amount equal to twenty percent of the annualized July 1 regular base pay of all Plan Participants shall be deemed to be applied to a fund (hereafter referred to as the "Award Fund"). The Award Fund shall then be converted to "Stock Units" by dividing the Award Fund by the Conversion Price. The Conversion Price is the average of the closing prices of Burlington Resources Inc. common stock for the last twenty trading days in June of each year. The Stock Units distributed to certain Plan Participants shall be referred to as an "Award". 2 Awards made to the Plan Participants shall be at the sole discretion of the Administrator. Awards, if any, shall be made and communicated to Plan Participants on or before August 15 of each year. 5. DISTRIBUTION AND CASH VALUE OF STOCK UNITS By August 15 of the year following the year of each Award, twenty percent of the Stock Units associated with that Award will be distributed to the Plan Participant. The remaining eighty (80%) percent of the Stock Units associated with that Award will be distributed annually over the subsequent four year period. The value of the Stock Units is immediately payable in cash to the Plan Participant at the time of their distribution. The value is determined by multiplying the number of Stock Units distributed, by the Conversion Price in effect at the time of that distribution. Appropriate state and federal income taxes, F.I.C.A. and other similar deductions will be withheld from any payment made under this Petrotech Plan. Except as otherwise provided in this Petrotech Plan, a Plan Participant must be a full time employee, on short-term disability or on an approved Unpaid Leave of Absence at the time the cash value of the Stock Units becomes payable to receive payments based upon any Award. 6. DEATH/DISABILITY/RETIREMENT/SEVERANCE If a Plan Participant dies, retires, is permanently disabled, or severed (as defined below) on or subsequent to the date that an Award is made, a Special Distribution, as defined below, will occur. The resulting payment shall be a final payment and complete settlement for all Awards then outstanding and for any benefits under the Petrotech Plan. Permanent Disability--A Plan Participant shall be deemed permanently disabled when the Administrator shall find upon the basis of medical evidence satisfactory to the Administrator that the Plan Participant is totally disabled, whether due to physical or mental condition, so as to be prevented from engaging in any further employment by Meridian, and such disability will be permanent and continuous during the remainder of the Plan Participant's life. 3 Retirement--A Plan Participant shall be deemed retired when the Plan Participant leaves the employment of Meridian and is eligible to receive a retirement benefit under the Burlington Resources Inc. Pension Plan. Severance--A Plan Participant's employment shall be deemed severed if the Plan Participant is included in a reduction in the work force or his/her position is job abolished as defined by Company policy. Voluntary termination or termination for poor performance or for cause or for any other reason other than job abolishment or reduction in force will not be a severance under the Petrotech Plan and will not result in a Special Distribution. 7. SPECIAL DISTRIBUTION A Special Distribution is made in the event of a Plan Participant's death, Disability, Retirement or Severance only. If such an event occurs on or subsequent to the date that an Award is made, the Stock Units that would have been distributed to the Plan Participant as part of the next year's usual distribution shall be immediately distributed to the Plan Participant or his/her beneficiary. The cash value of such Stock Units shall be determined by multiplying the number of Stock Units by the last determined Conversion Price. Payment of the cash value of the Stock Units shall be made within forty-five (45) days of the event and shall be the full and final payment and complete settlement for all Awards then outstanding and for any benefits under the Petrotech Plan. 8. BENEFICIARY Any person or persons may be named as the beneficiary of a Special Distribution in the event of the Plan Participant's death. If a beneficiary is not named or if the named beneficiary is not living at the time of the Plan Participant's death, payment from the Special Distribution will be made to the first survivor according to the following priority: spouse, children, parents, siblings, or the executor for the benefit of the Plan Participant's estate. 4 9. BENEFIT PLANS Awards and any payments to Plan Participants under this Petrotech Plan shall not be considered as part of a Plan Participant's salary for the calculation of regular pay, compensation, allowance, pension or any other benefits unless otherwise required by law or specific contractual obligation of Meridian. 10. UNFUNDED PLAN Nothing in this Petrotech Plan shall be construed as requiring Meridian to segregate any moneys from its general funds, or to create any trusts, or make any special deposits or investments in connection with any amounts credited to a Plan Participant. All funds deemed to be in the Award Fund and Stock Units are acknowledged to be subject to Meridian's general creditors prior to any actual payment of such funds to any Plan Participant. 11. ASSIGNMENT The benefits of a Plan Participant or a designated beneficiary of a Plan Participant under this Petrotech Plan may not be assigned. Any attempt to transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any rights, privileges or benefits or the sale or levy or any attachment or similar process upon the rights, privileges or benefits conferred hereby, shall be invalid. Any attempt to do so shall result in voiding of any Awards and payments thereunder. 12. NO CONTRACT OF EMPLOYMENT This Petrotech Plan shall not constitute a contract or any right of employment. Participation in this Petrotech Plan shall not affect Meridian's right to discharge a Plan Participant and thereby terminate a Plan Participant's participation in the Petrotech Plan and payout of Awards (except as specifically provided in Paragraph 6). 13. NO RIGHT OF INSPECTION Neither this Petrotech Plan nor any action taken thereunder by the Administrator shall be construed as giving any Plan Participant or beneficiary or any other person the right 5 to an accounting, to examine the books, or to review or question the affairs, management, or business decisions of Meridian relating to this Petrotech Plan. 14. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN The Administrator may, from time to time, amend any provision of the Petrotech Plan, or suspend or terminate the Petrotech Plan, in whole or in part, and if any term or condition of the Petrotech Plan is suspended or terminated, the Administrator may reinstate any or all the prior terms and conditions of the Petrotech Plan. The Administrator may take such actions from time to time and no Plan Participant has any vested or contract right under this Petrotech Plan. In the event the Petrotech Plan is suspended or terminated by the Administrator, the cash value of the Stock Units derived from previous Awards may continue to be paid in the manner described in the above referenced paragraphs entitled "Distribution of Stock Units" and "Special Distribution". 15. EFFECTIVE DATE The Petrotech Plan is effective as of July 1, 1988, revised August 1,1993 and July 1, 1994. EX-10.23 8 1994 RESTRICTED STOCK EXCHANGE PLAN 1 EXHIBIT 10.23 BURLINGTON RESOURCES INC. 1994 RESTRICTED STOCK EXCHANGE PLAN Effective July 6, 1994 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 ESTABLISHMENT AND PURPOSE . . . . . . . . . . 1 ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . 1 ARTICLE 3 ADMINISTRATION . . . . . . . . . . . . . . . 3 ARTICLE 4 SHARE UNITS AVAILABLE FOR THE PLAN . . . . . 4 ARTICLE 5 GRANT OF SHARE UNITS . . . . . . . . . . . . 4 ARTICLE 6 PAYMENT OF VESTED SHARE UNITS . . . . . . . . 4 ARTICLE 7 GENERAL PROVISIONS . . . . . . . . . . . . . 5
