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us-gaap:GainLossOnDerivativeInstrumentsMember 2019-01-01 2019-06-30 iso4217:USD xbrli:shares xbrli:shares iso4217:USD xbrli:pure apc:Segment iso4217:USD utreg:bbl utreg:MBbls utreg:D
 
 


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from        to        
Commission File No. 1-8968
ANADARKONAMELOGOA07.JPG
(Exact name of registrant as specified in its charter)
Delaware
 
76-0146568
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
1201 Lake Robbins Drive, The Woodlands, Texas
 
77380-1046
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code (832636-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange
on which registered
Common Stock, par value $0.10 per share
APC
New York Stock Exchange
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  þ    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. þ
Large accelerated filer  þ   Accelerated filer    Non-accelerated filer     Smaller reporting company   Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  þ 
The number of shares outstanding of the Company’s common stock at July 19, 2019, was 502,453,426.





 
 


TABLE OF CONTENTS
Page
PART I
Item 1.
 
 
6
 
7
 
8
 
9
 
11
 
12
 
12
 
14
 
17
 
17
 
17
 
18
 
18
 
19
 
24
 
26
 
29
 
30
 
30
 
30
 
32
 
33
 
34
 
35
 
36
Item 2.
40
 
41
 
43
 
55
 
58
Item 3.
59
Item 4.
60
 
 
 
 
 
 
Item 1.
61
Item 1A.
62
Item 2.
65
Item 6.
66


 
 


COMMONLY USED TERMS AND DEFINITIONS

Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. In addition, the following company or industry-specific terms and abbreviations are used throughout this report:

364-Day Facility - Anadarko’s $2.0 billion 364-day senior unsecured RCF that expired in January 2019
APC RCF - Anadarko’s $3.0 billion senior unsecured RCF
ASR Agreement - An accelerated share-repurchase agreement with an investment bank to repurchase the Company’s common stock
ASU - Accounting Standards Update
Bcf - Billion cubic feet
Board - The Board of Directors of Anadarko
BOE - Barrels of oil equivalent
Chevron - Chevron Corporation
Chevron Merger Agreement - Agreement and Plan of Merger, dated as of April 11, 2019, by and among Chevron, Justify Merger Sub 1 Inc., Justify Merger Sub 2 Inc. and Anadarko
Chevron Merger Termination Fee - The $1.0 billion termination fee paid to Chevron pursuant to the terms of the Chevron Merger Agreement
DD&A - Depreciation, depletion, and amortization
DJ - Denver-Julesberg
DJ Basin Complex - The Platte Valley system, Wattenberg system, Lancaster plant, and Wattenberg processing plant
FID - Final investment decision
Fitch - Fitch Ratings
FPSO - Floating production, storage, and offloading unit
G&A - General and administrative expenses
IPO - Initial public offering
IRS - U.S. Internal Revenue Service
LIBOR - London Interbank Offered Rate
LNG - Liquefied natural gas
LPG - Liquefied petroleum gas
MBbls/d - Thousand barrels per day
MBOE/d - Thousand barrels of oil equivalent per day
Mcf - Thousand cubic feet
MMBbls - Million barrels
MMBOE - Million barrels of oil equivalent
MMcf/d - Million cubic feet per day
Moody’s - Moody’s Investors Service
MTPA - Million tonnes per annum
NGL or NGLs - Natural-gas liquids
NYMEX - New York Mercantile Exchange
NYSE - New York Stock Exchange
Oil - Includes crude oil and condensate
Occidental - Occidental Petroleum Corporation
Occidental Merger - Occidental’s acquisition by merger of Anadarko pursuant to, and subject to the conditions of, the Occidental Merger Agreement
Occidental Merger Agreement - Agreement and Plan of Merger, dated as of May 9, 2019, by and among Occidental, Baseball Merger Sub 1, Inc. and Anadarko
RCF - Revolving credit facility

APC 2019 FORM 10-Q | 2

 
 


ROU - Right-of-use
S&P - Standard and Poor’s
Share-Repurchase Program - A program authorizing the repurchase of Anadarko’s common stock
TEN - Tweneboa/Enyenra/Ntomme
TEU or TEUs - Tangible equity units
Tronox - Tronox Incorporated
VIE or VIEs - Variable interest entity
WES - Western Midstream Partners, LP, a publicly traded limited partnership, is a consolidated subsidiary of Anadarko, with its common units traded on the NYSE under ticker symbol “WES”. WES consolidates Western Midstream Operating, LP. Prior to February 28, 2019, WES was known as Western Gas Equity Partners, LP, and its common units traded on the NYSE under ticker symbol “WGP”.
WES Merger - A merger, which was completed on February 28, 2019, whereby a wholly owned subsidiary of WES merged with and into WES Operating.
WES Operating - Western Midstream Operating, LP, a Delaware limited partnership in which WES holds (a) a 98% limited partner interest and (b) the entire non-economic general partner interest through its ownership of WES Operating’s sole general partner. Prior to February 28, 2019, WES Operating was known as Western Gas Partners, LP, and its common units traded on the NYSE under ticker symbol “WES”. Upon completion of the WES Merger, WES Operating’s common units ceased trading on the NYSE.
WES RCF - WES Operating’s $2.0 billion senior unsecured RCF
WES Term Loan Facility - WES Operating’s senior unsecured credit facility, previously referred to as the WES 364-Day Facility prior to the extension of the maturity date and increase in borrowing capacity effective July 1, 2019.
West Texas Complex - The DBM Complex and DBJV and Haley systems, all of which were combined into a single complex effective January 1, 2018.
WGP - Western Gas Equity Partners, LP, which changed its name to Western Midstream Partners, LP and began trading on the NYSE using the ticker symbol “WES” following the WES Merger.
WGP RCF - WGP’s $35 million senior secured RCF that matured in March 2019
WTI - West Texas Intermediate
Zero Coupons - Anadarko’s Zero-Coupon Senior Notes due 2036

3 | APC 2019 FORM 10-Q

 
 


CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
Unless the context otherwise requires, the terms “Anadarko” and “Company” refer to Anadarko Petroleum Corporation and its consolidated subsidiaries. The Company has made in this Form 10-Q, and may from time to time make in other public filings, press releases, and management discussions, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning the Company’s operations, economic performance, and financial condition. These forward-looking statements include, among other things, information concerning future production and reserves, schedules, plans, timing of development, contributions from oil and gas properties, marketing and midstream activities, matters related to the Occidental Merger Agreement, and also include those statements preceded by, followed by, or that otherwise include the words “may,” “could,” “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” “would,” “will,” “potential,” “continue,” “forecast,” “future,” “likely,” “outlook,” or similar expressions or variations on such expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will be realized. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

These forward-looking statements involve risk and uncertainties. Important factors that could cause actual results to differ materially from the Company’s expectations include, but are not limited to, the following risks and uncertainties:

the Company’s assumptions about energy markets
production and sales volume levels
levels of oil, natural-gas, and NGL reserves
operating results
competitive conditions
technology
availability of capital resources, levels of capital expenditures, and other contractual obligations
supply and demand for, the price of, and the commercialization and transporting of oil, natural gas, NGLs, and other products or services
volatility in the commodity-futures market
weather
inflation
availability of goods and services, including unexpected changes in costs
drilling and other operational risks
processing volume, pipeline throughput, and produced water disposal
general economic conditions, nationally, internationally, or in the jurisdictions in which the Company is, or in the future may be, doing business
the Company’s inability to timely obtain or maintain permits or other governmental approvals, including those necessary for drilling and/or development projects
legislative or regulatory changes, including changes relating to hydraulic fracturing or other oil and natural-gas operations; retroactive royalty or production tax regimes; deepwater and onshore drilling and permitting regulations; derivatives reform; changes in state, federal, and foreign income taxes; environmental regulation, including regulations related to climate change; environmental risks; and liability under international, provincial, federal, regional, state, tribal, local, and foreign environmental laws and regulations
civil or political unrest or acts of terrorism in a region or country
the creditworthiness and performance of the Company’s counterparties, including financial institutions, operating partners, and other parties
volatility in the securities, capital, or credit markets and related risks such as general credit, liquidity, and interest-rate risk
the impact of changes in the Company’s credit ratings

APC 2019 FORM 10-Q | 4

 
 


the Company’s ability to successfully plan, finance, build, and operate the necessary infrastructure and LNG park in Mozambique
uncertainties and liabilities associated with acquired and divested properties and businesses
disruptions in international oil and NGL cargo shipping activities
physical, digital, internal, and external security breaches
supply and demand, technological, political, governmental, and commercial conditions associated with long-term development and production projects in domestic and international locations
the outcome of pending and future regulatory, legislative, or other proceedings or investigations, including the investigation by the National Transportation Safety Board related to the Company’s operations in Colorado, and continued or additional disruptions in operations that may occur as the Company complies with regulatory orders or other state or local changes in laws or regulations in Colorado
the completion of the proposed merger transaction with Occidental
other factors discussed below and elsewhere in “Risk Factors” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, this Form 10-Q, and in the Company’s other public filings, press releases, and discussions with Company management

5 | APC 2019 FORM 10-Q

OILDERRICKGRAYB08.JPG
FINANCIAL STATEMENTS


PART I

Item 1.  Financial Statements

ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions except per-share amounts
2019

 
2018

 
2019

 
2018

Revenues and Other
 
 
 
 
 
 
 
Oil sales
$
2,470

 
$
2,265

 
$
4,566

 
$
4,392

Natural-gas sales
205

 
203

 
525

 
450

Natural-gas liquids sales
216

 
318

 
456

 
610

Gathering, processing, and marketing sales
465

 
382

 
935

 
742

Gains (losses) on divestitures and other, net
86

 
123

 
178

 
142

Total
3,442

 
3,291

 
6,660

 
6,336

Costs and Expenses
 
 
 
 
 
 
 
Oil and gas operating
310

 
275

 
599

 
551

Oil and gas transportation
222

 
209

 
444

 
405

Exploration
90

 
94

 
139

 
262

Gathering, processing, and marketing
274

 
252

 
530

 
489

General and administrative
368

 
288

 
635

 
566

Merger transaction costs
1,042

 

 
1,042

 

Depreciation, depletion, and amortization
1,161

 
1,003

 
2,242

 
1,993

Production, property, and other taxes
182

 
201

 
381

 
391

Impairments

 
128

 

 
147

Other operating expense
8

 
22

 
29

 
162

Total
3,657

 
2,472

 
6,041

 
4,966

Operating Income (Loss)
(215
)
 
819

 
619

 
1,370

Other (Income) Expense
 
 
 
 
 
 
 
Interest expense
249

 
237

 
502

 
465

(Gains) losses on derivatives, net
254

 
436

 
567

 
471

Other (income) expense, net
18

 
4

 
24

 
(8
)
Total
521

 
677

 
1,093

 
928

Income (Loss) Before Income Taxes
(736
)
 
142

 
(474
)
 
442

Income tax expense (benefit)
209

 
125

 
375

 
251

Net Income (Loss)
(945
)
 
17

 
(849
)
 
191

Net income (loss) attributable to noncontrolling interests
80

 
(12
)
 
191

 
41

Net Income (Loss) Attributable to Common Stockholders
$
(1,025
)
 
$
29

 
$
(1,040
)
 
$
150

 
 
 
 
 
 
 
 
Per Common Share
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders—basic
$
(2.09
)
 
$
0.05

 
$
(2.13
)
 
$
0.28

Net income (loss) attributable to common stockholders—diluted
$
(2.09
)
 
$
0.05

 
$
(2.13
)
 
$
0.28

Average Number of Common Shares Outstanding—Basic
491

 
504

 
491

 
511

Average Number of Common Shares Outstanding—Diluted
491

 
505

 
491

 
512

See accompanying Notes to Consolidated Financial Statements.

APC 2019 FORM 10-Q | 6

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FINANCIAL STATEMENTS


ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Net Income (Loss)
$
(945
)
 
$
17

 
$
(849
)
 
$
191

Other Comprehensive Income (Loss)
 
 
 
 
 
 
 
Adjustments for derivative instruments
 
 
 
 
 
 
 
Reclassification of previously deferred derivative losses to (gains) losses on derivatives, net

 

 
1

 
1

Total adjustments for derivative instruments, net of taxes

 

 
1

 
1

Adjustments for pension and other postretirement plans
 
 
 
 
 
 
 
Net gain (loss) incurred during period
(80
)
 

 
(80
)
 

Income taxes on net gain (loss) incurred during period
18

 

 
18

 

Amortization of net actuarial (gain) loss to other (income) expense, net
16

 
6

 
24

 
13

Income taxes on amortization of net actuarial (gain) loss
(4
)
 
(1
)
 
(6
)
 
(3
)
Amortization of net prior service (credit) cost to other (income) expense, net

 
(6
)
 
(1
)
 
(12
)
Income taxes on amortization of net prior service (credit) cost

 
1

 

 
2

Total adjustments for pension and other postretirement plans, net of taxes
(50
)
 

 
(45
)
 

Total
(50
)
 

 
(44
)
 
1

Comprehensive Income (Loss)
(995
)
 
17

 
(893
)
 
192

Comprehensive income (loss) attributable to noncontrolling interests
80

 
(12
)
 
191

 
41

Comprehensive Income (Loss) Attributable to Common Stockholders
$
(1,075
)
 
$
29

 
$
(1,084
)
 
$
151


See accompanying Notes to Consolidated Financial Statements.


7 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS


ANADARKO PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
June 30,

 
December 31,

millions except per-share amounts
2019

 
2018

ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents ($96 and $92 related to VIEs)
$
1,394

 
$
1,295

Accounts receivable (net of allowance of $11 and $13)
 
 
 
Customers ($118 and $138 related to VIEs)
1,195

 
1,491

Others
584

 
535

Other current assets
298

 
474

Total
3,471

 
3,795

Net Properties and Equipment (net of accumulated depreciation, depletion, and amortization of $39,998 and $37,905) ($8,785 and $6,612 related to VIEs)
29,091

 
28,615

Other Assets ($1,273 and $868 related to VIEs)
2,953

 
2,336

Goodwill and Other Intangible Assets ($1,271 and $1,163 related to VIEs)
5,614

 
5,630

Total Assets
$
41,129

 
$
40,376

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
 
 
 
Trade ($155 and $263 related to VIEs)
$
1,729

 
$
2,003

Other ($9 and $15 related to VIEs)
167

 
161

Short-term debt - Anadarko (1)
31

 
919

Short-term debt - WES

 
28

Current asset retirement obligations ($25 and $26 related to VIEs)
303

 
252

Other current liabilities ($146 and $54 related to VIEs)
1,562

 
1,295

Total
3,792

 
4,658

Long-term Debt
 
 
 
Long-term debt - Anadarko (1)
10,709

 
10,683

Long-term debt - WES
7,489

 
4,787

Total
18,198

 
15,470

Other Long-term Liabilities
 
 
 
Deferred income taxes
2,555

 
2,437

Asset retirement obligations ($320 and $260 related to VIEs)
2,879

 
2,847

Other
4,374

 
4,021

Total
9,808

 
9,305

 
 
 
 
Equity
 
 
 
Stockholders’ equity
 
 
 
Common stock, par value $0.10 per share (1.0 billion shares authorized, 579.1 million and 576.6 million shares issued)
58

 
57

Paid-in capital
13,135

 
12,393

Retained earnings (accumulated deficit)
(149
)
 
1,245

Treasury stock (87.7 million and 87.2 million shares)
(4,892
)
 
(4,864
)
Accumulated other comprehensive income (loss)
(379
)
 
(335
)
Total Stockholders’ Equity
7,773

 
8,496

Noncontrolling interests
1,558

 
2,447

Total Equity
9,331

 
10,943

Total Liabilities and Equity
$
41,129

 
$
40,376

Parenthetical references reflect amounts as of June 30, 2019, and December 31, 2018.
VIE amounts relate to WES. See Note 17—Variable Interest Entities.
(1) 
Excludes WES.
See accompanying Notes to Consolidated Financial Statements.

