LTIP PERFORMANCE UNIT AWARD PROGRAM
SUMMARY TERM SHEET
o Parent company officers and selected subsidiary level officers will receive
a portion of their awards under the Company's 2006 Long-Term Incentive Plan
(the "LTIP") in the form of performance units having a performance period
of three years, and a portion of their awards under the LTIP in restricted
stock.
o Payments in respect of earned performance units will be made in shares of
the Company's common stock.
o LTIP awards made in the first quarter of 2007 will be allocated as follows:
% Performance % Restricted
Officer Description Units Stock
- ------------------- ------------- ------------
Parent Company Officers 50% 50%
Selected Subsidiary Company Officers 25% 75%
o The terms of the restricted stock grants made in the first quarter of 2007
are expected to be similar to the terms of restricted stock grants made to
officers in prior years.
o The following terms relate to awards of performance units under the 2007
Performance Unit Award Program (the "2007 Program"):
o The performance metric under the 2007 Program will be based on
relative Total Shareholder Return ("TSR"), which means a comparison
among the Company and each peer company selected by the Compensation
and Management Development Committee of the annualized rate of return
that each company's shareholders receive through stock price changes
and the assumed reinvestment of all dividends over a three-year
performance period.
o TSR will be determined by comparing the change in the stock price at
the beginning of the three-year performance period, measured as the
average closing price for the 60 calendar days before January 1, 2007,
to the stock price at the end of the three-year performance period,
measured by the average closing price for the 60 calendar days on and
before December 31, 2009. In the event of a change in control of the
Company (a "CIC"), the stock price at the end of the abbreviated
performance period will be measured by the average closing price for
the 60 calendar days prior to closing date of the CIC transaction.
o Refer to the following TSR performance award table for the levels of
stock earned as a percentage of the performance unit target based on
the Company's TSR during the three-year performance period as compared
to that of a group of peer companies selected by the Compensation and
Management Development Committee.
o A separate performance table is provided if the peer group is reduced
to eleven, ten, nine or eight peers (inclusive of the Company) due to
a peer company no longer being publicly traded. Should the peer group
reduce to seven or fewer companies, the Compensation and Management
Development Committee has the discretion to add companies to the peer
group.
12 Co. 11 Co. 10 Co. 9 Co. 8 Co.
Rank Payout Payout Payout Payout Payout
Against % of % of % of % of % of
Peers Target Target Target Target Target
----- ------ ------ ------ ------ ------
1 250% 250% 250% 250% 250%
2 200% 200% 200% 200% 200%
3 175% 175% 170% 166% 155%
4 150% 150% 140% 133% 110%
5 125% 125% 110% 100% 70%
6 110% 100% 80% 65% 30%
7 75% 75% 50% 30% 0%
8 50% 50% 25% 0% 0%
9 25% 25% 0% 0%
10 0% 0% 0%
11 0% 0%
12 0%
o Dividends will be paid in shares at the time of the payout of earned
performance units and calculated based on the number of shares earned
times the aggregate dividends per share paid during the performance
period.
o In the event of a CIC, vesting of all units will accelerate and payout
will be measured by the relative TSR for the abbreviated performance
period.
o The effect of a participant's termination of employment, retirement,
death or disability will be described in the form of performance unit
award agreement to be approved by the Compensation and Management
Development Committee at or prior to the grant of performance units
under the 2007 Program.
o The peer group for the 2007 Program consists of the following companies:
XTO Energy Inc. Chesapeake Energy Corporation
Apache Corporation Quicksilver Resources Inc.
EOG Resources, Inc. Noble Energy, Inc.
Plains Exploration and Production Company Cimarex Energy Co.
Pogo Producing Company Newfield Exploration Company
Range Resources Corporation