-i- 3 BURLINGTON RESOURCES INC. 1994 RESTRICTED STOCK EXCHANGE PLAN ARTICLE I ESTABLISHMENT AND PURPOSE 1.1 Establishment. Burlington Resources Inc. (the "Company") hereby establishes the Burlington Resources Inc. 1994 Restricted Stock Exchange Plan for the benefit of certain eligible executives of the Company and its Subsidiaries. 1.2 Purpose. The purpose of this Plan is to permit the Company to defer the vesting of Restricted Stock awards previously granted to certain executives of the Company and its Subsidiaries, and thus to enhance the retention value of those awards to the Company, by offering those executives the opportunity to surrender to the Company their unvested shares of Restricted Stock in exchange for Share Units under this Plan. ARTICLE II 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 or Subsidiary (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 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 or Subsidiary, 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 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 or Subsidiary. Notwithstanding anything contained in 4 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) Committee. The Compensation and Nominating Committee of the Board. (f) 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 4.2. (g) Company. Burlington Resources Inc. (h) Exchange Act. The Securities Exchange Act of 1934, as amended. (i) Fair Market Value. The average of the highest and lowest quoted selling prices at which Common Stock was sold on the applicable Valuation Date as reported in the NYSE-Composite 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. 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. -2- 5 (j) Participant. An executive of the Company or a Subsidiary who has surrendered shares of Restricted Stock to the Company in exchange for the grant of Share Units under the Plan. (k) Permanent Disability. A Participant shall be deemed to have become permanently disabled for purposes of this Plan if the 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. (l) Restricted Stock. The shares of unvested Restricted Stock previously granted the executive by the Company, which are, in response to an offer by the Committee, surrendered to the Company by a Participant in exchange for a grant of Share Units under this Plan. (m) Share Unit. An award under the Plan having an accounting value equal to the Fair Market Value of one share of Common Stock. (n) Subsidiary. A corporation or other form of business association designated by the Committee as a subsidiary for purposes of the Plan. (o) Valuation Date. The date of a Participant's termination of employment with the Company and its Subsidiaries. ARTICLE III ADMINISTRATION The Plan shall be administered by the Committee. 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 and to the extent required to exempt the Plan from Section 16 of the Exchange Act, the Committee shall be constituted at all times so as to meet the requirements of Rule 16b-3 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. Subject to the terms of the Plan and applicable law, the Committee shall have the full power, authority and discretion to: (i) determine which executives shall be eligible to become Participants and how many Share Units shall be granted to each Participant; (ii) interpret, construe and administer the Plan and any instrument or agreement relating to Share Units granted under the Plan; (iii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (iv) make a determination as to the right of any person to receive payment with respect to vested Share Units; and (v) make any other determinations and take any other actions that the Committee deems necessary or desirable for the administration of the Plan. Each member of the Committee, while serving as such, shall be considered to be acting in his or her capacity as a director of the Company. Members of the Board and members of the Committee shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross negligence or willful misconduct in the performance of their duties. -3- 6 ARTICLE IV SHARE UNITS AVAILABLE FOR THE PLAN 4.1 Share Units. Subject to Section 4.2, the maximum number of Share Units which may be granted under the Plan is 120,000. If additional Share Units are needed under the Plan after such initial number has been fully utilized and prior to the expiration of the Plan, the Committee shall authorize such additional Share Units as it shall determine to be necessary under the Plan. 4.2 Recapitalization. In the event of a recapitalization, stock split, stock dividend, exchanges of shares, merger, reorganization, change in the corporate structure of the Company or similar event, the Committee may make appropriate adjustments in the number of Share Units authorized for the Plan and, with respect to outstanding Share Units, the Committee may make appropriate adjustments in the number of Share Units. ARTICLE V GRANT OF SHARE UNITS 5.1 Grants of Share Units. Each Participant shall be granted a number of Share Units equal to 120% (rounded up to the nearest whole number) of the number of shares of Restricted Stock such Participant surrenders in response to an offer from the Committee hereunder to the Company for cancellation. 5.2 Dividends. On each date that the Company pays a dividend or makes a distribution with respect to its Common Stock, a corresponding dividend or distribution shall be deemed to be credited to each outstanding Share Unit and shall be deemed reinvested in additional Share Units or fractions thereof based on the Fair Market Value of a share of Common Stock on such date. 5.3 Vesting. Share Units granted to a Participant hereunder shall become vested (nonforfeitable) on the second anniversary of the date the restrictions on the Participant's surrendered shares of Restricted Stock would have lapsed; however, all outstanding Share Units shall become fully vested in the event of a Change in Control. Further, in the event a Participant's employment with the Company and its Subsidiaries is terminated due to death or Permanent Disability, the Participant automatically shall be fully vested as of the date of such termination in all of the Participant's outstanding Share Units. Participants who terminate their employment for any other reason prior to full vesting shall not be entitled to receive payment from the Company or its Subsidiaries for any Share Units which are not vested as of the time they cease employment with the Company and its Subsidiaries. 5.4 Share Unit Agreements. The Committee shall enter into written agreements with each Participant setting forth the grant of Share Units hereunder and the terms applicable to such grant consistent with this Plan. ARTICLE VI PAYMENT OF VESTED SHARE UNITS 6.1 Entitlement to Payment. Subject to Sections 6.2 and 6.3 below, each Share Unit which is vested shall entitle the Participant or his Beneficiary to receive -4- 7 from the Participant's employer a lump sum payment in cash on or as soon as practicable, and within 10 days, following the applicable Valuation Date. The amount of such payment shall be determined by multiplying the number of such Participant's or Beneficiary's vested Share Units by the Fair Market Value of a share of Common Stock on the applicable Valuation Date. 6.2 Conversion of Share Units Following a Change in Control. Notwithstanding anything in the Plan to the contrary, if the Common Stock of the Company does not remain listed on the New York Stock Exchange following a Change in Control, the Fair Market Value of each Participant's Share Units at such time shall be converted into a separate ledger account for such Participant ("Memorandum Account"), which shall be credited with interest at the end of each calendar quarter or such other periods as may be determined by the Committee until the Memorandum Account is paid. The Committee shall determine the rate of interest periodically to be credited to the Memorandum Account. If a Memorandum Account is established, in lieu of payment pursuant to Section 6.1, a Participant shall be entitled to receive from the Participant's Employer a lump sum payment in cash equal to the value of the Participant's Memorandum Account on or as soon as practicable, and within 10 days, following the Valuation Date. 6.3 Delayed Payment. If the Committee determines that all or part of a payment to be made to a Participant pursuant to Section 6.1 or 6.2 would be nondeductible by the Company or Subsidiary for Federal tax purposes due to the limitations of Section 162(m) of the Internal Revenue Code, so much of the payment, if any, that would be deductible in the year of termination shall be paid to the Participant immediately following his or her termination of employment and the balance of the payment, with accrued interest as provided below, shall be paid to the Participant as soon as practicable in the next following year, but not later than the end of the third month of such following year. Any amount not paid pursuant to Section 6.1 or 6.2 in the year of termination shall be credited with interest at such times and at such rate as may be determined from time to time by the Committee until paid by the Participant's employer. ARTICLE VII GENERAL PROVISIONS 7.1 Unfunded Obligations. The amounts to be paid to Participants pursuant to this Plan with respect to Share Units 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 or Subsidiary may make to fulfill this obligation shall at all times remain in the Company or Subsidiary. Any investments and the creation or maintenance of any trust shall not create or constitute a trust or a fiduciary relationship between the 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 or Subsidiary with respect to this Plan. 7.2 Other Benefits. Grants, vesting, or payment with respect to 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 -5- 8 benefit plans provided by the Company or its Subsidiaries, or required by law or by contractual obligations of the Company or its Subsidiaries. 