APC 2019 FORM 10-Q | 8

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FINANCIAL STATEMENTS


ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
 
Total Stockholders’ Equity
 
 
 
millions
Common
Stock

Paid-in
Capital

Retained
Earnings (Accumulated Deficit)

Treasury
Stock

Accumulated Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity

Balance at March 31, 2019
$
57

$
13,057

$
1,024

$
(4,881
)
 
$
(329
)
 
$
1,605

$
10,533

Net income (loss)


(1,025
)

 

 
80

(945
)
Common stock issued
1

40



 

 

41

Share-based compensation expense

40



 

 

40

Dividends—common stock


(149
)

 

 

(149
)
Repurchases of common stock



(11
)
 

 

(11
)
Subsidiary equity transactions

(2
)
1


 

 
(1
)
(2
)
Distributions to noncontrolling interest owners




 

 
(126
)
(126
)
Adjustments for pension and other postretirement plans




 
(50
)
 

(50
)
Balance at June 30, 2019
$
58

$
13,135

$
(149
)
$
(4,892
)
 
$
(379
)
 
$
1,558

$
9,331



 
Total Stockholders’ Equity
 
 
 
millions
Common
Stock

Paid-in
Capital

Retained
Earnings (Accumulated Deficit)

Treasury
Stock

Accumulated Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity

Balance at March 31, 2018
$
57

$
11,701

$
1,152

$
(3,759
)
 
$
(410
)
 
$
3,015

$
11,756

Net income (loss)


29


 

 
(12
)
17

Common stock issued

6



 

 

6

Share-based compensation expense

45



 

 

45

Dividends—common stock


(127
)

 

 

(127
)
Repurchases of common stock

332


(346
)
 

 

(14
)
Subsidiary equity transactions

(8
)


 

 
10

2

Settlement of tangible equity units

230



 

 
(300
)
(70
)
Distributions to noncontrolling interest owners




 

 
(120
)
(120
)
Balance at June 30, 2018
$
57

$
12,306

$
1,054

$
(4,105
)
 
$
(410
)
 
$
2,593

$
11,495














9 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS


ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Unaudited)

 
Total Stockholders’ Equity
 
 
 
millions
Common
Stock

Paid-in
Capital

Retained
Earnings (Accumulated Deficit)

Treasury
Stock

Accumulated Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity

Balance at December 31, 2018
$
57

$
12,393

$
1,245

$
(4,864
)
 
$
(335
)
 
$
2,447

$
10,943

Net income (loss)


(1,040
)

 

 
191

(849
)
Common stock issued
1

40



 

 

41

Share-based compensation expense

78



 

 

78

Dividends—common stock


(299
)

 

 

(299
)
Repurchases of common stock



(28
)
 

 

(28
)
Subsidiary equity transactions

624



 

 
(824
)
(200
)
Distributions to noncontrolling interest owners




 

 
(256
)
(256
)
Adjustments for pension and other postretirement plans




 
(45
)
 

(45
)
Cumulative effect of accounting change (1)


(55
)

 

 

(55
)
Other




 
1

 

1

Balance at June 30, 2019
$
58

$
13,135

$
(149
)
$
(4,892
)
 
$
(379
)
 
$
1,558

$
9,331

(1) 
Beginning January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for further information.

 
Total Stockholders’ Equity
 
 
 
millions
Common
Stock

Paid-in
Capital

Retained
Earnings (Accumulated Deficit)

Treasury
Stock

Accumulated Other
Comprehensive
Income (Loss)
 
Non-
controlling
Interests
 
Total
Equity

Balance at December 31, 2017
$
57

$
12,000

$
1,109

$
(2,132
)
 
$
(338
)
 
$
3,094

$
13,790

Net income (loss)


150


 

 
41

191

Common stock issued

6



 

 

6

Share-based compensation expense

84



 

 

84

Dividends—common stock


(254
)

 

 

(254
)
Repurchases of common stock



(1,973
)
 

 

(1,973
)
Subsidiary equity transactions

(14
)


 

 
19

5

Settlement of tangible equity units

230



 

 
(300
)
(70
)
Distributions to noncontrolling interest owners




 

 
(238
)
(238
)
Cumulative effect of accounting change (1)


49


 
(73
)
 
(23
)
(47
)
Other




 
1

 

1

Balance at June 30, 2018
$
57

$
12,306

$
1,054

$
(4,105
)
 
$
(410
)
 
$
2,593

$
11,495

(1) 
Beginning January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. See Note 1—Summary of Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
See accompanying Notes to Consolidated Financial Statements.


APC 2019 FORM 10-Q | 10

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FINANCIAL STATEMENTS


ANADARKO PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Six Months Ended
 
June 30,
millions
2019

 
2018

Cash Flows from Operating Activities
 
 
 
Net income (loss)
$
(849
)
 
$
191

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
 
 
 
Depreciation, depletion, and amortization
2,242

 
1,993

Deferred income taxes
(54
)
 
27

Dry hole expense and impairments of unproved properties
41

 
149

Impairments

 
147

(Gains) losses on divestitures, net
(1
)
 
(28
)
Total (gains) losses on derivatives, net
569

 
473

Operating portion of net cash received (paid) in settlement of derivative instruments
2

 
(234
)
Other
112

 
139

Changes in assets and liabilities
 
 
 
(Increase) decrease in accounts receivable
228

 
(91
)
Increase (decrease) in accounts payable and other current liabilities
(271
)
 
91

Other items, net
(114
)
 
(202
)
Net cash provided by (used in) operating activities
1,905

 
2,655

Cash Flows from Investing Activities
 
 
 
Additions to properties and equipment
(2,691
)
 
(3,277
)
Divestitures of properties and equipment and other assets
31

 
384

Other, net
(125
)
 
(163
)
Net cash provided by (used in) investing activities
(2,785
)
 
(3,056
)
Cash Flows from Financing Activities
 
 
 
Borrowings, net of issuance costs
2,700

 
1,333

Repayments of debt
(940
)
 
(764
)
Financing portion of net cash received (paid) for derivative instruments
(228
)
 
55

Increase (decrease) in outstanding checks
26

 
34

Dividends paid
(299
)
 
(254
)
Repurchases of common stock
(28
)
 
(1,973
)
Issuances of common stock
41

 
6

Distributions to noncontrolling interest owners
(256
)
 
(238
)
Payments of future hard-minerals royalty revenues conveyed
(24
)
 
(25
)
Other
(12
)
 

Net cash provided by (used in) financing activities
980

 
(1,826
)
Effect of exchange rate changes on cash, cash equivalents, restricted cash, and restricted cash equivalents
2

 
(15
)
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents
102

 
(2,242
)
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents at Beginning of Period
1,429

 
4,674

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents at End of Period
$
1,531

 
$
2,432

See accompanying Notes to Consolidated Financial Statements.

11 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES



1. Summary of Significant Accounting Policies


General  Anadarko Petroleum Corporation is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and is advancing its Mozambique LNG project to the construction phase after announcing FID on June 18, 2019. In addition, the Company engages in gathering, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water. The Company also participates in the hard-minerals business through royalty arrangements.

Basis of Presentation  The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. Generally Accepted Accounting Principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain notes and other information have been condensed or omitted. The accompanying interim financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the Company’s consolidated financial statements. Certain prior-period amounts have been reclassified to conform to the current-period presentation. These interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, as well as the Form 8-K filed on May 15, 2019 to recast the segment information included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, following a change in reportable segments during the quarter ended March 31, 2019.

Merger On April 11, 2019, the Company entered into the Chevron Merger Agreement. On April 24, 2019, Occidental announced a proposal to acquire Anadarko and further revised its proposal on May 5, 2019. On May 6, 2019, Anadarko announced that the Board had unanimously determined that the Occidental proposal was a “Superior Proposal” as defined in the Chevron Merger Agreement and, on May 9, 2019, provided Chevron a notice terminating the Chevron Merger Agreement. Pursuant to the terms of the Chevron Merger Agreement, the Company paid the Chevron Merger Termination Fee of $1.0 billion. Also, on May 9, 2019, the Company entered into the Occidental Merger Agreement, which provides that, among other things, and subject to the terms and conditions of the Occidental Merger Agreement, a wholly owned subsidiary of Occidental will be merged with and into Anadarko, with Anadarko continuing as the surviving corporation and a wholly owned subsidiary of Occidental. Pursuant to the Occidental Merger Agreement, at the effective time of the Occidental Merger and subject to potential further adjustments as specified in the Occidental Merger Agreement, Anadarko stockholders will receive $59.00 in cash and 0.2934 of a share of Occidental common stock for each share of Anadarko common stock, plus cash in lieu of any fractional Occidental shares that otherwise would have been issued. The transaction was approved by the Boards of Directors of both companies. The Occidental Merger is subject to Anadarko stockholder approval and other customary closing conditions. Anadarko is holding a special meeting of its stockholders on August 8, 2019, for holders of record as of July 11, 2019, to vote on the proposal necessary to complete the Occidental Merger. Assuming all closing conditions are satisfied, including obtaining the requisite approval from Anadarko stockholders, Occidental and Anadarko expect the Occidental Merger to close shortly after the special meeting of Anadarko stockholders.
In addition to the Chevron Merger Termination Fee, Anadarko has incurred merger transaction costs of $42 million as of June 30, 2019.

Midstream Asset Sale and WES Merger On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its midstream assets, which consisted of oil infrastructure assets in the DJ basin and oil and water infrastructure assets in the Delaware basin, to WES Operating for $4.0 billion, with $2.0 billion of cash proceeds and $2.0 billion in WES Operating common units. As a result, the Company no longer reports an Other Midstream segment and now has two reporting segments: Exploration and Production and WES Midstream. Prior period amounts have been reclassified to conform to the current-period presentation. See Note 19—Segment Information for information on the Company’s reporting segments.
Immediately after the asset contribution and sale, a wholly owned subsidiary of WES merged with and into WES Operating, with WES Operating continuing as the surviving entity and a subsidiary of WES, resulting in a simplified midstream structure. Under the terms of the WES Merger, WES acquired all of the outstanding publicly held common units of WES Operating and substantially all of the WES Operating common units owned by Anadarko and its affiliates. WES Operating survived as a partnership with no publicly traded equity, owned 98% by WES and 2% by Anadarko. WES Operating owns all the operating assets and equity investments of WES, is the borrower for all existing WES debt and is expected to be the borrower for all future debt. Anadarko maintains operating control of WES, with approximately 55.5% ownership of the combined entity.



APC 2019 FORM 10-Q | 12

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FINANCIAL STATEMENTS
FOOTNOTES


1. Summary of Significant Accounting Policies (Continued)

The consolidated financial statements include the accounts of Anadarko and subsidiaries in which Anadarko holds, directly or indirectly, more than 50% of the voting rights and VIEs for which Anadarko is the primary beneficiary. The Company has determined that WES is a VIE. Anadarko is considered the primary beneficiary and consolidates WES. WES functions with a capital structure that is separate from Anadarko, consisting of its own debt instruments and publicly traded common units. All intercompany transactions have been eliminated. Undivided interests in oil and natural-gas exploration and production joint ventures are consolidated on a proportionate basis. Investments in noncontrolled entities that Anadarko has the ability to exercise significant influence over operating and financial policies and VIEs for which Anadarko is not the primary beneficiary are accounted for using the equity method. In applying the equity method of accounting, the investments are initially recognized at cost and subsequently adjusted for the Company’s proportionate share of earnings, losses, and distributions. Investments are included in other assets on the Company’s Consolidated Balance Sheets.

Recently Adopted Accounting Standards  

ASU 2016-02, Leases (Topic 842) This ASU requires lessees to recognize a lease liability and an ROU asset on the balance sheet for all leases, including operating leases. This ASU modifies the definition of a lease and outlines the recognition, measurement, presentation, and disclosure of leasing arrangements by both lessees and lessors. The Company adopted Topic 842 on January 1, 2019, using the modified retrospective method applied to all leases that existed on January 1, 2019, and prior-period financial statements were not adjusted. Anadarko elected not to reassess contracts that commenced prior to adoption, to continue applying its current accounting policy for existing or expired land easements, and not to recognize ROU assets or lease liabilities for short-term leases. Upon adoption, the Company recognized approximately $600 million of ROU assets and lease liabilities related to leases existing at January 1, 2019. The difference between ROU assets and operating lease liabilities, net of the deferred tax impact, was recognized as a $55 million reduction in the opening balance of retained earnings as a cumulative effect adjustment. See Note 10—Leases for additional information.

Accounting Policy  

Leases Anadarko determines if an arrangement is a lease based on rights and obligations conveyed at inception of a contract. At the commencement date, a lease is classified as either operating or finance, and an ROU asset and lease liability is recognized based on the present value of future lease payments over the lease term. As the rate implicit in Anadarko’s leases generally is not readily determinable, the Company discounts lease liabilities using the Company’s incremental borrowing rate at the commencement date. Non-lease components associated with leases that begin in 2019 or later are accounted for as part of the lease component, and prepaid lease payments are included in the ROU asset. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that Anadarko will exercise that option. Leases of 12 months or less are not recognized on the Company’s Consolidated Balance Sheets.
Lease cost is recognized over the lease term, unless the end of the useful life of the underlying asset in a finance lease is before the end of the lease term. Lease cost is recognized on a straight-line basis unless another method better represents the pattern that benefit is expected to be derived from the right to use the underlying asset. For finance leases, interest expense is recognized over the lease term using the effective interest method. Variable lease payments are recognized when the obligation for those payments is incurred.
Generally, a contract in a joint arrangement is evaluated as a lease if Anadarko is the operator. Anadarko recognizes an ROU asset and lease liability for the full amount of each contract determined to be a lease, although a portion of lease payments generally is recovered from partners. Lease payments associated with the drilling of exploratory wells and development wells net of amounts billed to partners initially will be capitalized as a component of oil and gas properties and either depreciated, impaired, or written off as exploration expense in future periods.

13 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


2. Revenue from Contracts with Customers


Disaggregation of Revenue from Contracts with Customers The following table disaggregates revenue by significant product type and segment:
millions
Exploration
& Production
 
WES Midstream
 
Other and
Intersegment
Eliminations
 
Total
 
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
Oil sales
 
$
2,470

 
$

 
$

 
$
2,470

Natural-gas sales
 
205

 

 

 
205

Natural-gas liquids sales
 
216

 

 

 
216

Gathering, processing, and marketing sales (1)
 
1

 
685

 
(82
)
 
604

Other, net
 
12

 

 
21

 
33

Total Revenue from Customers
 
$
2,904

 
$
685

 
$
(61
)
 
$
3,528

Gathering, processing, and marketing sales (2)
 

 

 
(139
)
 
(139
)
Gains (losses) on divestitures, net
 
6

 

 

 
6

Other, net
 
(16
)
 
70

 
(7
)
 
47

Total Revenue from Other than Customers
 
$
(10
)
 
$
70

 
$
(146
)
 
$
(86
)
Total Revenue and Other
 
$
2,894

 
$
755

 
$
(207
)
 
$
3,442

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 
Oil sales
 
$
2,265

 
$

 
$

 
$
2,265

Natural-gas sales
 
203

 

 

 
203

Natural-gas liquids sales
 
318

 

 

 
318

Gathering, processing, and marketing sales (1)
 

 
519

 
84

 
603

Other, net
 
4

 

 
21

 
25

Total Revenue from Customers
 
$
2,790

 
$
519

 
$
105

 
$
3,414

Gathering, processing, and marketing sales (2)
 

 
(1
)
 
(220
)
 
(221
)
Gains (losses) on divestitures, net
 
52

 
1

 
(1
)
 
52

Other, net
 
(1
)
 
39

 
8

 
46

Total Revenue from Other than Customers
 
$
51

 
$
39

 
$
(213
)
 
$
(123
)
Total Revenue and Other
 
$
2,841

 
$
558

 
$
(108
)
 
$
3,291

(1) 
The amount in Other and Intersegment Eliminations primarily represents sales of third-party natural gas and NGLs of $176 million and intersegment eliminations of $(233) million for the three months ended June 30, 2019, and sales of third-party natural gas and NGLs of $261 million and intersegment eliminations of $(174) million for the three months ended June 30, 2018.
(2) 
The amount in Other and Intersegment Eliminations represents purchases of third-party natural gas and NGLs. Although these purchases are reported net in gathering, processing, and marketing sales in the Company’s Consolidated Statements of Income, they are shown separately on this table as the purchases are not considered revenue from customers.


APC 2019 FORM 10-Q | 14

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FINANCIAL STATEMENTS
FOOTNOTES


2. Revenue from Contracts with Customers (Continued)
millions
Exploration
& Production
 
WES Midstream
 
Other and
Intersegment
Eliminations
 
Total
 
Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
Oil sales
 
$
4,566

 
$

 
$

 
$
4,566

Natural-gas sales
 
525

 

 

 
525

Natural-gas liquids sales
 
456

 

 

 
456

Gathering, processing, and marketing sales (1)
 
2

 
1,357

 
(107
)
 
1,252

Other, net
 
21

 

 
46

 
67

Total Revenue from Customers
 
$
5,570

 
$
1,357

 
$
(61
)
 
$
6,866

Gathering, processing, and marketing sales (2)
 

 

 
(317
)
 
(317
)
Gains (losses) on divestitures, net
 
6

 

 
(5
)
 
1

Other, net
 
(17
)
 
132

 
(5
)
 
110

Total Revenue from Other than Customers
 
$
(11
)
 
$
132

 
$
(327
)
 
$
(206
)
Total Revenue and Other
 
$
5,559

 
$
1,489

 
$
(388
)
 
$
6,660

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
Oil sales
 
$
4,392

 
$

 
$

 
$
4,392

Natural-gas sales
 
450

 

 

 
450

Natural-gas liquids sales
 
610

 

 

 
610

Gathering, processing, and marketing sales (1)
 

 
1,021

 
130

 
1,151

Other, net
 
7

 

 
40

 
47

Total Revenue from Customers
 
$
5,459

 
$
1,021

 
$
170

 
$
6,650

Gathering, processing, and marketing sales (2)
 

 
(2
)
 
(407
)
 
(409
)
Gains (losses) on divestitures, net
 
19

 
1

 
8

 
28

Other, net
 
(13
)
 
80

 

 
67

Total Revenue from Other than Customers
 
$
6

 
$
79

 
$
(399
)
 
$
(314
)
Total Revenue and Other
 
$
5,465

 
$
1,100

 
$
(229
)
 
$
6,336

(1) 
The amount in Other and Intersegment Eliminations primarily represents sales of third-party natural gas and NGLs of $381 million and intersegment eliminations of $(456) million for the six months ended June 30, 2019, and sales of third-party natural gas and NGLs of $485 million and intersegment eliminations of $(337) million for the six months ended June 30, 2018.
(2) 
The amount in Other and Intersegment Eliminations represents purchases of third-party natural gas and NGLs. Although these purchases are reported net in gathering, processing, and marketing sales in the Company’s Consolidated Statements of Income, they are shown separately on this table as the purchases are not considered revenue from customers.


15 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


2. Revenue from Contracts with Customers (Continued)

Contract Liabilities Contract liabilities primarily relate to midstream fees and capital reimbursements that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of benefit, fixed and variable fees that are received from customers but revenue recognition is deferred under midstream cost of service contracts, and hard-minerals bonus payments received from customers that must be recognized as revenue over the expected period of benefit. The following table summarizes the current period activity related to contract liabilities from contracts with customers:
millions
 
Balance at December 31, 2018
$
150

Increase due to cash received, excluding revenues recognized in the period (1)
20

Decrease due to revenue recognized (2)
(23
)
Balance at June 30, 2019
$
147

 
 
Contract liabilities at June 30, 2019
 
Other current liabilities
$
19

Other long-term liabilities - other
128

Total contract liabilities from contracts with customers
$
147


(1) 
Includes $(26) million for the three months ended June 30, 2019.
(2) 
Includes $7 million for the three months ended June 30, 2019.

Transaction Price Allocated to Remaining Performance Obligations Revenue expected to be recognized from certain performance obligations that are unsatisfied as of June 30, 2019, is reflected in the table below. The Company applies the optional exemptions in Topic 606 and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied performance obligations. Therefore, the following table represents only a small portion of Anadarko’s expected future consolidated revenues as future revenue from the sale of most products and services is dependent on future production or variable customer volume and variable commodity prices for that volume.
millions
Exploration
& Production
 
WES Midstream
 
Other and
Intersegment
Eliminations
 
Total
 
Remainder of 2019
 
$
52

 
$
380

 
$
(250
)
 
$
182

2020
 
103

 
873

 
(620
)
 
356

2021
 
103

 
912

 
(681
)
 
334

2022
 
7

 
963

 
(739
)
 
231

2023
 
7

 
918

 
(729
)
 
196

Thereafter
 
60

 
4,341

 
(3,830
)
 
571

Total
 
$
332

 
$
8,387

 
$
(6,849
)
 
$
1,870




APC 2019 FORM 10-Q | 16

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FINANCIAL STATEMENTS
FOOTNOTES


3. Commodity Inventories


The following summarizes the major classes of commodity inventories included in other current assets:
millions
June 30, 2019
 
December 31, 2018
 
Oil
 
$
159

 
$
139

Natural gas
 
7

 
18

NGLs
 
58

 
78

Total commodity inventories
 
$
224

 
$
235



4. Divestitures


The following summarizes the proceeds received and gains (losses) recognized on divestitures:
 
Six Months Ended
 
June 30,
millions
2019

 
2018

Proceeds received, net of closing adjustments
$
31

 
$
384

Gains (losses) on divestitures, net
1

 
28



2018 During the six months ended June 30, 2018, the Company divested of the following U.S. onshore and Gulf of Mexico assets:
Alaska nonoperated assets, included primarily in the Exploration and Production reporting segment, for net proceeds of $383 million and net losses of $37 million in 2018 and $154 million in the fourth quarter of 2017.
Ram Powell nonoperated assets in the Gulf of Mexico, included in the Exploration and Production reporting segment, resulting in a net gain of $67 million.

5. Impairments

Impairments of Long-Lived Assets

2018 During the three months ended June 30, 2018, the Company expensed $128 million primarily related to a gathering system in the DJ basin, included in the WES Midstream reporting segment that was permanently taken out of service in the second quarter of 2018.

Fair values were measured as of the impairment date using the income approach and Level 3 inputs. The primary assumptions used to estimate undiscounted future net cash flows include anticipated future production, commodity prices, and capital and operating costs.

Impairments of Unproved Properties Impairments of unproved properties are included in exploration expense in the Company’s Consolidated Statements of Income. The Company recognized impairments of unproved Gulf of Mexico properties of $35 million during the six months ended June 30, 2019, and $94 million during the six months ended June 30, 2018, primarily related to blocks where the Company determined it would no longer pursue activities.

It is reasonably possible that significant declines in commodity prices, further changes to the Company’s drilling plans in response to lower prices, reduction of proved and probable reserve estimates, or increases in drilling or operating costs could result in additional impairments.


17 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


6. Suspended Exploratory Well Costs


The Company’s suspended exploratory well costs were $413 million at June 30, 2019, and $444 million at December 31, 2018. For exploratory wells, drilling costs are capitalized, or “suspended,” on the balance sheet when the well has found a sufficient quantity of reserves to justify its completion as a producing well and sufficient progress is being made in assessing the reserves and the economic and operating viability of the project. If additional information becomes available that raises substantial doubt as to the economic or operational viability of any of these projects, the associated costs will be expensed at that time. During the six months ended June 30, 2019, there was no exploration expense recorded for suspended exploratory well costs previously capitalized for greater than one year at December 31, 2018.

7. Current Liabilities


Accounts Payable Accounts payable, trade included liabilities of $206 million at June 30, 2019, and $180 million at December 31, 2018, representing the amount by which checks issued but not presented to the Company’s banks for collection exceeded balances in applicable bank accounts. Changes in these liabilities are classified as cash flows from financing activities.

Other Current Liabilities The following summarizes the Company’s other current liabilities:
millions
June 30, 2019
 
December 31, 2018
 
Accrued income taxes
 
$
135

 
$
167

Interest payable
 
252

 
267

Production, property, and other taxes payable
 
334

 
309

Accrued employee benefits
 
229

 
319

Derivatives
 
175

 
89

Operating lease liabilities
 
249

 

Other
 
188

 
144

Total other current liabilities
 
$
1,562

 
$
1,295




APC 2019 FORM 10-Q | 18

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FINANCIAL STATEMENTS
FOOTNOTES


8. Derivative Instruments


Objective and Strategy  The Company uses derivative instruments to manage its exposure to cash-flow variability from commodity-price and interest-rate risks. Futures, swaps, and options are used to manage exposure to commodity-price risk inherent in the Company’s oil and natural-gas production and natural-gas processing operations (Oil and Natural-Gas Production/Processing Derivative Activities). Futures contracts and commodity-price swap agreements are used to fix the price of expected future oil and natural-gas sales at major industry trading locations, such as Cushing, Oklahoma or Sullom Voe, Scotland for oil and Henry Hub, Louisiana for natural gas. Basis swaps are periodically used to fix or float the price differential between product prices at one market location versus another. Options are used to establish a floor price, a ceiling price, or a floor and a ceiling price (collar) for expected future oil and natural-gas sales. Derivative instruments are also used to manage commodity-price risk inherent in customer price requirements and to fix margins on the future sale of natural gas and NGLs from the Company’s leased storage facilities.
Interest-rate swaps are used to fix or float interest rates on existing or anticipated indebtedness. The purpose of these instruments is to manage the Company’s existing or anticipated exposure to interest-rate changes. The fair value of the Company’s current interest-rate swap portfolio is subject to changes in interest rates.
The Company does not apply hedge accounting to any of its currently outstanding derivative instruments. As a result, gains and losses associated with derivative instruments are recognized currently in earnings. Net derivative losses attributable to derivatives previously subject to hedge accounting reside in accumulated other comprehensive income (loss) and are reclassified to earnings as the transactions to which the derivatives relate are recognized in earnings.

Oil and Natural-Gas Production/Processing Derivative Activities  The oil prices listed below are a combination of NYMEX WTI and Intercontinental Exchange, Inc. (ICE) Brent Blend prices. The Company had no natural-gas production/processing derivatives at June 30, 2019. The following is a summary of the Company’s oil derivative instruments at June 30, 2019:
 
2019 Settlement

Oil
 
Three-Way Collars (MBbls/d)
87

Average price per barrel

Ceiling sold price (call)
$
72.98

Floor purchased price (put)
$
56.72

Floor sold price (put)
$
46.72



A three-way collar is a combination of three options: a sold call, a purchased put, and a sold put. The sold call establishes the maximum price that the Company will receive for the contracted commodity volume. The purchased put establishes the minimum price that the Company will receive for the contracted volume unless the market price for the commodity falls below the sold put strike price, at which point the minimum price equals the reference price (e.g., NYMEX) plus the excess of the purchased put strike price over the sold put strike price.


19 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


8. Derivative Instruments (Continued)

Anadarko Interest-Rate Derivatives (Excluding WES)  Anadarko has outstanding interest-rate swap contracts to manage interest-rate risk associated with anticipated debt issuances. The Company has locked in a fixed interest rate in exchange for a floating interest rate indexed to the three-month LIBOR.
At June 30, 2019, the Company had outstanding interest-rate swaps with a notional amount of $1.6 billion due prior to or in September 2023 that manage interest-rate risk associated with potential future debt issuances. Depending on market conditions, liability-management actions, or other factors, the Company may enter into offsetting interest-rate swap positions or settle or amend certain or all of the currently outstanding interest-rate swaps. The Company had the following outstanding interest-rate swaps at June 30, 2019
millions except percentages
 
Mandatory
Weighted-Average

Notional Principal Amount
Reference Period
Termination Date
Interest Rate

$
550

 
September 2016 - 2046
September 2020
6.418
%
$
250

 
September 2016 - 2046
September 2022
6.809
%
$
100

 
September 2017 - 2047
September 2020
6.891
%
$
250

 
September 2017 - 2047
September 2021
6.570
%
$
450

 
September 2017 - 2047
September 2023
6.445
%


Derivative settlements and collateralization are classified as cash flows from operating activities unless the derivatives contain an other-than-insignificant financing element, in which case the settlements and collateralization are classified as cash flows from financing activities. As a result of prior extensions of reference-period start dates without settlement of the related interest-rate derivative obligations, the interest-rate derivatives in Anadarko’s portfolio contain an other-than-insignificant financing element, and therefore, any settlements, collateralization, or cash payments for amendments related to these extended interest-rate derivatives are classified as cash flows from financing activities. Net cash payments related to settlements and amendments of interest-rate swap agreements were $30 million during the six months ended June 30, 2019, and $48 million during the six months ended June 30, 2018.

WES Interest-Rate Derivatives WES entered into interest-rate swap agreements with an aggregate notional amount of $750 million in December 2018 and $375 million in March 2019 to manage interest-rate risk associated with anticipated 2019 debt issuances. WES exchanged a floating interest rate indexed to the three-month LIBOR for a fixed interest rate. Depending on market conditions, liability management actions, or other factors, WES may settle or amend certain or all of the currently outstanding interest-rate swaps. The following interest-rate swaps were outstanding at June 30, 2019:
millions except percentages
 
Mandatory
Weighted-Average

Notional Principal Amount
Reference Period
Termination Date
Interest Rate

$
375

 
December 2019 - 2024
December 2019
2.662
%
$
375

 
December 2019 - 2029
December 2019
2.802
%
$
375

 
December 2019 - 2049
December 2019
2.885
%




APC 2019 FORM 10-Q | 20

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FINANCIAL STATEMENTS
FOOTNOTES


8. Derivative Instruments (Continued)

Effect of Derivative InstrumentsBalance Sheet  The following summarizes the fair value of the Company’s derivative instruments:
 
Gross Derivative Assets
 
Gross Derivative Liabilities
millions
June 30,
 
December 31,
 
 
June 30,
 
December 31,
 
Balance Sheet Classification
 
2019

 
2018

 
 
2019

 
2018

Commodity derivatives - Anadarko
 
 
 
 
 
 
 
 
 
Other current assets
 
$
37

 
$
300

 
 
$
(14
)
 
$
(126
)
Other current liabilities
 

 
1

 
 
(1
)
 
(6
)
 
 
37

 
301

 
 
(15
)
 
(132
)
Interest-rate derivatives - Anadarko (1)
 


 
 
 
 
 
 
 
Other current assets
 
15

 
22

 
 

 

Other assets
 
16

 
34

 
 

 

Other current liabilities
 

 

 
 
(86
)
 
(82
)
Other liabilities
 

 

 
 
(1,426
)
 
(1,156
)
 
 
31

 
56

 
 
(1,512
)
 
(1,238
)
Interest-rate derivatives - WES
 
 
 
 
 
 
 
 
 
Other current liabilities
 

 

 
 
(103
)
 
(8
)
Total derivatives
 
$
68

 
$
357

 
 
$
(1,630
)
 
$
(1,378
)

(1) 
Excludes amounts related to WES interest-rate swap agreements.

Effect of Derivative InstrumentsStatement of Income  The following summarizes gains and losses related to derivative instruments:
 
Three Months Ended
 
Six Months Ended
millions
June 30,
 
June 30,
Classification of (Gain) Loss Recognized
 
2019

 
2018

 
 
2019

 
2018

Commodity derivatives - Anadarko
 
 
 
 
 
 
 
 
 
Gathering, processing, and marketing sales
 
$

 
$
1

 
 
$
2

 
$
2

(Gains) losses on derivatives, net
 
(5
)
 
468

 
 
144

 
630

Interest-rate derivatives - Anadarko (1)
 

 

 
 
 
 

(Gains) losses on derivatives, net
 
200

 
(32
)
 
 
328

 
(159
)
Interest-rate derivatives - WES
 
 
 
 
 
 
 
 
 
(Gains) losses on derivatives, net
 
59

 

 
 
95

 

Total (gains) losses on derivatives, net
 
$
254

 
$
437

 
 
$
569

 
$
473


(1) 
Excludes amounts related to WES interest-rate swap agreements.


21 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


8. Derivative Instruments (Continued)

Credit-Risk Considerations  The financial integrity of exchange-traded contracts, which are subject to nominal credit risk, is assured by NYMEX or ICE through systems of financial safeguards and transaction guarantees. Over-the-counter traded swaps, options, and futures contracts expose the Company to counterparty credit risk. The Company monitors the creditworthiness of its counterparties, establishes credit limits according to the Company’s credit policies and guidelines, and assesses the impact on the fair value of its counterparties’ creditworthiness. The Company has the ability to require cash collateral or letters of credit to mitigate its credit-risk exposure.
The Company has netting agreements with financial institutions that permit net settlement of gross commodity derivative assets against gross commodity derivative liabilities and routinely exercises its contractual right to offset gains and losses when settling with derivative counterparties. In addition, the Company has setoff agreements with certain financial institutions that may be exercised in the event of default and provide for contract termination and net settlement across derivative types.
The Company’s derivative instruments are subject to individually negotiated credit provisions that may require collateral of cash or letters of credit depending on the derivative’s portfolio valuation versus negotiated credit thresholds. These credit thresholds generally require full or partial collateralization of the Company’s obligations depending on certain credit-risk-related provisions, such as the Company’s credit rating from S&P and Moody’s. As of June 30, 2019, the Company’s long-term debt was rated investment grade (BBB) by both S&P and Fitch and below investment grade (Ba1) by Moody’s. In January 2019, Moody’s changed its outlook with respect to its rating from stable to positive. The Company may be required to post additional collateral with respect to its derivative instruments if its credit ratings decline below current levels or if the liability associated with any such derivative instrument increases above the credit threshold. The aggregate fair value of derivative instruments with credit-risk-related contingent features for which a net liability position existed was $1.4 billion (net of $264 million of collateral) at June 30, 2019, and $1.1 billion (net of $66 million of collateral) at December 31, 2018.