7.3 Beneficiary. A Participant's designation of a Beneficiary shall be on a form provided by the Committee, executed by the Participant (with the consent of the Participant's spouse, if required by the Committee for reasons of community property or otherwise), and delivered to the 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 payment is made, the payment shall be made to the Participant's spouse or, if there is no surviving spouse, to his or her lineal descendants, pro rata, or, if there is 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 this sort and is not preempted by laws which recognize the provisions of this Section 7.3. 7.4 Withholding Taxes. Appropriate tax withholding shall be made by the Company or Subsidiary from payments to a Participant (or a Beneficiary) pursuant to this Plan, or from other wages of the Participant, as required under applicable law. In addition, upon the vesting of any Share Units granted under the Plan, the Company or Subsidiary shall make appropriate tax withholdings from the other wages of the Participant or make other arrangements therefor satisfactory to the Committee. 7.5 Nonassignment. The right of a Participant or Beneficiary to any payment 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. 7.6 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 Share Unit to a Participant shall not give the Participant any right to subsequent grants of Share Units under the Plan. 7.7 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. 7.8 Transfers. In the event a Participant is transferred from the Company to a Subsidiary, or vice versa, or between Subsidiaries or is promoted or given different responsibilities, the Share Units granted to the Participant prior to such date shall not be affected. 7.9 Shareholder Rights. The grant of a Share Unit shall not entitle a Participant or Beneficiary to any dividend, voting or other rights as a shareholder of the Company. 7.10 Termination and Amendment. The Board or the 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 Share Units (or a Memorandum Account) that have vested as of such date without the consent of such Participant. Upon termination of the Plan, the -6- 9 Committee may provide for the immediate payment of all Share Units (or Memorandum Accounts, as the case may be), notwithstanding that the Participants have not terminated employment. The Committee may amend the Plan, without Board 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. If the Plan is suspended or terminated, the Committee may reinstate any or all of its provisions. 7.11 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. 7.12 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 construed to meet the requirements for exemption from Section 16 of the Exchange Act and, if any Plan provision is later found to be contrary to meeting the requirements for such exemption, that provision shall be deemed null and void. 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 of the Exchange Act without so restricting, limiting or conditioning the Plan with respect to other Participants. 7.13 Effective Date of Plan. Upon approval by the Committee, the Plan shall become effective on July 6, 1994. -7- EX-10.24 9 SHORT-TERM REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.24 BURLINGTON RESOURCES INC. $300,000,000 SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of July 20, 1994 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 2.02. Making the A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.04. Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.05. Repayment of A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.06. Interest on A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.07. Additional Interest on Eurodollar Rate Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.08. Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.09. Voluntary Conversion of A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.10. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.12. Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 2.13. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.14. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.16. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 2.17. Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.18. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.19. The B Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.20. Increase of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 2.21. Renewal of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 3.02. Conditions Precedent to Each A Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 3.03. Conditions Precedent to Each B Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 5.03. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.02. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.03. Citibank and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 7.04. Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 7.06. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.04. Costs and Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.06. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 8.07. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 8.08. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 8.09. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 8.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 SECTION 8.11. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-ii- 4 EXHIBITS Exhibit A Form of A Note Exhibit B Form of B 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 Fried, Frank, Harris, Shriver & Jacobson, 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 SCHEDULES Schedule I -- Domestic and Eurodollar Lending Offices Schedule II -- Material Subsidiaries -iii- 5 SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of July 20, 1994 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: 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. "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 6 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. "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. "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 -2- 7 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. -3- 8 "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. "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 -4- 9 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. "Eligible Assignee" means, with respect to any particular assignment under Section 8.07, any bank or -5- 10 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 -6- 11 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 0.23% per annum. "Eurodollar Reserve Percentage" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including, 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 0.08% per annum. "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 -7- 12 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 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: (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 -8- 13 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. "Long-Term Revolving Credit Agreement" means the Long-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 it may be amended or otherwise modified from time to time. "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 -9- 14 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. "Maturity Date" means July 15, 1995 or such later Stated Termination Date as may be in effect pursuant to Section 2.21, or if the Borrower has elected the Term Loan Conversion Option such later date to which the Maturity Date has been extended pursuant to Section 2.21(g). "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 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). -10- 15 "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 -11- 16 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. -12- 17 "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. "Single Employer Plan" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "Stated Termination Date" means July 15, 1995 or such later date, if any, as may be in effect pursuant to Section 2.21. "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. "Term Loan Conversion Option" has the meaning specified in Section 2.21(g). "Termination Date" means the earlier of (i) the Stated Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "Termination Event" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower -13- 18 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. 