APC 2019 FORM 10-Q | 22

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FINANCIAL STATEMENTS
FOOTNOTES


8. Derivative Instruments (Continued)

Fair Value  Fair value of futures contracts is based on unadjusted quoted prices in active markets for identical assets or liabilities, which represent Level 1 inputs. Valuations of physical-delivery purchase and sale agreements, over-the-counter financial swaps, and commodity option collars are based on similar transactions observable in active markets and industry-standard models that primarily rely on market-observable inputs. Inputs used to estimate fair value in industry-standard models are categorized as Level 2 inputs because substantially all assumptions and inputs are observable in active markets throughout the full term of the instruments. Inputs used to estimate the fair value of swaps and options include market-price curves; contract terms and prices; credit-risk adjustments; and, for Black-Scholes option valuations, discount factors and implied market volatility.
The following summarizes the fair value of the Company’s derivative assets and liabilities by input level within the fair-value hierarchy:
millions
Level 1

 
Level 2

 
Level 3

 
Netting (1)

Collateral
 
 
Total

June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Anadarko (2)
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$

 
$
37

 
$

 
$
(14
)
 
$

 
$
23

Interest-rate derivatives

 
31

 

 

 

 
31

Total derivative assets
$

 
$
68

 
$

 
$
(14
)
 
$

 
$
54

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Anadarko (2)
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$

 
$
(15
)
 
$

 
$
14

 
$

 
$
(1
)
Interest-rate derivatives

 
(1,512
)
 

 

 
264

 
(1,248
)
WES
 
 
 
 
 
 
 
 
 
 
 
Interest-rate derivatives

 
(103
)
 

 

 

 
(103
)
Total derivative liabilities
$

 
$
(1,630
)
 
$

 
$
14

 
$
264

 
$
(1,352
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
 
 
Anadarko (2)
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
1

 
$
300

 
$

 
$
(127
)
 
$

 
$
174

Interest-rate derivatives

 
56

 

 

 

 
56

Total derivative assets
$
1

 
$
356

 
$

 
$
(127
)
 
$

 
$
230

Liabilities
 
 
 
 
 
 
 
 
 
 
 
Anadarko (2)
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
(2
)
 
$
(130
)
 
$

 
$
127

 
$
2

 
$
(3
)
Interest-rate derivatives

 
(1,238
)
 

 

 
66

 
(1,172
)
WES
 
 
 
 
 
 
 
 
 
 
 
Interest-rate derivatives

 
(8
)
 

 

 

 
(8
)
Total derivative liabilities
$
(2
)
 
$
(1,376
)
 
$

 
$
127

 
$
68

 
$
(1,183
)
(1) 
Represents the impact of netting commodity derivative assets and liabilities with counterparties where the Company has the contractual right and intends to net settle.
(2) 
Excludes amounts related to WES interest-rate swap agreements.




23 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


9. Debt

Debt Activity  The following summarizes the Company’s borrowing activity, after eliminating the effect of intercompany transactions, during the six months ended June 30, 2019:
 
 
Carrying Value
 
millions
Anadarko (1)
 
WES
 
Anadarko Consolidated
 
Description
Balance at December 31, 2018
 
$
11,354

 
$
4,815

 
$
16,169

 
Borrowings
 
 
 
 
 
 
 
 
 

 
2,000

 
2,000

WES Term Loan Facility
 
 

 
700

 
700

WES RCF
Repayments
 
 
 
 
 
 
 
 
 
(600
)
 

 
(600
)
8.700 % Senior Notes due 2019
 
 
(300
)
 

 
(300
)
6.950 % Senior Notes due 2019
 
 

 
(28
)
 
(28
)
WGP RCF
Other, net
 
25

 
2

 
27

Amortization of discounts, premiums, and debt issuance costs
Balance at June 30, 2019
 
$
10,479

 
$
7,489

 
$
17,968

 
(1) 
Excludes WES.

Debt  The following summarizes the Company’s outstanding debt, including finance lease liabilities, after eliminating the effect of intercompany transactions:
millions
Anadarko (1)
 
WES
 
Anadarko Consolidated
 
June 30, 2019
 
 
 
 
 
 
Total borrowings at face value
 
$
11,893

 
$
7,540

 
$
19,433

Net unamortized discounts, premiums, and debt issuance costs (2)
 
(1,414
)
 
(51
)
 
(1,465
)
Total borrowings (3)
 
10,479

 
7,489

 
17,968

Finance lease liabilities
 
261

 

 
261

Less short-term debt
 
31

 

 
31

Total long-term debt
 
$
10,709

 
$
7,489

 
$
18,198

 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
Total borrowings at face value
 
$
12,793

 
$
4,868

 
$
17,661

Net unamortized discounts, premiums, and debt issuance costs (2)
 
(1,439
)
 
(53
)
 
(1,492
)
Total borrowings (3)
 
11,354

 
4,815

 
16,169

Finance lease liabilities
 
248

 

 
248

Less short-term debt
 
919

 
28

 
947

Total long-term debt
 
$
10,683

 
$
4,787

 
$
15,470


(1) 
Excludes WES.
(2) 
Unamortized discounts, premiums, and debt issuance costs are amortized over the term of the related debt. Debt issuance costs related to RCFs are included in other current assets and other assets on the Company’s Consolidated Balance Sheets.
(3) 
The Company’s outstanding borrowings, except for borrowings under the WGP RCF, are senior unsecured.

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FINANCIAL STATEMENTS
FOOTNOTES


9. Debt (Continued)

Fair Value  The Company uses a market approach to determine the fair value of its fixed-rate debt using observable market data, which results in a Level 2 fair-value measurement. The carrying amount of floating-rate debt approximates fair value as the interest rates are variable and reflective of market rates. The estimated fair value of the Company’s total borrowings was $20.2 billion at June 30, 2019, and $16.8 billion at December 31, 2018.

Anadarko Debt (Excluding WES)  In January 2019, the $2.0 billion 364-day senior unsecured RCF (364-Day Facility) expired. At June 30, 2019, the Company had a $3.0 billion senior unsecured RCF maturing in January 2023 (APC RCF). At June 30, 2019, Anadarko had no outstanding borrowings under the APC RCF and was in compliance with all covenants.
In March 2019, Anadarko repaid $600 million of 8.700% Senior Notes at maturity and redeemed its $300 million of 6.950% Senior Notes due June 2019.
Anadarko’s Zero Coupons can be put to the Company in October of each year, in whole or in part, for the then-accreted value of the outstanding Zero Coupons, which, if put in whole, would be $942 million at the next put date in October 2019. Anadarko’s Zero Coupons were classified as long-term debt on the Company’s Consolidated Balance Sheet at June 30, 2019, as the Company has the ability and intent to refinance these obligations using long-term debt, should a put be exercised.
The Company also has notes payable related to its ownership of certain noncontrolling mandatorily redeemable interests that are not included in the Company’s reported debt balance and do not affect consolidated interest expense. See Note 9—Equity-Method Investments in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

WES and WGP Debt  Effective on February 15, 2019, WES amended the maturity date of its senior unsecured RCF from February 2023 to February 2024, and upon completion of the WES Merger, expanded the borrowing capacity from $1.5 billion to $2.0 billion (WES RCF). During the six months ended June 30, 2019, WES borrowed $700 million under its RCF, which was used for general partnership purposes, including to fund capital expenditures. At June 30, 2019, WES had outstanding borrowings under its RCF of $920 million at an interest rate of 3.71%, outstanding letters of credit of $5 million, available borrowing capacity of $1.1 billion, and was in compliance with all covenants.
In February 2019, WES borrowed $2.0 billion under its senior unsecured credit facility (WES Term Loan Facility) to fund substantially all of the cash portion of the consideration under the WES midstream asset contribution and sale and the payment of related transaction costs. As of June 30, 2019, the WES Term Loan Facility was anticipated to mature on February 27, 2020, the day prior to the one-year anniversary of the completion of the WES Merger. As of June 30, 2019, net cash proceeds received from future asset sales and debt or equity offerings by WES were required to be used to repay amounts outstanding under the WES Term Loan Facility. At June 30, 2019, WES had outstanding borrowings under its WES Term Loan Facility of $2.0 billion at an interest rate of 3.78% and was in compliance with all covenants.
On July 1, 2019, WES entered into an amendment to the WES Term Loan Facility to, among other things, (i) increase the commitments available under the WES Term Loan Facility from $2.0 billion to $3.0 billion, the incremental $1.0 billion of which may be drawn by WES on or before September 30, 2019, (ii) extend the maturity date from February 27, 2020 to December 31, 2020, and (iii) modify the provision requiring that all debt issuance proceeds be used to repay the WES Term Loan Facility to allow for a $1.0 billion carve out of debt offering proceeds.
In March 2019, the $35 million senior secured RCF (WGP RCF) matured following the completion of the WES Merger. During the six months ended June 30, 2019, WES made repayments of $28 million for the WGP RCF.
See Note 1—Summary of Significant Accounting Policies for additional information related to the WES Merger.


25 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


10. Leases

Operating Leases  At June 30, 2019, total lease liabilities related to operating leases were $557 million and primarily related to offshore and onshore drilling rigs and real estate.
The operating lease liabilities included $177 million for offshore drilling vessels and certain contracts for onshore drilling rigs expiring at various dates through 2021. Lease payments commonly vary based on activities being performed by the rig. To the extent that lease payments vary from amounts recognized on the Company’s balance sheet, the amount is included in variable lease cost.
Additionally, the Company has $187 million of operating lease liabilities for real estate, primarily related to the Company’s Denver corporate office lease expiring in 2033, with options to terminate the lease early.

Finance Leases  At June 30, 2019, total lease liabilities related to finance leases were $261 million and primarily related to an FPSO for the Company’s TEN field in Ghana. The initial FPSO lease term ends in 2027 with annual renewal periods for an additional 10 years, annual purchase options that decrease over time, and no residual value guarantees.

The following table summarizes information related to the Company’s leases at June 30, 2019:
millions except lease term and discount rate
Operating Leases
 
Finance Leases
 
Assets
 
 
 
 
Other assets
 
$
539

 
$

Net properties and equipment
 

 
193

Total lease assets (1)
 
$
539

 
$
193

 
 
 
 
 
Liabilities
 
 
 
 
Current liabilities
 
 
 
 
Other current liabilities
 
$
249

 
$

Short-term debt - Anadarko
 

 
31

Long-term liabilities
 
 
 
 
Other
 
308

 

Long-term debt - Anadarko
 

 
230

Total lease liabilities (1)
 
$
557

 
$
261

 
 
 
 
 
Weighted-average remaining lease term (years)
 
5

 
16

Weighted-average discount rate (2)
 
4.3
%
 
15.1
%

(1) 
Includes additions to ROU assets and lease liabilities of $126 million related to operating leases and $22 million related to finance leases for the six months ended June 30, 2019.
(2) 
The FPSO finance lease commenced prior to the adoption of ASU 2016-02, Leases (Topic 842). In accordance with previous accounting guidance, the implied rate is based on the fair value of the underlying asset.


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FINANCIAL STATEMENTS
FOOTNOTES


10. Leases (Continued)

The following table summarizes the Company’s lease cost before amounts recovered from partners:
 
Three Months Ended
 
 
Six Months Ended
 
millions
June 30, 2019
 
 
June 30, 2019
 
Operating lease cost
 
$
70

 
 
$
148

Short-term lease cost
 
42

 
 
61

Variable lease cost
 
37

 
 
76

Finance lease cost
 
 
 
 
 
Amortization of ROU assets
 
10

 
 
20

Interest on lease liabilities
 
9

 
 
18

Total lease cost
 
$
168

 
 
$
323


The following table summarizes cash paid for amounts included in the measurement of lease liabilities:
 
Six Months Ended
 
June 30, 2019
millions
Operating Leases
 
Finance Leases
 
Operating cash flows
 
$
133

 
$
18

Investing cash flows
 
37

 

Financing cash flows
 

 
9



The following table reconciles the undiscounted cash flows to the operating and finance lease liabilities recorded on the Company’s Consolidated Balance Sheet at June 30, 2019:
millions
Operating Leases (1)
 
Finance Leases
 
Remainder of 2019
 
$
134

 
$
35

2020
 
191

 
62

2021
 
70

 
52

2022
 
49

 
48

2023
 
35

 
44

Thereafter
 
155

 
322

Total lease payments
 
$
634

 
$
563

Less portion representing imputed interest
 
77

 
302

Total lease liabilities
 
$
557

 
$
261

(1) 
For leases commencing prior to 2019, lease payments exclude payments to lessors for drilling rig services and real estate services, taxes, and common area maintenance.

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FINANCIAL STATEMENTS
FOOTNOTES


10. Leases (Continued)

The following table summarizes future minimum lease payments related to the Company’s operating and finance leases as of December 31, 2018:
millions
Operating Leases
 
Finance Leases
 
2019
 
$
264

 
$
58

2020
 
139

 
50

2021
 
57

 
48

2022
 
35

 
45

2023
 
24

 
43

Thereafter
 
135

 
323

Total lease payments
 
$
654

 
$
567

Less portion representing imputed interest
 
*

 
319

Total lease liabilities
 
*

 
$
248

*
Prior to the adoption of ASU 2016-02, Leases (Topic 842) on January 1, 2019, operating lease liabilities were not recognized on the Company’s Consolidated Balance Sheets. Refer to Note 1—Summary of Significant Accounting Policies for additional information.


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FINANCIAL STATEMENTS
FOOTNOTES


11. Income Taxes


The following summarizes income tax expense (benefit) and effective tax rates:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions except percentages
 
2019

 
2018

 
 
2019

 
2018

Current income tax expense (benefit)
 
$
269

 
$
147

 
 
$
437

 
$
237

Deferred income tax expense (benefit)
 
(60
)
 
(22
)
 
 
(62
)
 
14

Total income tax expense (benefit)
 
$
209

 
$
125

 
 
$
375

 
$
251

Income (loss) before income taxes
 
(736
)
 
142

 
 
(474
)
 
442

Effective tax rate
 
(28
)%
 
88
%
 
 
(79
)%
 
57
%


The Company’s tax provision for interim periods is determined using an estimate of its annual current and deferred effective tax rates, adjusted for discrete items. Each quarter, the Company updates these rates and records a cumulative adjustment to current and deferred tax expense by applying the rates to the year-to-date pre-tax income excluding discrete items. The Company’s quarterly estimate of its annual current and deferred effective tax rates can vary significantly based on various forecasted items, including future commodity prices, capital expenditures, expenses for which tax benefits are not recognized, and the geographic mix of pre-tax income and losses.
The variance from the U.S. federal statutory rate of 21% for the three and six months ended June 30, 2019, was primarily attributable to the following items:
tax impact from foreign operations
non-deductible Algerian exceptional profits tax for Algerian income tax purposes
income attributable to noncontrolling interests
non-deductible Chevron Merger Termination Fee
The variance from the U.S. federal statutory rate of 21% for the three and six months ended June 30, 2018, was primarily attributable to the following items:
tax impact from foreign operations
non-deductible Algerian exceptional profits tax for Algerian income tax purposes

The Company recognized a tax benefit of $346 million as of June 30, 2019 and December 31, 2018, related to the deduction of its 2015 settlement payment for the Tronox Adversary Proceeding. This benefit is net of uncertain tax positions of $1.2 billion as of June 30, 2019 and December 31, 2018, due to uncertainty related to the deductibility of the settlement payment. Due to the deduction of the settlement payment on the Company’s 2015 tax return, the Company had a net operating loss carryback, which resulted in a tentative tax refund of $881 million in 2016. The IRS has audited this position and, in April 2018, issued a final notice of proposed adjustment denying the deductibility of the settlement payment. In September 2018, the Company received a statutory notice of deficiency from the IRS disallowing the net operating loss carryback and rejecting the Company’s refund claim. As a result, the Company filed a petition with the U.S. Tax Court to dispute the disallowances in November 2018 and, pursuant to standard U.S. Tax Court procedures, the Company is not required to repay the $881 million refund to dispute the IRS’s position. Accordingly, the Company has not revised its estimate of the benefit that will ultimately be realized. After the case is tried and briefed in the Tax Court, the court will issue an opinion and then enter a decision. If the Company does not prevail on the issue, the earliest date the Company might be required to repay the refund received, plus interest, would be 91 days after entry of the decision. At such time, the Company would reverse the portion of the $346 million net benefit previously recognized in its consolidated financial statements to the extent necessary to reflect the result of the Tax Court decision. It is reasonably possible the amount of uncertain tax position and/or tax benefit could materially change as the Company asserts its position in the Tax Court proceedings. Although management cannot predict the timing of a final resolution of the Tax Court proceedings, the Company does not currently anticipate a decision to be entered before 2022. 


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FINANCIAL STATEMENTS
FOOTNOTES


12. Commitments

Anadarko has various long-term contractual commitments pertaining to oil and natural-gas activities, such as work-related commitments for drilling wells, obtaining and processing seismic data, and fulfilling rig commitments. Anadarko also enters into various processing, transportation, storage, and purchase agreements to access markets and provide flexibility to sell its oil, natural gas, and NGLs in certain areas.
On June 18, 2019, the Company and the co-venturers in Mozambique’s Offshore Area 1 announced FID on the Anadarko-led Area 1 Mozambique LNG project. This official declaration of FID confirms the Golfinho Atum Plan of Development is now effective with notice provided to the Government of Mozambique that all conditions precedent have been satisfied, and the project can now advance to the construction phase. Subsequent to FID, Anadarko began entering into various long-term contractual commitments pertaining primarily to offshore engineering, procurement, construction, and installation activities in Mozambique. These commitments as of June 30, 2019, have been included in the table below.
The Company’s various long-term contractual obligations expire at various dates through 2034. The following summarizes the gross aggregate future payments under these contracts at June 30, 2019:
millions
 
2019
$
1,028

2020
1,627

2021
1,419

2022
1,306

2023
714

Thereafter
1,467

Total (1)(2)
$
7,561

(1)  
Excludes purchase commitments for jointly owned fields and facilities for which the Company is not the operator.
(2)  
Includes gross commitments related to the Mozambique development activities of $2.0 billion ($507 million net to Anadarko).