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, -14- 19 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 -15- 20 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 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 -16- 21 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. (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 reduction shall be in the aggregate amount of $10,000,000 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 Maturity Date (or -17- 22 such earlier date as may be applicable to such Lender pursuant to Section 2.21(c)(iv)) 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, 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 -18- 23 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 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). -19- 24 (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. (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 -20- 25 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 -21- 26 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. 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 -22- 27 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 corporation in the light of such circumstances, to the extent that such -23- 28 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. -24- 29 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, 2.21(c)(iv) or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the 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 -25- 30 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 -26- 31 thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under 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, either (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) or (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, -27- 32 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. (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 -28- 33 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 -29- 34 pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.21(c)(iv) 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 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. -30- 35 SECTION 2.19. The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.19 from time to time on any Business Day during the period from the date hereof until the earlier of (I) the Termination Date or (II) the date occurring 30 days prior to the Stated Termination Date in the manner set forth below; provided that (x) each B Borrowing shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof and (y) following the making of each B Borrowing, the aggregate number of outstanding B Borrowings shall not exceed seven and the aggregate amount of all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction). (i) The Borrower may request a B Borrowing under this Section 2.19 by delivering to the 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) the Stated Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The 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 -31- 36 thereof to the Borrower), before 10:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the 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 -32- 37 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 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 -33- 38 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. -34- 39 (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). (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 $400,000,000 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 $100,000,000, (b) any Increase in Commitments pursuant to this Section 2.20 shall be in the amount of $10,000,000 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 $10,000,000, (f) simul- -35- 40 taneously 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 Long-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 Long-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 Long-Term Revolving Credit Agreement pursuant to Section 2.20 thereof with a "Commitment" (under and as defined in the Long-Term Revolving Credit Agreement) that constitutes the same percentage of all "Commitments" thereunder as the percentage that its Commitment hereunder constitutes of all Commitments hereunder, unless the Long-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 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 -36- 41 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. SECTION 2.21. Renewal of Commitments. (a) So long as no Event of Default shall have occurred and be continuing, the Borrower may request by notice to the Agent and each Lender, given no earlier than 60 days prior to, and no later than 40 days prior to, any Stated Termination Date ("Existing Termination Date"), that the Lenders renew their respective Commitments for an additional 364 days. If a Lender agrees, in its sole and absolute discretion, to so renew its Commitment, it will give notice to the Agent of its decision to do so no earlier than 30 days prior to, and no later than 20 days prior to, such Existing Termination Date. No later than 19 days prior to such Existing Termination Date (or the next Business Day, if the day 19 days prior to such Existing Termination Date is not a Business Day), the Agent will notify the Borrower and the Lenders of the Lenders from which it has received such a notice agreeing to so renew ("Renewing Lenders"). Any failure by a Lender to so notify the Agent shall be deemed to be a decision by such Lender to not so renew its Commitment. (b) If all Lenders elect to so renew their respective Commitments, the Stated Termination Date shall automatically become the date that is 364 days following the Existing Termination Date unless the Borrower shall elect the Term Loan Conversion Option. (c) If, at the time the Agent gives the notice contemplated by Section 2.21(a) to the Borrower and the Lenders, the Commitments of the Renewing Lenders aggregate at least 51% of, but less than 100% of, the Commitments of all of the Lenders at such time ("Existing Commitments"), unless the Borrower shall elect the Term Loan Conversion Option, (i) effective as of the Existing Termination Date, the Stated Termination Date shall automatically become the date that is 364 days following the Existing Termination Date as to each Renewing Lender, (ii) the Stated Termination Date shall remain unchanged as to each Lender that is not a Renewing Lender (each a "Terminating Bank"), (iii) each Terminating Bank's Commitment shall terminate on the Existing Termination Date, -37- 42 and (iv) the Borrower shall pay on the Existing Termination Date the outstanding Advances owed to each Terminating Bank and all other amounts owed to each Terminating Bank. (d) If, at the time the Agent gives the notice contemplated by Section 2.21(a) to the Borrower and the Lenders, the Commitments of the Renewing Lenders aggregate less than 100% of the Existing Commitments, then the Borrower may (i) request one or more Renewing Lenders to increase their respective Commitments pursuant to Section 2.20 (but no Lender shall be obligated to do so), and (ii) if the Borrower is unable to obtain the agreement of Renewing Lenders to so increase their respective Commitments in an amount that is sufficient to cause the Commitments of the Renewing Lenders (after giving effect to such increase) to aggregate 100% or more of the Existing Commitments, attempt to add one or more banks or other financial institutions to this Agreement pursuant to Section 2.20. (e) If on the Existing Termination Date, after giving effect to any such increase or addition pursuant to Section 2.21(d), the Commitments of the Renewing Lenders and such additional banks or other financial institutions aggregate less than 51% of the Existing Commitments, none of the Commitments (including, without limitation, the Commitment of any Renewing Lender) will be extended and the Stated Termination Date shall remain unchanged, without prejudice to the Borrower's right to elect the Term Loan Conversion Option. (f) The Borrower may repeat the process contemplated by this Section 2.21 once each year (commencing in 1995) so long as the Term Loan Conversion Option has not been exercised, but the election by any Lender to become a Renewing Lender at any time shall not obligate such Lender to become a Renewing Lender at any other time, it being agreed that each election of any Lender to renew or not renew shall be made by such Lender in its sole and absolute discretion and that such discretion shall not be limited by any prior election to become a Renewing Lender. (g) The Borrower shall have the option ("Term Loan Conversion Option") to elect both (i) to have the Stated Termination Date remain unchanged (whether or not sufficient Lenders have elected to renew their respective Commitments), and (ii) to have the Maturity Date extended by one year, which option, if exercised, shall be exercised only by notice to the Agent at least one Business Day before such Stated Termination Date. If the Term Loan Conversion Option has been elected prior to any Stated Termination Date, such Stated Termination -38- 43 Date shall remain unchanged, the Borrower shall not borrow hereunder after the Stated Termination Date, and the Maturity Date shall be extended to the date that is one year following such Stated Termination Date. 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, on or before August 15, 1994, 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. -39- 44 (e) A favorable opinion of Fried, Frank, Harris, Shriver & Jacobson, 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. (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. (h) A letter addressed to the Agent from the Borrower with respect to the Revolving Credit Agreement dated as of April 21, 1992 (the "1992 Agreement"), among the Borrower, the financial institutions party thereto as "Lenders" thereunder, and Citibank as agent for such "Lenders", stating to the effect that (i) all the "Commitments" (as defined in and under the 1992 Agreement) of the "Lenders" under the 1992 Agreement have been terminated, (ii) no advances are outstanding under the 1992 Agreement, and (iii) all fees and other amounts payable under the 1992 Agreement have been paid in full. Anything in this Agreement to the contrary notwithstanding, if all of the conditions to effectiveness of this Agreement specified in this Section 3.01 shall not have been fulfilled on or before August 15, 1994, this Agreement, and all of the obligations of the Borrower, the Lenders and the Agent hereunder, shall be terminated on and as of 5:00 P.M. (New York City time) on August 15, 1994; provided, however, that as soon as the Agent determines that all of the conditions to effectiveness of this Agreement specified in this Section 3.01 shall have been fulfilled on or before August 15, 1994, the Agent shall furnish written notice to the Borrower and the Initial Lenders to the effect that it has so determined, and such notice by the Agent shall constitute conclusive evidence that this Agreement shall have become effective for all purposes. 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 -40- 45 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 -41- 46 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; (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 -42- 47 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, 1993 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 Subsidiaries as at such date 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, 1994 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 such date 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, 1994 -43- 48 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). -44- 49 (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. (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. -45- 50 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. (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 -46- 51 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 -47- 52 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. (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: -48- 53 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 by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement or the Long-Term Revolving Credit Agreement or any replacement therefor), shall not exceed the aggregate of the Borrower's unused bank lines of credit and unused credit available to the Borrower under financing arrangements with banks; and -49- 54 (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 further that, no such sale, lease or other transfer shall be permitted by this clause (iii) unless either (1) after giving effect to such sale, -50- 55 lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) the Borrower or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. (d) Mergers, Etc. Merge or consolidate with any Person, or permit any of its Material Subsidiaries to merge or consolidate with any Person, except that (i) such a Subsidiary may merge or consolidate with (or liquidate into) any other Subsidiary or may merge or consolidate with (or liquidate into) the Borrower, provided that (A) if such Material Subsidiary merges or consolidates with (or liquidates into) the Borrower, the Borrower shall be the continuing or surviving corporation, (B) if any such Material Subsidiary merges or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one of such Subsidiaries is the surviving corporation and, if either such Subsidiary is not wholly-owned by the Borrower, such merger or consolidation is on an arm's length basis and (C) as a result of such merger or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower or any Material Subsidiary may merge or consolidate with any other corporation (that is, in addition to the Borrower or any Subsidiary of the Borrower), provided that (A) if the Borrower merges or consolidates with any such other corporation, the Borrower is the surviving corporation, (B) if any Material Subsidiary merges or 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 -51- 56 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 -52- 57 Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their stocks; (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 -53- 58 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 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; -54- 59 (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 (c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in this -55- 60 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 -56- 61 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 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 -57- 62 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, -58- 63 election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) Any "Event of Default" as defined in the Long-Term Revolving Credit Agreement shall occur and be continuing; then, and in any such event, the 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 -59- 64 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 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 -60- 65 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 or 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 or any action taken or omitted by the Agent under this Agreement, 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 its 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, to the extent that the Agent acts in its capacity as Agent and is not reimbursed for such expenses by the Borrower. SECTION 7.06. Successor Agent. The Agent may resign at any time by giving written notice thereof to the -61- 66 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, -62- 67 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 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 -63- 68 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 -64- 69 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 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. -65- 70 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 Long-Term Revolving Credit Agreement, unless the Long-Term Revolving Credit Agreement has been terminated, shall be contemporaneously assigned by such assigning Lender to the same assignee pursuant to Section 8.07(a) of the Long-Term Revolving Credit Agreement, (ii) the sum of (x) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) plus (y) the amount of the "Commitment" of the assigning Lender under the Long-Term Revolving Credit Agreement contemporaneously assigned by such assigning Lender to such assignee as contemplated by clause (i) of this sentence must be equal to or greater than $25,000,000 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, 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 -66- 71 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 -67- 72 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 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, -68- 73 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 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. -69- 74 (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 -70- 75 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 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 -71- 76 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. -72- 77 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. 