On July 26, 2019, Anadarko issued a Notice-to-Proceed to the onshore engineering, procurement, and construction contractor for the Mozambique LNG project, resulting in additional obligations with gross aggregate future payments of approximately $8.0 billion, of which $2.1 billion is net to Anadarko.

13. Contingencies
Litigation  There are no material developments in previously reported contingencies nor are there any other material matters that have arisen since the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.



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FINANCIAL STATEMENTS
FOOTNOTES


14. Pension Plans and Other Postretirement Benefits


The Company has contributory and non-contributory defined-benefit pension plans, which include both qualified and supplemental plans. The Company also provides certain health care and life insurance benefits for certain retired employees. Retiree health care benefits are funded by contributions from the retiree and, in certain circumstances, contributions from the Company. The Company’s retiree life insurance plan is noncontributory. The following summarizes the Company’s pension and other postretirement benefit cost:

Pension Benefits
 
Other Benefits
millions

2019


2018

 
 
2019

 
2018

Three Months Ended June 30
 
 
 
 
 
 
 
 
 
Service cost
 
$
22

 
$
22

 
 
$

 
$
1

Interest cost
 
20

 
19

 
 
3

 
2

Expected (return) loss on plan assets
 
(20
)
 
(20
)
 
 

 

Amortization of net actuarial loss (gain)
 
3

 
6

 
 

 

Amortization of net prior service cost (credit)
 

 

 
 

 
(6
)
Settlement expense
 
13

 

 
 

 

Termination benefits expense
 
2

 

 
 

 

Net periodic benefit cost (1)
 
$
40

 
$
27

 
 
$
3

 
$
(3
)
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30
 
 
 
 
 
 
 
 
 
Service cost
 
$
44

 
$
45

 
 
$

 
$
1

Interest cost
 
40

 
38

 
 
6

 
5

Expected (return) loss on plan assets
 
(41
)
 
(41
)
 
 

 

Amortization of net actuarial loss (gain)
 
7

 
13

 
 

 

Amortization of net prior service cost (credit)
 

 

 
 
(1
)
 
(12
)
Settlement expense
 
17

 

 
 

 

Termination benefits expense
 
2

 

 
 

 

Net periodic benefit cost (1)
 
$
69

 
$
55

 
 
$
5

 
$
(6
)

(1) 
The service cost component of net periodic benefit cost is included in G&A; oil and gas operating expense; gathering, processing, and marketing expense; and exploration expense, and all other components of net periodic benefit cost are included in other (income) expense on the Company’s Consolidated Statements of Income.

The Company contributed $91 million to funded pension plans and $25 million to unfunded pension plans during the six months ended June 30, 2019.


31 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


15. Stockholders’ Equity


Earnings Per Share  The Company’s basic earnings per share (EPS) is computed based on the average number of shares of common stock outstanding for the period and includes the effect of any participating securities and TEUs as appropriate. Diluted EPS includes the effect of the Company’s outstanding stock options, restricted stock awards, restricted stock units, and TEUs, if the inclusion of these items is dilutive. All outstanding TEUs were settled in June 2018.
The following provides a reconciliation between basic and diluted EPS attributable to common stockholders:
 
 
Three Months Ended
 
 
Six Months Ended
 
 
June 30,
 
 
June 30,
millions except per-share amounts
 
2019

 
2018

 
 
2019

 
2018

Net income (loss)
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
 
$
(1,025
)
 
$
29

 
 
$
(1,040
)
 
$
150

Income (loss) effect of TEUs
 

 
(1
)
 
 

 
(4
)
Less distributions on participating securities
 
1

 
1

 
 
3

 
2

Basic
 
$
(1,026
)
 
$
27

 
 
$
(1,043
)
 
$
144

Income (loss) effect of TEUs
 

 

 
 

 
(1
)
Diluted
 
$
(1,026
)
 
$
27

 
 
$
(1,043
)
 
$
143

Shares
 
 
 
 
 
 
 
 
 
Average number of common shares outstanding—basic
 
491

 
504

 
 
491

 
511

Dilutive effect of stock options
 

 
1

 
 

 
1

Average number of common shares outstanding—diluted
 
491

 
505

 
 
491

 
512

Excluded due to anti-dilutive effect
 
12

 
9

 
 
12

 
9

Net income (loss) per common share
 
 
 
 
 
 
 
 
 
Basic
 
$
(2.09
)
 
$
0.05

 
 
$
(2.13
)
 
$
0.28

Diluted
 
$
(2.09
)
 
$
0.05

 
 
$
(2.13
)
 
$
0.28

Dividends per common share
 
$
0.30

 
$
0.25

 
 
$
0.60

 
$
0.50



Common Stock  The Share-Repurchase Program authorizes the repurchase of the Company’s common stock in the open market or through private transactions. During 2018, the Share-Repurchase Program was expanded to $5.0 billion and extended through mid-year 2020. As of December 31, 2018, the Company had completed $3.75 billion of the Share-Repurchase Program through ASR Agreements and open-market repurchases. These transactions were accounted for as equity transactions, with all of the repurchased shares classified as treasury stock. Additionally, the receipt of these shares reduced the average number of shares of common stock outstanding used to compute both basic and diluted EPS. There were no additional repurchases of common stock under the Share-Repurchase Program for the six months ended June 30, 2019. No additional share repurchases under the Share-Repurchase Program are anticipated pursuant to the terms of the Occidental Merger Agreement. See Note 1—Summary of Significant Accounting Policies for additional information on the Occidental Merger Agreement.

Dividends  Dividends declared are recorded as a reduction of retained earnings, to the extent that retained earnings were available at the beginning of the reporting period, with any excess recorded as a reduction of paid-in capital.



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FINANCIAL STATEMENTS
FOOTNOTES


16. Noncontrolling Interests


WES is a limited partnership formed by Anadarko in September 2012 and owns a 98% limited partner interest in WES Operating, a Delaware limited partnership formed by Anadarko in 2007 to acquire, own, develop and operate midstream assets, and all of the outstanding equity interests of WES Operating’s general partner, which holds the entire non-economic general partner interest in WES Operating.
WES Operating Class C units issued to Anadarko converted into WES Operating common units in a unit-for-unit, tax-free exchange immediately prior to the closing of the WES Merger on February 28, 2019. Prior to the closing of the WES Merger, the Class C units received quarterly distributions in the form of additional Class C units. WES distributed 309 thousand Class C units to Anadarko during the six months ended June 30, 2019, and 1.1 million Class C units to Anadarko during 2018. See Note 1—Summary of Significant Accounting Policies for additional information on the WES Merger.
At June 30, 2019, Anadarko’s ownership interest in WES consisted of a 55.5% limited partner interest and the entire non-economic general partner interest. The remaining 44.5% limited partner interest in WES was owned by the public.
At June 30, 2019, Anadarko’s ownership interest in WES Operating consisted of a 2% limited partner interest.


33 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


17. Variable Interest Entities

Consolidated VIEs The Company determined that the partners in WES with equity at risk lack the power, through voting rights or similar rights, to direct the activities that most significantly impact WES’s economic performance; therefore, WES is considered a VIE. Anadarko, through its ownership of the general partner interest in WES, has the power to direct the activities that most significantly affect economic performance and the obligation to absorb losses or the right to receive benefits that could be potentially significant to WES; therefore, Anadarko is considered the primary beneficiary and consolidates WES and all of its consolidated subsidiaries. For additional information on WES, see Note 16—Noncontrolling Interests.

Assets and Liabilities of VIEs The assets of WES and its subsidiaries cannot be used by Anadarko for general corporate purposes and are included in and disclosed parenthetically on the Company’s Consolidated Balance Sheets. The carrying amounts of liabilities related to WES and its subsidiaries for which the creditors do not have recourse to other Anadarko assets are included in and disclosed parenthetically on the Company’s Consolidated Balance Sheets.
All outstanding debt for WES at June 30, 2019, and December 31, 2018, including any borrowings under the WES RCF and WES Term Loan Facility, is recourse to WES Operating’s general partner, which in turn has been indemnified in certain circumstances by certain wholly owned subsidiaries of the Company for such liabilities. See Note 9—Debt for additional information on WES short-term and long-term debt balances.

VIE Financing WES’s sources of liquidity include cash and cash equivalents, cash flows generated from operations, interest income from a note receivable from Anadarko as discussed below, borrowings under the WES RCF, the issuance of additional partnership units, and debt offerings. See Note 9—Debt and Note 16—Noncontrolling Interests for additional information on WES financing activity.

VIE Distributions The following table presents WES distributions:
 
Six Months Ended
 
June 30,
millions
2019

 
2018

WES distributions to Anadarko (1)
$
264

 
$
203

WES distributions to third parties
255

 
238

(1) 
WES distributions to Anadarko are eliminated upon consolidation.

Financial Support Provided to VIEs Concurrent with the closing of its May 2008 IPO, WES Operating loaned the Company $260 million in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%, payable quarterly. The related interest income for WES Operating was $8 million for the six months ended June 30, 2019 and 2018. The note receivable and related interest income are eliminated in consolidation.
To reduce WES’s exposure to a majority of the commodity-price risk inherent in certain of its contracts, Anadarko had commodity price swap agreements in place with WES Operating that expired without renewal on December 31, 2018, with final settlement in the first quarter of 2019. WES recorded a capital contribution from Anadarko in its Consolidated Statement of Equity and Partners’ Capital for an amount equal to (i) the amount by which the swap price for product sales exceeds the applicable market price, minus (ii) the amount by which the swap price for product purchases exceeds the market price. WES recorded a capital contribution from Anadarko of $7 million for the six months ended June 30, 2019, and $28 million for the six months ended June 30, 2018.


APC 2019 FORM 10-Q | 34

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FINANCIAL STATEMENTS
FOOTNOTES


18. Supplemental Cash Flow Information


Additions to properties and equipment as presented within Anadarko’s cash flows from investing activities include cash payments for cost of properties, equipment, and facilities. The cost of properties includes the initial capitalization of drilling costs associated with all exploratory wells, whether or not they were deemed to have a commercially sufficient quantity of proved reserves.
The following summarizes cash paid (received) for interest and income taxes, as well as non-cash investing and financing activities:
 
Six Months Ended
 
June 30,
millions
2019

 
2018

Cash paid (received)
 
 
 
Interest, net of amounts capitalized
$
536

 
$
471

Income taxes, net of refunds
29

 
53

Non-cash investing activities
 
 
 
Fair value of properties and equipment acquired
$
1

 
$
7

Asset retirement cost additions
117

 
162

Accruals of property, plant, and equipment
748

 
1,036

Net liabilities assumed (divested) in acquisitions and divestitures

 
(97
)
Non-cash investing and financing activities
 
 
 
Finance leases
$
22

 
$

Non-cash financing activities
 
 
 
Settlement of tangible equity units
$

 
$
300


 
The following table provides a reconciliation of Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents as reported in the Consolidated Statement of Cash Flows to the line items within the Consolidated Balance Sheets:
millions
June 30, 2019
 
December 31, 2018
 
Cash and cash equivalents
 
$
1,394

 
$
1,295

Restricted cash and restricted cash equivalents included in Other Assets
 
137

 
134

Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents
 
$
1,531

 
$
1,429



Included in cash and cash equivalents is restricted cash and restricted cash equivalents of $118 million at June 30, 2019, and $139 million at December 31, 2018. Total restricted cash and restricted cash equivalents are primarily associated with certain international joint venture operations, payments of future hard-minerals royalty revenues conveyed, like-kind exchanges of property, and a judicially-controlled account related to a Brazilian tax dispute. See Note 18—Contingencies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.


35 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES


19. Segment Information


Anadarko’s business segments are separately managed due to distinct operational differences. On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its remaining midstream assets to WES. Due to this contribution and sale, the Company no longer reports an Other Midstream segment and now has two reporting segments: Exploration and Production and WES Midstream, which include their respective marketing results. Prior period amounts have been reclassified to conform to the current-period presentation.
The Exploration and Production reporting segment is engaged in the exploration, development, production, and sale of oil, natural gas, and NGLs and is advancing its Mozambique LNG project to the construction phase after announcing FID on June 18, 2019. The WES Midstream reporting segment is engaged in gathering, compressing, treating, processing, and transporting of natural gas; gathering, stabilizing, and transporting of oil and NGLs; and gathering and disposing of produced water.
To assess the performance of Anadarko’s operating segments, the chief operating decision maker analyzes Adjusted EBITDAX. The Company defines Adjusted EBITDAX as income (loss) before income taxes; interest expense; DD&A; exploration expense; gains (losses) on divestitures, net; impairments; total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives; certain items not related to the Company’s normal operations; and less net income (loss) attributable to noncontrolling interests.
The Company’s definition of Adjusted EBITDAX excludes gains (losses) on divestitures, net and exploration expense as they are not indicators of operating efficiency for a given reporting period. DD&A and impairments are excluded from Adjusted EBITDAX as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred. Adjusted EBITDAX also excludes interest expense to allow for assessment of segment operating results without regard to Anadarko’s financing methods or capital structure. Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives are excluded from Adjusted EBITDAX because these (gains) losses are not considered a measure of asset operating performance. Finally, net income (loss) attributable to noncontrolling interests is excluded from the Company’s measure of Adjusted EBITDAX because it represents earnings that are not attributable to the Company’s common stockholders.
Management believes Adjusted EBITDAX provides information useful in assessing the Company’s operating and financial performance across periods. Adjusted EBITDAX as defined by Anadarko may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) attributable to common stockholders and other performance measures, such as operating income. Below is a reconciliation of consolidated Adjusted EBITDAX to income (loss) before income taxes:

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Income (loss) before income taxes
$
(736
)
 
$
142

 
$
(474
)
 
$
442

Interest expense
249

 
237

 
502

 
465

DD&A
1,161

 
1,003

 
2,242

 
1,993

Exploration expense
90

 
94

 
139

 
262

(Gains) losses on divestitures, net
(6
)
 
(52
)
 
(1
)
 
(28
)
Impairments

 
128

 

 
147

Total (gains) losses on derivatives, net, less net cash from settlement of commodity derivatives
255

 
267

 
571

 
240

Reorganization-related charges
15

 

 
33

 

Merger transaction costs
1,042

 

 
1,042

 

Less net income (loss) attributable to noncontrolling interests
80

 
(12
)
 
191

 
41

Consolidated Adjusted EBITDAX
$
1,990

 
$
1,831

 
$
3,863

 
$
3,480






APC 2019 FORM 10-Q | 36

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FINANCIAL STATEMENTS
FOOTNOTES


19. Segment Information (Continued)

Information presented below as “Other and Intersegment Eliminations” includes corporate costs, margin on sales of third-party commodity purchases, deficiency fee expenses, results from hard-minerals royalties, net cash from settlement of commodity derivatives, and net income (loss) attributable to noncontrolling interests. The following summarizes selected financial information for Anadarko’s reporting segments:
millions
Exploration
& Production
 
WES Midstream
 
Other and
Intersegment
Eliminations
 
 
Total

Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
Sales revenues
 
$
2,852

 
$
492

 
$
12

 
$
3,356

Intersegment revenues
 
40

 
193

 
(233
)
 

Other
 
(4
)
 
70

 
14

 
80

Total revenues and other (1)
 
2,888

 
755

 
(207
)
 
3,436

Operating costs and expenses (2)
 
987

 
381

 
(4
)
 
1,364

Net cash from settlement of commodity derivatives
 

 

 

 

Other (income) expense, net (3)
 

 
(59
)
 
62

 
3

Net income (loss) attributable to noncontrolling interests
 

 

 
80

 
80

Total expenses and other
 
987

 
322

 
138

 
1,447

Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
 

 

 
1

 
1

Adjusted EBITDAX
 
$
1,901

 
$
433

 
$
(344
)
 
$
1,990

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
 
Sales revenues
 
$
2,772

 
$
358

 
$
38

 
$
3,168

Intersegment revenues
 
14

 
160

 
(174
)
 

Other
 
3

 
39

 
29

 
71

Total revenues and other (1)
 
2,789

 
557

 
(107
)
 
3,239

Operating costs and expenses (2)
 
900

 
246

 
101

 
1,247

Net cash from settlement of commodity derivatives
 

 

 
170

 
170

Other (income) expense, net (3)
 

 

 
4

 
4

Net income (loss) attributable to noncontrolling interests
 

 

 
(12
)
 
(12
)
Total expenses and other
 
900

 
246

 
263

 
1,409

Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
 

 

 
1

 
1

Adjusted EBITDAX
 
$
1,889

 
$
311

 
$
(369
)
 
$
1,831

(1) 
Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.
(2) 
Operating costs and expenses excludes exploration expense, DD&A, impairments, reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.
(3) 
Other (income) expense, net excludes reorganization-related charges since these expenses are excluded from Adjusted EBITDAX.