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/ Barbara A. Cohen Name: Barbara A. Cohen Title: Vice President Commitments The Initial Lenders - ----------- ------------------- $30,000,000 CITIBANK, N.A. By: /s/ Barbara A. Cohen Name: Barbara A. Cohen Title: Vice President $30,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Vernon M. Ford, Jr. Name: Vernon M. Ford, Jr. Title: Vice President -73- 78 Commitments - ----------- $30,000,000 NATIONSBANK OF TEXAS, N.A. By: /s/ Paul A. Squires Name: Paul A. Squires Title: Senior Vice President $30,000,000 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ Scott Richardson Name: Scott Richardson Title: Vice President $21,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ David E. Sisler Name: David E. Sisler Title: Vice President $21,000,000 THE FIRST NATIONAL BANK OF BOSTON By: /s/ Cynthia A. Stableford Name: Cynthia A. Stableford Title: Vice President $21,000,000 CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ Xavier Ratouis Name: Xavier Ratouis Title: Authorized Signature -74- 79 Commitments - ----------- $21,000,000 MELLON BANK, N.A. By: /s/ A.J. Sabatelle Name: A.J. Sabatelle Title: Vice President $21,000,000 TORONTO DOMINION (TEXAS), INC. By: /s/ Warren Finlay Name: Warren Finlay Title: Vice President $12,500,000 ABN AMRO BANK N.V. By: /s/ W. Bryan Chapman Name: W. Bryan Chapman Title: Vice President By: /s/ C.W. Randall Name: C.W. Randall Title: Group Vice President $12,500,000 THE BANK OF TOKYO, LTD. By: /s/ Michael Meiss Name: Michael Meiss Title: Vice President & Manager $12,500,000 FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ Ann M. Rhoads Name: Ann M. Rhoads Title: Vice President -75- 80 Commitments - ----------- $12,500,000 THE NORTHERN TRUST COMPANY By: /s/ Martin G. Alston Name: Martin G. Alston Title: Vice President $12,500,000 THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY By: /s/ Tatsuo Ueda Name: Tatsuo Ueda Title: General Manager $12,500,000 UNION BANK OF SWITZERLAND By: /s/ Evans Swann Name: Evans Swann Title: Vice President By: /s/ Jean Claude de Roche Name: Jean Claude de Roche Title: Assistant Vice President $300,000,000 Total of the Commitments ============ -76- EX-10.25 10 LONG-TERM REVOLVING CREDIT AGREEMENT 1 EXHIBIT 10.25 BURLINGTON RESOURCES INC. $600,000,000 LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of July 20, 1994 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2.02. Making the A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2.03. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 2.04. Reduction of the Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.05. Repayment of A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.06. Interest on A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.07. Additional Interest on Eurodollar Rate Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.08. Interest Rate Determination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 2.09. Voluntary Conversion of A Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.10. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.11. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.12. Increased Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.13. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.14. Payments and Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 2.15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.16. Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.17. Evidence of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.18. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.19. The B Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.20. Increase of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE III CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 3.02. Conditions Precedent to Each A Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 3.03. Conditions Precedent to Each B Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE V COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 5.02. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 5.03. Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE VI EVENTS OF DEFAULT SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE VII THE AGENT SECTION 7.01. Authorization and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 7.02. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 7.03. Citibank and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.04. Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.06. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.04. Costs and Expenses; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 8.05. Right of Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 SECTION 8.06. Binding Effect 64 SECTION 8.07. Assignments and Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 8.08. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 SECTION 8.09. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 8.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 8.11. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
-ii- 4 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 Fried, Frank, Harris, Shriver & Jacobson, 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 SCHEDULES Schedule I -- Domestic and Eurodollar Lending Offices Schedule II -- Material Subsidiaries Schedule III -- Pricing Grid -iii- 5 LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of July 20, 1994 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: 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. "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 6 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. "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. "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 -2- 7 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. -3- 8 "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. "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 -4- 9 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. "Eligible Assignee" means, with respect to any particular assignment under Section 8.07, any bank or -5- 10 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 -6- 11 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 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 -7- 12 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: -8- 13 (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. -9- 14 "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 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). -10- 15 "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 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; -11- 16 (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. -12- 17 "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 it may be 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. "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, 1999 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 -13- 18 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". "Utilization Fee Percentage" means for any date the percentage per annum, if any, applicable on such date as set forth in the row labelled "Utilization 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. "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. -14- 19 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, -15- 20 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 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 -16- 21 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. (d) Utilization Fee. The Borrower agrees to pay to each Lender (other than a Designated Bidder) a utilization fee on the average daily aggregate amount of the A Advances owing to such Lender and outstanding from time to time at a rate per annum equal to the Utilization Fee Percentage in effect from time to time, payable quarterly in arrears on the last day of -17- 22 each March, June, September and December, beginning September 30, 1994, and on the Termination Date; provided, however, that no utilization fee shall be payable with respect to any quarter or portion thereof for which the utilization fee would otherwise be payable by the Borrower in accordance with the foregoing provisions of this subsection (d) if the average daily aggregate amount of Advances owing to all the Lenders and outstanding from time to time during such quarter or portion is equal to or less than 50% of the average daily aggregate amount of the Commitments (used and unused) of all the Lenders during such quarter or portion. 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 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 -18- 23 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 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 -19- 24 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 -20- 25 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. (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 -21- 26 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. 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 -22- 27 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 -23- 28 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 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 -24- 29 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 -25- 30 other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the 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 and utilization 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 or utilization 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 -26- 31 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 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 -27- 32 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, either (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) or (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"). -28- 33 (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. (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 -29- 34 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 from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of -30- 35 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, 1999, 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 -31- 36 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, 1999), 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 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 -32- 37 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 para- -33- 38 graph (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 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 -34- 39 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). (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 -35- 40 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 -36- 41 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 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, on or before August 15, 1994, 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), -37- 42 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 Fried, Frank, Harris, Shriver & Jacobson, 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. (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. (h) A letter addressed to the Agent from the Borrower with respect to the Revolving Credit Agreement dated as of April 21, 1992 (the "1992 Agreement"), among the Borrower, the financial institutions party thereto as "Lenders" thereunder, and Citibank as agent for such "Lenders", stating to the effect that (i) all the "Commitments" (as defined in and under the 1992 Agreement) of the "Lenders" under the 1992 Agreement have -38- 43 been terminated, (ii) no advances are outstanding under the 1992 Agreement, and (iii) all fees and other amounts payable under the 1992 Agreement have been paid in full. Each Lender that is a party to the 1992 Agreement hereby waives the requirement of notice of termination contemplated by Section 2.04 of the 1992 Agreement. Anything in this Agreement to the contrary notwithstanding, if all of the conditions to effectiveness of this Agreement specified in this Section 3.01 shall not have been fulfilled on or before August 15, 1994, this Agreement, and all of the obligations of the Borrower, the Lenders and the Agent hereunder, shall be terminated on and as of 5:00 P.M. (New York City time) on August 15, 1994; provided, however, that as soon as the Agent determines that all of the conditions to effectiveness of this Agreement specified in this Section 3.01 shall have been fulfilled on or before August 15, 1994, the Agent shall furnish written notice to the Borrower and the Initial Lenders to the effect that it has so determined, and such notice by the Agent shall constitute conclusive evidence that this Agreement shall have become effective for all purposes. 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 -39- 44 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; (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 -40- 45 (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. -41- 46 (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, 1993 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 Subsidiaries as at such date 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, 1994 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 such date 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, 1994 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 -42- 47 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. (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. -43- 48 (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). -44- 49 (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. (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 -45- 50 financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the 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. (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 -46- 51 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. -47- 52 (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 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 -48- 53 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 further that, 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 -49- 54 or consolidates with (or liquidates into) the Borrower, the Borrower shall be the continuing or surviving corporation, (B) if any such Material Subsidiary merges or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one of such Subsidiaries is the surviving corporation and, if either such Subsidiary is not wholly-owned by the Borrower, such merger or consolidation is on an arm's length basis and (C) as a result of such merger or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower or any Material Subsidiary may merge or consolidate with any other corporation (that is, in addition to the Borrower or any Subsidiary of the Borrower), provided that (A) if the Borrower merges or consolidates with any such other corporation, the Borrower is the surviving corporation, (B) if any Material Subsidiary merges or 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 -50- 55 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; (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; -51- 56 (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; -52- 57 (h) as soon as practicable and in any event (i) within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Borrower or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and (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 -53- 58 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 (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 -54- 59 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 -55- 60 enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced) 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 -56- 61 (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; 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. -57- 62 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 -58- 63 pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. 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 or 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 or any action taken or omitted by the Agent under this Agreement, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, -59- 64 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 its 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, to the extent that the Agent acts in its capacity as Agent and is not reimbursed for such expenses by the Borrower. 