37 | APC 2019 FORM 10-Q

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FINANCIAL STATEMENTS
FOOTNOTES



19. Segment Information (Continued)

millions
Exploration
& Production
 
WES Midstream
 
Other and
Intersegment
Eliminations
 

Total

Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
Sales revenues
 
$
5,458

 
$
992

 
$
32

 
$
6,482

Intersegment revenues
 
91

 
365

 
(456
)
 

Other
 
4

 
132

 
41

 
177

Total revenues and other (1)
 
5,553

 
1,489

 
(383
)
 
6,659

Operating costs and expenses (2)
 
1,979

 
723

 
(98
)
 
2,604

Net cash from settlement of commodity derivatives
 

 

 
(6
)
 
(6
)
Other (income) expense, net (3)
 

 
(95
)
 
100

 
5

Net income (loss) attributable to noncontrolling interests
 

 

 
191

 
191

Total expenses and other
 
1,979

 
628

 
187

 
2,794

Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
 

 

 
(2
)
 
(2
)
Adjusted EBITDAX
 
$
3,574

 
$
861

 
$
(572
)
 
$
3,863

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
Sales revenues
 
$
5,428


$
706

 
$
60


$
6,194

Intersegment revenues
 
24


313

 
(337
)


Other
 
(6
)

80

 
40


114

Total revenues and other (1)
 
5,446


1,099

 
(237
)

6,308

Operating costs and expenses (2)
 
1,770


476

 
318


2,564

Net cash from settlement of commodity derivatives
 



 
238


238

Other (income) expense, net
 



 
(8
)

(8
)
Net income (loss) attributable to noncontrolling interests
 



 
41


41

Total expenses and other
 
1,770


476

 
589


2,835

Total (gains) losses on derivatives, net included in marketing revenue, less net cash from settlement
 



 
7


7

Adjusted EBITDAX
 
$
3,676


$
623

 
$
(819
)

$
3,480

(1) 
Total revenues and other excludes gains (losses) on divestitures, net since these gains and losses are excluded from Adjusted EBITDAX.
(2) 
Operating costs and expenses excludes exploration expense, DD&A, impairments, reorganization-related charges, and certain other operating expenses since these expenses are excluded from Adjusted EBITDAX.
(3) 
Other (income) expense, net excludes reorganization-related charges since these expenses are excluded from Adjusted EBITDAX.




APC 2019 FORM 10-Q | 38

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FINANCIAL STATEMENTS
FOOTNOTES


19. Segment Information (Continued)

The following summarizes selected financial information for Anadarko’s reporting segments:
millions
Exploration
& Production
 
WES Midstream
 
Other and
Intersegment
Eliminations
 
Total
 
June 30, 2019
 
 
 
 
 
 
 
 
Net properties and equipment
 
$
18,306

 
$
8,794

 
$
1,991

 
$
29,091

Capital expenditures (1)
 
$
1,879

 
$
571

 
$
103

 
$
2,553

Goodwill
 
$
4,343

 
$
446

 
$

 
$
4,789

 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
Net properties and equipment
 
$
18,276

 
$
8,410

 
$
1,929

 
$
28,615

Capital expenditures (1)
 
$
4,103

 
$
1,912

 
$
170

 
$
6,185

Goodwill
 
$
4,343

 
$
446

 
$

 
$
4,789


(1) 
WES Midstream includes $49 million at June 30, 2019, and $734 million at December 31, 2018, of capitalized costs incurred by Anadarko prior to the contribution and sale of midstream assets to WES.


39 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
INDEX


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read together with the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in this Form 10-Q in Part I, Item 1; the information set forth in the Risk Factors under Part II, Item 1A; the Consolidated Financial Statements and the Notes to Consolidated Financial Statements, which are included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018; and the information set forth in the Risk Factors under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Index
Page
41
43
55
58

APC 2019 FORM 10-Q | 40

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MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT OVERVIEW


MANAGEMENT OVERVIEW

Anadarko’s strategic objectives are to explore for, develop, and commercialize resources globally; ensure health, safety, and environmental excellence; focus on financial discipline, flexibility, and value creation; and demonstrate the Company’s core values in all its business activities. The Company’s revenues, operating results, cash flows from operations, capital spending, and future growth rates are highly dependent on commodity prices, which affect the value the Company receives from its sales of oil, natural gas, and NGLs.
The Company remains committed to investing within cash flow in a $50 oil-price environment. Anadarko is focused on capital efficiency and maximizing cash flow generation, and has actively managed its portfolio to focus on higher-return, oil-levered opportunities in areas where it possesses both scale and competitive advantages, namely in the Delaware and DJ basins in the U.S. onshore and in the deepwater Gulf of Mexico.
In the Delaware basin, the Company continues to build out one of the most expansive and integrated infrastructure positions in the region as it transitions toward multi-well pad development, primarily in Reeves and Loving counties. The Company also continues to leverage its minerals-interest ownership and extensive infrastructure position in the DJ basin to deliver development wells with attractive rates of return. In the Gulf of Mexico, the Company is conducting operations that are focused toward high-return oil development opportunities near the Company’s expansive infrastructure. 
The Company has returned capital directly to its investors through its quarterly cash dividend, its authorized Share-Repurchase Program, and its debt-reduction program. Since the Share-Repurchase Program was announced in 2017, the Company has repurchased 65 million shares of its common stock for $3.75 billion. Additionally, since the announcement of the debt-reduction program in 2018, the Company has completed total repayments of $1.5 billion. No additional share repurchases under the Share-Repurchase Program or debt retirements are anticipated pursuant to the terms of the Occidental Merger Agreement.

Merger On April 11, 2019, the Company entered into the Chevron Merger Agreement. On April 24, 2019, Occidental announced a proposal to acquire Anadarko and further revised its proposal on May 5, 2019. On May 6, 2019, Anadarko announced that its Board had unanimously determined that the Occidental proposal was a “Superior Proposal” as defined in the Chevron Merger Agreement and, on May 9, 2019, provided Chevron a notice terminating the Chevron Merger Agreement. Pursuant to the terms of the Chevron Merger Agreement, the Company paid the Chevron Merger Termination Fee of $1.0 billion. Also on May 9, 2019, the Company entered into the Occidental Merger Agreement, which provides that, among other things, and subject to the terms and conditions of the Occidental Merger Agreement, a wholly owned subsidiary of Occidental will be merged with and into Anadarko, with Anadarko continuing as the surviving corporation and a wholly owned subsidiary of Occidental. Pursuant to the Occidental Merger Agreement, at the effective time of the Occidental Merger and subject to potential further adjustments as specified in the Occidental Merger Agreement, Anadarko stockholders will receive $59.00 in cash and 0.2934 of a share of Occidental common stock for each share of Anadarko common stock, plus cash in lieu of any fractional Occidental shares that otherwise would have been issued. The transaction was approved by the Boards of Directors of both companies. The Occidental Merger is subject to Anadarko stockholder approval and other customary closing conditions. Anadarko is holding a special meeting of its stockholders on August 8, 2019, for holders of record as of July 11, 2019, to vote on the proposal necessary to complete the Occidental Merger. Assuming all closing conditions are satisfied, including obtaining the requisite approval from the Anadarko stockholders, Occidental and Anadarko expect the Occidental Merger to close shortly after the special meeting of Anadarko stockholders.
In addition to the Chevron Merger Termination Fee, Anadarko has incurred merger transaction costs of $42 million as of June 30, 2019.

Mozambique FID On June 18, 2019, the Company and its co-venturers in Mozambique’s Offshore Area 1 announced FID on the Anadarko-led Area 1 Mozambique LNG project. This official declaration of FID confirms the Golfinho/Atum Plan of Development is now effective with notice provided to the Government of Mozambique that all conditions precedent have been satisfied, and the project can now advance to the construction phase. The Mozambique LNG project initially consists of two LNG trains with total nameplate capacity of 12.88 MTPA to support the development of the Golfinho/Atum fields located entirely within Offshore Area 1. Subsequent to FID, the Company began entering into various long-term contractual commitments pertaining to LNG activities in Mozambique. As of June 30, 2019, the gross aggregate future payments under these contracts was approximately $2.0 billion, of which $507 million is net to Anadarko. On July 26, 2019, Anadarko issued a Notice-to-Proceed to the onshore engineering, procurement, and construction contractor for the Mozambique LNG project, resulting in additional obligations with gross aggregate future payments of approximately $8.0 billion, of which $2.1 billion is net to Anadarko. See Note 12—Commitments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information.


41 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT OVERVIEW


Midstream Asset Sale and WES Merger On February 28, 2019, Anadarko completed the previously announced contribution and sale of substantially all of its midstream assets, which consisted mainly of oil infrastructure assets in the DJ basin and oil and water infrastructure assets in the Delaware basin, to WES Operating for $4.0 billion, with $2.0 billion of cash proceeds and $2.0 billion of WES Operating common units. Immediately after the asset contribution and sale, a wholly owned subsidiary of WES merged with and into WES Operating, with WES Operating continuing as the surviving entity and a subsidiary of WES.
Significant Second Quarter 2019 Operating and Financial Activities
Total Company
The Company’s oil sales volume averaged 434 MBbls/d in the second quarter of 2019, representing a 19% increase from the second quarter of 2018, primarily due to increased sales volume from the Delaware and DJ basins, Algeria, Ghana, and the Gulf of Mexico.
The Company’s overall sales-volume product mix in the second quarter of 2019 is 59% oil and 74% liquids.
U.S. Onshore
Total sales volume averaged 484 MBOE/d in the second quarter of 2019, representing a 16% increase from the second quarter of 2018, and oil sales volume averaged 207 MBbls/d in the second quarter of 2019, representing a 23% increase from the second quarter of 2018, primarily due to continued drilling and completion activities and midstream infrastructure additions.
Gulf of Mexico
Oil sales volume averaged 130 MBbls/d in the second quarter of 2019, representing a 14% increase from the second quarter of 2018, primarily due to new wells coming online at Holstein, increased well performance at Horn Mountain, and lower downtime at various platforms in 2019 compared to 2018, partially offset by natural production declines.
Ghana
In the TEN field, a previously drilled water injection well was completed and brought online, and another water injection well was drilled.
In the Jubilee field, drilling operations were concluded on a production well and a previously drilled water injection well was completed and brought online.
Mozambique
Anadarko and its Area 1 co-venturers announced FID on the Anadarko-led Area 1 Mozambique LNG project.
As of June 30, 2019, Anadarko and its Area 1 co-venturers have successfully secured 11.1 MTPA of long-term LNG sales with key buyers in Asia and Europe, including a 17-year sale and purchase agreement with JERA Co., Inc. and CPC Corporation, Taiwan for 1.6 MTPA announced in May 2019. All of the executed long-term SPAs are now effective, with total contracted volume representing 86% of the plant’s nameplate capacity.
The Company issued a Notice-to-Proceed to the offshore engineering, procurement, construction, and installation contractor shortly after FID and issued a Notice-to-Proceed to the onshore engineering, procurement, and construction contractor in July 2019.
The Company is working to finalize project finance arrangements and site preparation activities continue as crews progress the construction of the resettlement village, the camp expansion, the airstrip, and the Palma-Afungi Highway.
Financial
The Company generated $776 million of cash flow from operations and ended the second quarter of 2019 with $1.4 billion of cash.
Pursuant to the terms of the Chevron Merger Agreement, the Company paid the Chevron Merger Termination Fee of $1.0 billion.


APC 2019 FORM 10-Q | 42

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


FINANCIAL RESULTS
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions except per-share amounts
2019

 
2018

 
2019

 
2018

Oil, natural-gas, and NGL sales
$
2,891

 
$
2,786

 
$
5,547

 
$
5,452

Gathering, processing, and marketing sales
465

 
382

 
935

 
742

Gains (losses) on divestitures and other, net
86

 
123

 
178

 
142

Revenues and other
$
3,442

 
$
3,291

 
$
6,660

 
$
6,336

Costs and expenses (1)
3,657

 
2,472

 
6,041

 
4,966

Other (income) expense
521

 
677

 
1,093

 
928

Income tax expense (benefit)
209

 
125

 
375

 
251

Net income (loss) attributable to common stockholders
$
(1,025
)
 
$
29

 
$
(1,040
)
 
$
150

Net income (loss) per common share attributable to common stockholders—diluted
$
(2.09
)
 
$
0.05

 
$
(2.13
)
 
$
0.28

Average number of common shares outstanding—diluted
491

 
505

 
491

 
512

(1) 
Includes the Chevron Merger Termination Fee of $1.0 billion. See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information on the Occidental Merger.

The following discussion pertains to Anadarko’s results of operations, financial condition, and changes in financial condition. Any increases or decreases “for the three months ended June 30, 2019,” refer to the comparison of the three months ended June 30, 2019, to the three months ended June 30, 2018, and any increases or decreases “for the six months ended June 30, 2019,” refer to the comparison of the six months ended June 30, 2019, to the six months ended June 30, 2018. The primary factors that affect the Company’s results of operations include commodity prices for oil, natural gas, and NGLs; sales volume; the cost of finding and developing such reserves; and operating costs.


43 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


REVENUES AND SALES VOLUME

E&P Sales Revenues by Product
CHART-849558641A7E1E956F6.JPG CHART-EB778EC205427ED3EC8.JPG
 
 
Oil
 
Natural Gas
 
NGLs
 


The table below illustrates the effects of changes in prices and sales volume. Price changes for the three and six months ended June 30, 2019 were primarily due to lower oil and NGL prices in 2019. Sales volume changes for the three and six months ended June 30, 2019 primarily included increases associated with continued drilling and completion activities in the Delaware and DJ basins.

Total E&P Sales Revenues
CHART-6CB985F45E790003990.JPG CHART-02FFF9B66FB8209E799.JPG


APC 2019 FORM 10-Q | 44

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


The following provides Anadarko’s sales volume for the three and six months ended June 30:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019

 
2018

 
2019

 
2018

Barrels of Oil Equivalent (MMBOE)
 
 
 
 
 
 
 
United States
59

 
50

 
115

 
100

International
9

 
8

 
17

 
16

Total barrels of oil equivalent
68

 
58

 
132

 
116

 
 
 
 
 
 
 
 
Barrels of Oil Equivalent per Day (MBOE/d)
 
 
 
 
 
 
 
United States
642

 
552

 
636

 
553

International
102

 
85

 
93

 
87

Total barrels of oil equivalent per day
744

 
637

 
729

 
640


Sales volume represents actual production volume adjusted for changes in commodity inventories as well as natural-gas production volume provided to satisfy a commitment under the Jubilee development plan in Ghana. The Company has derivative instruments in place to reduce the price risk associated with future production. For additional information, see Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q. Production of oil, natural gas, and NGLs is usually not affected by seasonal swings in demand.

45 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Oil Sales Revenues, Volume, and Average Prices

Oil Sales Revenues
CHART-1A1C7731D1AEBE41138.JPG CHART-9F09B1E886B15DF9A54.JPG
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019

 
2018

 
2019

 
2018

Oil sales revenues (millions)
$
2,470

 
$
2,265

 
$
4,566

 
$
4,392

 
 
 
 
 
 
 
 
Average price per barrel
 
 
 
 
 
 
 
United States
$
60.60

 
$
66.94

 
$
57.90

 
$
64.75

International
68.88

 
73.70

 
65.96

 
70.51

Total
$
62.45

 
$
68.43

 
$
59.58

 
$
66.03

 
 
 
 
 
 
 
 
Sales volume (MMBbls)
 
 
 
 
 
 
 
United States
32

 
27

 
61

 
52

International
8

 
7

 
16

 
15

Total
40

 
34

 
77

 
67

 
 
 
 
 
 
 
 
Sales volume per day (MBbls/d)
 
 
 
 
 
 
 
United States
337

 
284

 
335

 
286

International
97

 
80

 
88

 
82

Total
434

 
364

 
423

 
368


Oil Prices
The average oil price received decreased for the three and six months ended June 30, 2019, primarily due to concerns of oil demand weakness from a slowing global economy.