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 -60- 65 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 or utilization fees hereunder, (d) postpone any date fixed for any payment of principal of, or interest on, the A Notes or any facility fees or utilization fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the 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 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 -61- 66 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 -62- 67 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 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. -63- 68 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, 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 -64- 69 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. -65- 70 (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 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 -66- 71 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 has been completed and is substantially in the form of Exhibit K hereto, (i) accept such Designation -67- 72 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 or utilization fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Note, or (D) consent to the assignment or the transfer by the Borrower of any of its rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (i) Any Lender may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree in 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. -68- 73 (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 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. -69- 74 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. -70- 75 SECTION 8.10. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. 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/ Barbara A. Cohen Name: Barbara A. Cohen Title: Vice President Commitments The Initial Lenders - ----------- ------------------- $60,000,000 CITIBANK, N.A. By: /s/ Barbara A. Cohen Name: Barbara A. Cohen Title: Vice President -71- 76 Commitments - ----------- $60,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Vernon M. Ford, Jr. Name: Vernon M. Ford, Jr. Title: Vice President $60,000,000 NATIONSBANK OF TEXAS, N.A. By: /s/ Paul A. Squires Name: Paul A. Squires Title: Senior Vice President $60,000,000 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ Scott Richardson Name: Scott Richardson Title: Vice President $42,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: /s/ David E. Sisler Name: David E. Sisler Title: Vice President $42,000,000 THE FIRST NATIONAL BANK OF BOSTON By: /s/ Cynthia A. Stableford Name: Cynthia A. Stableford Title: Vice President -72- 77 Commitments - ----------- $42,000,000 CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ Xavier Ratouis Name: Xavier Ratouis Title: Authorized Signature $42,000,000 MELLON BANK, N.A. By: /s/ A.J. Sabatelle Name: A.J. Sabatelle Title: Vice President $42,000,000 TORONTO DOMINION (TEXAS), INC. By: /s/ Warren Finlay Name: Warren Finlay Title: Vice President $25,000,000 ABN AMRO BANK N.V. By: /s/ W. Bryan Chapman Name: W. Bryan Chapman Title: Vice President By: /s/ C.W. Randall Name: C.W. Randall Title: Group Vice President $25,000,000 THE BANK OF TOKYO, LTD. By: /s/ Michael Meiss Name: Michael Meiss Title: Vice President & Manager -73- 78 Commitments - ----------- $25,000,000 FIRST INTERSTATE BANK OF TEXAS, N.A. By: /s/ Ann M. Rhoads Name: Ann M. Rhoads Title: Vice President $25,000,000 THE NORTHERN TRUST COMPANY By: /s/ Martin G. Alston Name: Martin G. Alston Title: Vice President $25,000,000 THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY By: /s/ Tatsuo Ueda Name: Tatsuo Ueda Title: General Manager $25,000,000 UNION BANK OF SWITZERLAND By: /s/ Evans Swann Name: Evans Swann Title: Vice President By: /s/ Jean Claude de Roche Name: Jean Claude de Roche Title: Assistant Vice President $600,000,000 Total of the Commitments ============ -74- EX-11.1 11 EARNINGS PER SHARE COMPUTATION 1 EXHIBIT 11.1 BURLINGTON RESOURCES INC. EARNINGS PER SHARE COMPUTATION
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 1994 1993 1992 ------------------ ------------------ ------------------ EARNINGS SHARES EARNINGS SHARES EARNINGS SHARES -------- ------- -------- ------- -------- ------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Primary earnings per common share: Net earnings available for common stock and weighted average common shares outstanding.................. $154,246 128,406 $256,312 129,746 $257,828 130,757 Stock options assumed exercised- net.......................... -- 628 -- 1,036 -- 1,126 -------- ------- -------- ------- -------- ------- Total net earnings and primary common shares................ $154,246 129,034 $256,312 130,782 $257,828 131,883 ======== ======= ======== ======= ======== ======= Primary earnings per common share........................ $ 1.20 $ 1.96 $ 1.95 ======== ======== ======== Fully diluted earnings per common share: Net earnings available for common stock and weighted average common shares outstanding.................. $154,246 128,406 $256,312 129,746 $257,828 130,757 Stock options assumed exercised- net.......................... -- 628 -- 1,036 -- 1,126 -------- ------- -------- ------- -------- ------- Total net earnings and fully diluted common shares........ $154,246 129,034 $256,312 130,782 $257,828 131,883 ======== ======= ======== ======= ======== ======= Fully diluted earnings per common share................. $ 1.20 $ 1.96 $ 1.95 ======== ======== ========
EX-12.1 12 RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 BURLINGTON RESOURCES INC. RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT RATIO AMOUNTS) Earnings: Income from Continuing Operations Before Income Taxes.................... $ 90,269 $307,438 $218,039 $103,118 $149,992 Add: Interest and fixed charges............. 90,291 72,799 79,196 90,344 60,390 Portion of rent under long-term operating leases representative of an interest factor...................... 4,926 4,688 4,205 5,903 5,873 -------- -------- -------- -------- -------- Total Earnings Available for Fixed Charges................................ $185,486 $384,925 $301,440 $199,365 $216,255 ======== ======== ======== ======== ======== Fixed Charges: Interest and fixed charges................ $ 90,291 $ 72,799 $ 79,196 $ 90,344 $ 60,390 Portion of rent under long-term operating leases representative of an interest factor................................. 4,926 4,688 4,205 5,903 5,873 Capitalized interest...................... 1,380 2,829 3,094 6,137 6,600 -------- -------- -------- -------- -------- Total Fixed Charges....................... $ 96,597 $ 80,316 $ 86,495 $102,384 $ 72,863 ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges.......... 1.92x 4.79x 3.49x 1.95x 2.97x
EX-21.1 13 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 JURISDICTION DIRECTLY OR OF INDIRECTLY BY NAME OF COMPANY INCORPORATION IMMEDIATE PARENT -------------- ------------- ---------------- El Paso Production Company.................................. Delaware 100% Glacier Park Company........................................ Delaware 100% Meridian Minerals Company................................... Montana 100% Meridian Oil Hydrocarbons Inc............................... Delaware 100% Meridian Oil Inc............................................ Delaware 100% Meridian Oil Production Inc................................. Delaware 100% Meridian Oil Trading Inc.................................... Delaware 100% Southland Royalty 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 14 CONSENT OF COOPERS & LYBRAND 1 [COOPERS & LYBRAND LETTERHEAD] 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 and 33-53973) and on Form S-3 (Registration Nos. 33-47154, 33-50077 and 33-54477) of our report dated January 11, 1995, on our audit of the consolidated financial statements of Burlington Resources Inc. as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, which report is included in this 1994 Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. Houston, Texas January 11, 1995 EX-27.1 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1994, AND THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE 1994 ANNUAL REPORT ON FORM 10-K. 1,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 19,898 0 193,825 0 35,188 266,102 6,261,625 1,904,212 4,808,610 262,021 1,309,137 1,500 0 0 2,566,541 4,808,610 1,054,847 1,054,847 0 879,810 0 0 90,291 90,269 (63,977) 154,246 0 0 0 154,246 1.20 1.20
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