APC 2019 FORM 10-Q | 46

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Oil Sales Volume

2019 vs. 2018  The Company’s oil sales volume increased by 70 MBbls/d for the three months ended June 30, 2019, and 55 MBbls/d for the six months ended June 30, 2019, primarily due to the following:

U.S. Onshore
Sales volume for the Delaware basin increased by 20 MBbls/d for the three months ended June 30, 2019, and 24 MBbls/d for the six months ended June 30, 2019, primarily due to continued drilling and completion activities and midstream infrastructure additions in 2019.
Sales volume for the DJ basin increased by 12 MBbls/d for the three months ended June 30, 2019, and 8 MBbls/ d for the six months ended June 30, 2019, primarily due to continued drilling and completion activities in 2019.
Gulf of Mexico
Sales volume for the Gulf of Mexico increased by 15 MBbls/d for the three months ended June 30, 2019, and 13 MBbls/d for the six months ended June 30, 2019, primarily due to new wells coming online at Holstein, increased well performance at Horn Mountain, and lower downtime at various platforms in 2019 compared to 2018, partially offset by natural production declines.
International
Sales volume for Algeria increased by 8 MBbls/d for the three months ended June 30, 2019, and 6 MBbls/d for the six months ended June 30, 2019, primarily due to the size and timing of liftings.
Sales volume for Ghana increased by 9 MBbls/d for the three months ended June 30, 2019, primarily due to the timing of liftings.


47 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Natural-Gas Sales Revenues, Volume, and Average Prices

Natural-Gas Sales Revenues
CHART-FE7815214B354403097.JPG CHART-E0E0B12ACC585C71861.JPG
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019

 
2018

 
2019

 
2018

Natural-gas sales revenues (millions)
$
205

 
$
203

 
$
525

 
$
450

 
 
 
 
 
 
 
 
Average price per Mcf
$
1.93

 
$
2.15

 
$
2.50

 
$
2.38

 
 
 
 
 
 
 
 
Sales volume (Bcf) (1)
106

 
94

 
210

 
189

Sales volume per day (MMcf/d) (1)
1,167

 
1,037

 
1,159

 
1,044

(1) 
Natural-gas sales volume primarily originates in the United States.  

Natural-Gas Prices
The average natural-gas price received increased for the six months ended June 30, 2019, primarily due to increased residential and commercial demand from colder-than-normal temperatures in the western U.S. and improved price differentials in the DJ basin through April 2019. The average natural-gas price received decreased for the three months ended June 30, 2019, due to lower electric generation demand and wider DJ and Delaware basin differentials during the last two months of the second quarter.

Natural-Gas Sales Volume
2019 vs. 2018  The Company’s natural-gas sales volume increased by 130 MMcf/d for the three months ended June 30, 2019, and 115 MMcf/d for the six months ended June 30, 2019, primarily due to continued drilling and completion activities in the Delaware and DJ basins in 2019.


APC 2019 FORM 10-Q | 48

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Natural-Gas Liquids Sales Revenues, Volume, and Average Prices

Natural-Gas Liquids Sales Revenues
CHART-79A07F59C62ACEC562E.JPG CHART-AB7A8B2DC12D51E6827.JPG
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019

 
2018

 
2019

 
2018

Natural-gas liquids sales revenues (millions)
$
216

 
$
318

 
$
456

 
$
610

 
 
 
 
 
 
 
 
Average price per barrel
$
20.63

 
$
34.88

 
$
22.33

 
$
34.27

 
 
 
 
 
 
 
 
Sales volume (MMBbls) (1)
10

 
9

 
20

 
18

Sales volume (MBbls/d) (1)
115

 
100

 
113

 
98

(1) 
Approximately 95% of NGL sales volume originates in the United States.

NGL Prices
The average NGL price received decreased for the three and six months ended June 30, 2019, primarily due to higher overall NGL production as a result of infrastructure additions and lower consumption stemming from both reduced chemical plant utilization and stagnant LPG exports.

NGL Sales Volume
2019 vs. 2018  The Company’s NGL sales volume increased by 15 MBbls/d for the three and six months ended June 30, 2019, primarily due to continued drilling and completion activities and midstream infrastructure additions in the Delaware basin in 2019.



49 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Gathering, Processing, and Marketing
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Gathering, processing, and marketing sales
$
465

 
$
382

 
$
935

 
$
742

Gathering, processing, and marketing expense
274

 
252

 
530

 
489

Gathering, processing, and marketing, net
$
191

 
$
130

 
$
405

 
$
253


Gathering and processing sales include fee revenue earned by providing gathering, processing, compression, and treating services to third parties as well as revenue from the sale of NGLs and remaining residue gas extracted from natural gas purchased from third parties and processed by WES. The net margin from the sale of NGLs and residue gas for service customers when WES is acting as an agent is also included. Gathering and processing expense includes the cost of third-party natural gas purchased and processed by WES as well as transportation and other operating expenses related to WES’s costs to perform gathering and processing activities.
Marketing sales include the margin earned from purchasing and selling third-party oil and natural gas. Marketing expense includes transportation and other operating expenses related to the Company’s costs to perform third-party marketing activities.
Total gathering, processing, and marketing, net increased by $61 million for the three months ended June 30, 2019, and by $152 million for the six months ended June 30, 2019, primarily due to increased throughput volume at the West Texas Complex and the DJ Basin Complex as a result of increased drilling activities in the Delaware basin and increased third-party activity in the DJ basin.

Gains (Losses) on Divestitures and Other, net
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Gains (losses) on divestitures, net
$
6

 
$
52

 
$
1

 
$
28

Other
80

 
71

 
177

 
114

Gains (losses) on divestitures and other, net
$
86

 
$
123

 
$
178

 
$
142


Gains (losses) on divestitures and other, net includes gains (losses) on divestitures and other operating revenues, including earnings (losses) from equity investments, hard-minerals royalties, and other revenues.
Earnings (losses) from equity investments increased by $15 million for the three months ended June 30, 2019, and by $58 million for the six months ended June 30, 2019, primarily related to the Company’s investments in midstream joint ventures. During the six months ended June 30, 2018, Anadarko divested certain non-core U.S. onshore and Gulf of Mexico assets. See Note 4—Divestitures in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information.


APC 2019 FORM 10-Q | 50

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


COSTS AND EXPENSES

The following provides Anadarko’s total costs and expenses for the three and six months ended June 30:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Oil and gas operating
$
310

 
$
275

 
$
599

 
$
551

Oil and gas transportation
222

 
209

 
444

 
405

Exploration
90

 
94

 
139

 
262

Gathering, processing, and marketing (1)
274

 
252

 
530

 
489

G&A
368

 
288

 
635

 
566

Merger transaction costs (2)
1,042

 

 
1,042

 

DD&A
1,161

 
1,003

 
2,242

 
1,993

Production, property, and other taxes
182

 
201

 
381

 
391

Impairments (3)

 
128

 

 
147

Other operating expense (4)
8

 
22

 
29

 
162

Total
$
3,657

 
$
2,472

 
$
6,041

 
$
4,966

(1) 
See above explanation of gathering, processing, and marketing.
(2) 
Includes Chevron Merger Termination Fee of $1.0 billion, as well as $42 million of additional merger transaction costs. See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information on the Occidental Merger.
(3) 
See Note 5—Impairments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information on impairments.
(4) 
Includes adjustments to contingency accruals, charges for drilling rig idle time, adjustments to drilling rig termination fees, and surface owner payments.

Oil and Gas Operating Expenses
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019

 
2018

 
2019

 
2018

Oil and gas operating (millions)
$
310

 
$
275

 
$
599

 
$
551

Oil and gas operating—per BOE
4.57

 
4.75

 
4.54

 
4.76


Oil and gas operating expense increased by $48 million for the six months ended June 30, 2019, primarily due to the following:
higher U.S. onshore costs of $63 million, primarily related to increased operated and nonoperated activity in the DJ and Delaware basins
higher operated costs of $33 million in the Gulf of Mexico, primarily related to increased workover activity
lower nonoperated costs of $37 million in Ghana, primarily due to insurance reimbursement credits received in 2019 related to Jubilee turret repair
lower costs of $10 million as a result of U.S. onshore and Gulf of Mexico asset divestitures
The related costs per BOE decreased by $0.22 for the six months ended June 30, 2019, primarily due to insurance reimbursement credits received in 2019 related to Jubilee turret repair, partially offset by an increased percentage of production in the Delaware basin and higher operated costs in the Gulf of Mexico related to increased workover activity.


51 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Oil and Gas Transportation Expenses
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2019

 
2018

 
2019

 
2018

Oil and gas transportation (millions)
$
222

 
$
209

 
$
444

 
$
405

Oil and gas transportation—per BOE
3.28

 
3.61

 
3.37

 
3.50


Oil and gas transportation expense increased by $39 million for the six months ended June 30, 2019, primarily due to increased sales volumes in the Delaware and DJ basins and the Gulf of Mexico, partially offset by lower average transportation rates.

Exploration Expense
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Dry hole expense
$
3

 
$
2

 
$
3

 
$
55

Impairments of unproved properties
38

 
41

 
38


94

Geological and geophysical, exploration overhead, and other expense
49

 
51

 
98

 
113

Total exploration expense
$
90

 
$
94

 
$
139

 
$
262


Dry Hole Expense
Dry hole expense for the six months ended June 30, 2018, included $50 million related to unsuccessful drilling activities in the Gulf of Mexico.

Impairments of Unproved Properties
For discussion related to impairments of unproved properties, see Note 5—Impairments in the Notes to the Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


APC 2019 FORM 10-Q | 52

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


G&A
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

G&A
$
368

 
$
288

 
$
635

 
$
566


G&A increased by $80 million for the three months ended June 30, 2019, and $69 million for the six months ended June 30, 2019, primarily due to increases in the fair value of performance-based unit awards, reorganization-related expenses, and legal and consulting fees.
The fair value of the performance-based unit awards is calculated using a Monte Carlo simulation that incorporates several variables, including Anadarko’s historical share price and share prices of a predetermined group of peer companies to estimate the future total stockholder returns of each. Accordingly, future G&A could be higher or lower based on the outputs from the Monte Carlo simulation for the performance-based unit awards.

DD&A
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

DD&A
$
1,161

 
$
1,003

 
$
2,242

 
$
1,993


DD&A expense increased by $249 million for the six months ended June 30, 2019, primarily due to the following:
$179 million increase, primarily due to increased production in the Delaware and DJ basins and the Gulf of Mexico, partially offset by a lower DD&A rate in 2019 primarily driven by increased proved developed reserves in Ghana
$71 million increase in straight line depreciation related to additional midstream infrastructure in the Delaware and DJ basins


Other (Income) Expense

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions
2019

 
2018

 
2019

 
2018

Interest expense
$
249

 
$
237

 
$
502

 
$
465

(Gains) losses on derivatives, net (1)
254

 
436

 
567

 
471

Other (income) expense, net
18

 
4

 
24

 
(8
)
Total
$
521

 
$
677

 
$
1,093

 
$
928

(1) 
(Gains) losses on derivatives, net represents the changes in fair value of the Company’s derivative instruments as a result of changes in commodity prices and interest rates, contract modifications, and settlements. See Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


53 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS


Income Tax Expense (Benefit)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
millions except percentages
2019

 
2018

 
2019

 
2018

Income tax expense (benefit)
$
209

 
$
125

 
$
375

 
$
251

Income (loss) before income taxes
(736
)
 
142

 
(474
)
 
442

Effective tax rate
(28
)%
 
88
%
 
(79
)%
 
57
%

The Company’s effective tax rate is impacted each year by the relative pre-tax income (loss) earned by the Company’s operations in the U.S., Algeria, and the rest of the world. The Company is subject to statutory tax rates of 38% in Algeria and 35% in Ghana. These higher-taxed foreign operations as well as non-deductible Algerian exceptional profits tax for Algerian income tax purposes generally cause the Company’s effective tax rate to vary significantly from the U.S. corporate tax rate. Additionally, the Company’s effective tax rate is typically impacted by net changes in uncertain tax positions, income attributable to noncontrolling interests, state income taxes (net of federal benefit), and dispositions of non-deductible goodwill. For the three and six months ended June 30, 2019, the Company’s effective tax rate was also impacted by the non-deductible Chevron Merger Termination Fee.
In 2018, the Company filed a petition with the U.S. Tax Court to dispute IRS disallowances related to the Company’s 2015 settlement payment for the Tronox Advisory Proceeding. For additional information, see Note 11—Income Taxes in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.


APC 2019 FORM 10-Q | 54

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MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES


LIQUIDITY AND CAPITAL RESOURCES
 
Six Months Ended
 
June 30,
millions
2019

 
2018

Net cash provided by (used in) operating activities
$
1,905

 
$
2,655

Net cash provided by (used in) investing activities
(2,785
)
 
(3,056
)
Net cash provided by (used in) financing activities
980

 
(1,826
)

Overview

The Company has a variety of funding sources available, including cash, an asset portfolio that provides ongoing cash-flow-generating capacity, and the Company’s credit facility.
During the six months ended June 30, 2019, Anadarko retired $900 million of debt. Anadarko had $1.4 billion of cash at June 30, 2019 and following the expiration of the 364-Day facility in January 2019, the Company has $3.0 billion of borrowing capacity under the APC RCF. Anadarko believes that its current available cash and future operating cash flows will be sufficient to fund the Company’s operational and capital programs and its quarterly dividends. The Company continuously monitors its liquidity position and evaluates available funding alternatives in light of current and expected conditions.

Operating Activities

One of the primary sources of variability in the Company’s cash flows from operating activities is the fluctuation in commodity prices, the impact of which Anadarko partially mitigates by periodically entering into commodity derivatives. Sales-volume changes also impact cash flow but historically have not been as volatile as commodity prices. Anadarko’s cash flows from operating activities are also impacted by the costs related to operations and interest payments related to the Company’s outstanding debt.
Cash flows from operating activities were $1.9 billion for the six months ended June 30, 2019, $750 million lower compared to the same period in 2018, primarily due to the payment of the Chevron Merger Termination Fee of $1.0 billion in 2019. See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information related to the Chevron Merger Termination Fee.



55 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES


Investing Activities

Capital Expenditures  The following presents the Company’s capital expenditures:
 
Six Months Ended
 
June 30,
millions
2019

 
2018

Cash Flows from Investing Activities
 
 
 
Additions to properties and equipment (1)
$
2,691

 
$
3,277

Adjustments for capital expenditures
 
 
 
Changes in capital accruals
(74
)
 
211

Other
(64
)
 
14

Total capital expenditures
$
2,553

 
$
3,502

 
 
 
 
Exploration and Production and other capital expenditures
$
1,982

 
$
2,374

WES Midstream capital expenditures (2)
571

 
1,128

(1) 
Additions to properties and equipment as presented within Anadarko’s cash flows from investing activities include cash payments for cost of properties, equipment, and facilities. The cost of properties includes the initial capitalization of drilling costs associated with all exploratory wells, whether or not they were deemed to have a commercially sufficient quantity of proved reserves.
(2) 
WES Midstream includes $49 million at June 30, 2019, and $500 million at June 30, 2018, of capitalized costs incurred by Anadarko prior to the contribution and sale of midstream assets to WES.

The Company’s capital expenditures decreased by $949 million for the six months ended June 30, 2019. Exploration and Production capital expenditures decreased primarily due to lower development costs of $279 million driven by reduced drilling activity in the DJ and Delaware basins and the Gulf of Mexico. Exploration costs decreased by $122 million primarily related to decreased exploration activity in the U.S. onshore. WES Midstream capital expenditures decreased by $557 million primarily due to reduced development activity in the Delaware basin following the completion of significant infrastructure projects in 2018.

Investments  During the six months ended June 30, 2019, the Company made capital contributions of $171 million for equity investments, which are presented as cash flows from investing activities as a component of Other, net. These contributions were primarily associated with joint ventures for the Red Bluff and Cactus II pipelines in West Texas.



APC 2019 FORM 10-Q | 56

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MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES


Financing Activities
millions except percentages
June 30, 2019
 
December 31, 2018
 
Anadarko
 
$
10,740

 
$
11,602

WES
 
7,489

 
4,815

Total debt
 
$
18,229

 
$
16,417

Total equity
 
9,331

 
10,943

Consolidated debt to total capitalization ratio
 
66.1
%
 
60.0
%

Debt-Reduction Program  The Company commenced a $2.0 billion debt-reduction program in 2018. During the six months ended June 30, 2019, Anadarko retired $900 million of debt, bringing total repayments under the debt-reduction program to $1.5 billion. No additional debt retirements are anticipated pursuant to the terms of the Occidental Merger Agreement.

Credit Facilities

APC RCFs  The Company has a $3.0 billion senior unsecured RCF that matures in January 2023. The Company’s $2.0 billion 364-day senior unsecured RCF expired in January 2019. At June 30, 2019, Anadarko had no outstanding borrowings under the APC RCF and was in compliance with all covenants.
 
WES RCFs Effective on February 15, 2019, WES amended the maturity date of its senior unsecured RCF from February 2023 to February 2024, and upon completion of the WES Merger, expanded the borrowing capacity from $1.5 billion to $2.0 billion (WES RCF). At June 30, 2019, WES had outstanding borrowings under its RCF of $920 million at an interest rate of 3.71%, outstanding letters of credit of $5 million, available borrowing capacity of $1.1 billion, and was in compliance with all covenants.
In February 2019, WES borrowed $2.0 billion under its senior unsecured credit facility (WES Term Loan Facility) to fund substantially all of the cash portion of the consideration under the WES midstream asset contribution and sale and the payment of related transaction costs. As of June 30, 2019, the WES Term Loan Facility was anticipated to mature on February 27, 2020, the day prior to the one-year anniversary of the completion of the WES Merger. As of June 30, 2019, net cash proceeds received from future asset sales and debt or equity offerings by WES were required to be used to repay amounts outstanding under the WES Term Loan Facility. At June 30, 2019, WES had outstanding borrowings under its WES Term Loan Facility of $2.0 billion at an interest rate of 3.78% and was in compliance with all covenants.
On July 1, 2019, WES entered into an amendment to the WES Term Loan Facility to, among other things, (i) increase the commitments available under the WES Term Loan Facility from $2.0 billion to $3.0 billion, the incremental $1.0 billion of which may be drawn by WES on or before September 30, 2019, (ii) extend the maturity date from February 27, 2020 to December 31, 2020, and (iii) modify the provision requiring that all debt issuance proceeds be used to repay the WES Term Loan Facility to allow for a $1.0 billion carve out of debt offering proceeds.
See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information related to the WES Merger.

WGP RCF  In March 2019, the $35 million senior secured RCF (WGP RCF) matured following the completion of the WES Merger. See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information related to the WES Merger.


57 | APC 2019 FORM 10-Q

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MANAGEMENT’S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES


Debt Activity  Amounts in the table below do not include finance lease activity and are presented at face value.
 
 
Six Months Ended

 
 
millions
Company
June 30, 2019

 
Description
Borrowings
WES
$
2,000

 
WES Term Loan Facility (1)
 
WES
700

 
WES RCF (2)
Repayments
Anadarko
(600
)
 
8.700% Senior Notes due 2019
 
Anadarko
(300
)
 
6.950% Senior Notes due 2019
 
WES
(28
)
 
WGP RCF
(1) 
Borrowings were used to fund substantially all of the cash portion of the consideration for the WES midstream asset contribution and sale and the payment of related transaction costs.
(2) 
Borrowings were used for general partnership purposes, including capital expenditures.

See Note 9—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional information on the Company’s debt instruments.

Debt Maturities  Anadarko’s Zero Coupons can be put to the Company in October of each year, in whole or in part, for the then-accreted value of the outstanding Zero Coupons, which, if put in whole, will be $942 million at the next put date in October 2019. Anadarko’s Zero Coupons were classified as long-term debt on the Company’s Consolidated Balance Sheet at June 30, 2019, as the Company has the ability and intent to refinance these obligations using long-term debt, should a put be exercised.
For additional information on the Company’s debt instruments, see Note 9—Debt in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Derivative Instruments  For information on derivative instruments, including cash flow treatment, see Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Common Stock Dividends  Anadarko paid dividends to its common stockholders of $299 million during the six months ended June 30, 2019, and $254 million during the six months ended June 30, 2018. In February 2018, the Company increased the quarterly dividend to $0.25 per share. As part of the Company’s focus on increasing stockholder returns, the quarterly dividend increased again in November 2018 to $0.30 per share. Anadarko has paid a dividend to its common stockholders quarterly since becoming a public company in 1986.
The amount of future dividends paid to Anadarko common stockholders is determined by the Board on a quarterly basis and is based on the Company’s earnings, financial condition, capital requirements, the effect a dividend payment would have on the Company’s compliance with relevant financial covenants, and other factors deemed relevant by the Board.

Distributions to Noncontrolling Interest Owners  Distributions to noncontrolling interest owners primarily relate to WES distributions to third parties of $255 million for the six months ended June 30, 2019, and $238 million for the six months ended June 30, 2018.

RECENT ACCOUNTING DEVELOPMENTS

See Note 1—Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for discussion of recent accounting developments affecting the Company.


APC 2019 FORM 10-Q | 58

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MARKET RISK
QUANTITATIVE AND QUALITATIVE DISCLOSURES


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary market risks are attributable to fluctuations in energy prices and interest rates. These risks can affect revenues and cash flows, and the Company’s risk-management policies provide for the use of derivative instruments to manage these risks. The types of commodity derivative instruments used by the Company include futures, swaps, options, and fixed-price physical-delivery contracts. The volume of commodity derivatives entered into by the Company is governed by risk-management policies and may vary from year to year. Both exchange and over-the-counter traded derivative instruments may be subject to margin-deposit requirements, and the Company may be required from time to time to deposit cash or provide letters of credit with exchange brokers or counterparties to satisfy these margin requirements. For additional information relating to the Company’s derivative and financial instruments, see Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

COMMODITY-PRICE RISK 

The Company’s most significant market risk relates to prices for oil, natural gas, and NGLs. Management expects energy prices to remain unpredictable and potentially volatile. As energy prices decline or rise significantly, revenues and cash flows are likewise affected. In addition, a non-cash write-down of the Company’s oil and gas properties or goodwill may be required if commodity prices experience a significant decline.

Derivative Instruments Held for Non-Trading Purposes  The Company had derivative instruments in place to reduce the price risk associated with future production of 16 MMBbls of oil at June 30, 2019, with a net derivative asset position of $21 million. Based on actual derivative contractual volume, a 10% increase in underlying commodity prices would reduce the fair value of these derivatives by $30 million, while a 10% decrease in underlying commodity prices would increase the fair value of these derivatives by $36 million. However, any cash received or paid to settle these derivatives would be substantially offset by the sales value of production covered by the derivative instruments.

INTEREST-RATE RISK  

Borrowings, if any, under each of the APC RCF, the WES RCF, and the WES Term Loan Facility are subject to variable interest rates. The remaining balance of the Anadarko’s short-term and long-term borrowings has fixed interest rates. The Company has $2.9 billion of LIBOR-based obligations that are presented on the Company’s Consolidated Balance Sheets net of preferred investments in two noncontrolled entities. These obligations give rise to minimal net interest-rate risk because coupons on the related preferred investments are also LIBOR-based. While a 10% change in the applicable benchmark interest rate would not materially impact the Company’s interest cost, it would affect the fair value of outstanding fixed-rate debt.
At June 30, 2019, the Company had a net derivative liability position of $1.6 billion related to interest-rate swaps. A 10% increase (decrease) in the LIBOR interest-rate curve would decrease (increase) the aggregate fair value of outstanding interest-rate swap agreements by $105 million. However, any change in the interest-rate derivative gain or loss could be substantially offset by changes in actual borrowing costs associated with future debt issuances. For a summary of the Company’s outstanding interest-rate derivative positions, see Note 8—Derivative Instruments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

59 | APC 2019 FORM 10-Q

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CONTROLS AND PROCEDURES




Item 4.  Controls and Procedures

EVALUATION AND DISCLOSURE CONTROLS AND PROCEDURES

Anadarko’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (Exchange Act). The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective as of June 30, 2019.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in Anadarko’s internal control over financial reporting during the second quarter of 2019 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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OTHER INFORMATION




PART II

Item 1.  Legal Proceedings
The Company is a defendant in a number of lawsuits and is involved in governmental proceedings and regulatory controls arising in the ordinary course of business, including personal injury and death claims; title disputes; tax disputes; royalty claims; contract claims; contamination claims relating to oil and gas exploration, development, production, transportation, and processing; and environmental claims, including claims involving assets owned by acquired companies and claims involving assets previously sold to third parties and no longer a part of the Company’s current operations. Anadarko is also subject to various environmental-remediation and reclamation obligations arising from federal, state, tribal, and local laws and regulations. While the ultimate outcome and impact on the Company cannot be predicted with certainty, after consideration of recorded expense and liability accruals, management believes that the resolution of pending proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
WGR Operating, LP, a subsidiary of the Company, is currently in negotiations with the U.S. Environmental Protection Agency (EPA) and the State of Wyoming with respect to alleged noncompliance with the leak detection and repair requirements of the Clean Air Act at its Granger, Wyoming facilities. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matter will result in a fine or penalty in excess of $100,000.
In April 2019, Kerr-McGee Oil and Gas Onshore, LP, a subsidiary of the Company, entered into a Compliance Order on Consent with the State of Colorado’s Department of Public Health and Environment with respect to alleged noncompliance with the Colorado Air Quality Control Commission’s Regulations at certain facilities in the DJ basin in Colorado and agreed to pay a penalty of $521,400.
Kerr-McGee Gathering, LLC, a subsidiary of the Company, is currently in negotiations with the EPA and the State of Colorado with respect to alleged noncompliance with the leak detection and repair requirements of the Clean Air Act at its Fort Lupton complex in Colorado. Although management cannot predict the outcome of settlement discussions, it is likely a resolution of this matter will result in a fine or penalty in excess of $100,000.
See Note 13—Contingencies in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q, which is incorporated herein by reference, for a discussion of material legal proceedings to which the Company is a party.

61 | APC 2019 FORM 10-Q

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OTHER INFORMATION




Item 1A.  Risk Factors

Due to the Company’s proposed combination with Occidental, there have been material changes to the risk factors included under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
For a complete discussion of the Company’s risk factors, refer to the risk factors included under Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 and the following risk factors relating to the proposed combination with Occidental:

We will be subject to business uncertainties while the Occidental Merger is pending, which could adversely affect our businesses.

Uncertainty about the effect of the Occidental Merger on employees and those that do business with us may have an adverse effect on Anadarko. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Occidental Merger is completed and for a period of time thereafter, and could cause those that deal with us to delay or defer certain business decisions or seek to terminate, change or renegotiate their relationships with us. Employee retention at Anadarko may be challenging during the pendency of the Occidental Merger, as employees may experience uncertainty about their future roles. In addition, the Occidental Merger Agreement restricts us from entering into certain corporate transactions, entering into certain material contracts, making certain changes to our capital budget, incurring certain indebtedness and taking other specified actions without the consent of Occidental, and generally requires us to continue our operations in the ordinary course of business during the pendency of the Occidental Merger. These restrictions may prevent us from pursuing attractive business opportunities or adjusting our capital plan prior to the completion of the Occidental Merger.

We may be subject to lawsuits relating to the Occidental Merger, which could adversely affect our business, financial condition and operating results.

Anadarko and/or its directors and officers may be subject to lawsuits relating to the Occidental Merger. Such litigation is very common in connection with acquisitions of public companies, regardless of any merits related to the underlying acquisition. While we will evaluate and defend against any actions vigorously, the costs of the defense of such lawsuits and other effects of such litigation could have an adverse effect on our business, financial condition and operating results.

Completion of the Occidental Merger is subject to a number of conditions, and if these conditions are not satisfied or waived, the Occidental Merger will not be completed. Failure to complete, or significant delays in completing, the Occidental Merger could negatively affect the trading price of our common stock and our future business and financial results.

Completion of the Occidental Merger is subject to satisfaction or waiver of certain closing conditions, including (1) the adoption of the Occidental Merger Agreement by Anadarko stockholders, (2) the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, as amended, applicable to the Occidental Merger (the U.S. Federal Trade Commission granted early termination of the applicable waiting period on June 3, 2019), (3) the absence of any order or law prohibiting consummation of the Occidental Merger, (4) the effectiveness of the Registration Statement on Form S-4 (the Registration Statement) filed by Occidental pursuant to which the shares of Occidental common stock to be issued in connection with the Occidental Merger will be registered with the Securities and Exchange Commission (the Registration Statement was declared effective on July 11, 2019) and (5) the authorization for listing on the NYSE of the shares of Occidental common stock to be issued in connection with the Occidental Merger. There can be no assurance that the conditions to the completion of the Occidental Merger will be satisfied or waived or that the Occidental Merger will be completed.
If the Occidental Merger is not completed, or if there are significant delays in completing the Occidental Merger, the trading price of our common stock and our future business and financial results could be negatively affected, and we may be subject to several risks, including the following:
the requirement to, under certain circumstances provided in the Occidental Merger Agreement, pay Occidental a termination fee of $1.0 billion, which would have otherwise been available for general corporate purposes and other uses;
negative reactions from the financial markets, including declines in the prices of our common stock due to the fact that the current price may reflect a market assumption that the Occidental Merger will be completed;
having to pay certain transaction expenses and other costs relating to the Occidental Merger; and
the attention of our management may have been diverted to the Occidental Merger rather than our own operations and pursuit of other opportunities that could have been beneficial to us.

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OTHER INFORMATION




The Occidental Merger Agreement limits our ability to pursue alternatives to the Occidental Merger.

The Occidental Merger Agreement contains provisions that may discourage a third party from submitting a competing proposal that might result in greater value to our stockholders than the Occidental Merger, or may result in a potential competing acquirer of the Company proposing to pay a lower per share price to acquire us than it might otherwise have proposed to pay. These provisions include a general prohibition on us from soliciting or, subject to certain exceptions relating to the exercise of fiduciary duties by our Board, entering into discussions with any third party regarding any competing proposal or offer for a competing transaction.

Because the exchange ratio in the Occidental Merger Agreement is fixed and because the market price of Occidental common stock will fluctuate prior to the completion of the Occidental Merger, our stockholders cannot be sure of the market value of the Occidental common stock they will receive as consideration in the Occidental Merger.

Under the terms of the Occidental Merger Agreement, our stockholders will receive consideration consisting of a combination of $59.00 in cash and 0.2934 of a share of Occidental common stock for each share of Anadarko common stock. The exchange ratio for the stock component of the merger consideration is fixed, subject to adjustment only in limited circumstances pursuant to the Occidental Merger Agreement. There will be no adjustment to the exchange ratio to reflect changes in the market price of either Occidental common stock or our common stock between the date the Occidental Merger Agreement was signed and completion of the Occidental Merger.
Accordingly, the actual value of the stock component of any merger consideration received by our stockholders at the completion of the Occidental Merger will depend on the market value of Occidental common stock at that time. This market value may differ, possibly materially, from the market value of Occidental common stock at the time the Occidental Merger Agreement was signed or at any other time. The respective market prices of shares of Occidental and Anadarko common stock have fluctuated since the Occidental Merger Agreement was executed and will continue to fluctuate through the completion of the Occidental Merger as a result of a variety of factors, including general market and economic conditions, changes in each company’s business, operations and prospects, commodity prices, regulatory considerations, and the market’s assessment of Occidental’s business and the Occidental Merger. Such factors are difficult to predict and in many cases may be beyond the control of Occidental and us.

Material differences between the estimated and actual timing of critical events may affect the completion, cost and commencement of production from development projects.

We are involved in certain large development projects, such as the Mozambique LNG project for which the Company announced FID in June 2019. The completion of such projects may be delayed beyond our anticipated completion dates. Key factors that may affect the timing and outcome of such projects include the following:
project approvals and funding by joint-venture partners
availability of project financing
timely issuance of permits and licenses by governmental agencies or legislative and other governmental approvals
weather conditions
availability of qualified personnel
civil and political environment of, and existing infrastructure in, the country or region in which the project is located
manufacturing and delivery schedules of critical equipment
commercial arrangements for pipelines, tankers, and related equipment to transport and market hydrocarbons
Delays and differences between estimated and actual timing of critical events or our ability to secure financing on acceptable terms or at all may affect the forward-looking statements related to large development projects. If we are unable to complete such projects at their expected costs and in a timely manner, our financial condition, results of operations, or cash flows could be materially and adversely affected.


63 | APC 2019 FORM 10-Q

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OTHER INFORMATION




Risks related to acquisitions and divestitures may adversely affect our business, financial condition, and results of operations.

Any acquisition involves potential risks, including, among other things:
the validity of our assumptions about, among other things, reserves, estimated production, revenues, capital expenditures, operating expenses, and costs
the assumption of environmental, decommissioning, and other liabilities, and losses or costs for which we are not indemnified or for which our indemnity is inadequate
a failure to attain or maintain compliance with environmental, safety, and other governmental regulations
In addition, from time to time, we may sell or otherwise dispose of certain of our properties as a result of an evaluation of our asset portfolio and to help enhance our liquidity. These transactions also have inherent risks, including:
possible delays in closing
lower-than-expected sales proceeds for the disposed assets
potential post-closing claims for indemnification
Moreover, the agreements relating to these transactions contain provisions pursuant to which liabilities related to past and future operations, such as matters of litigation, environmental contingencies, royalty obligations and income taxes, have been allocated between the parties by means of liability assumptions, indemnities, escrows, trusts and similar arrangements. The magnitude of any such retained liability or indemnification obligation may be difficult to quantify at the time of the transaction and ultimately may be material. Also, as is typical in divestiture transactions, third parties may be unwilling to release the Company from guarantees or other credit support provided prior to the sale of the divested assets. In addition, one or more of the parties in these transactions could fail to perform its obligations under the agreements as a result of financial distress. For example, Sanchez Energy Corporation, which purchased substantially all of Anadarko’s Eagleford oil and natural-gas assets in 2017, recently elected to defer making an interest payment on its 6.125% Senior Notes due 2023. The indenture governing the 6.125% Senior Notes provides for a 30-day grace period, which expires on August 14, 2019, to make the scheduled interest payment. Anadarko is currently evaluating the matter. In the event that any such counterparty were to become the subject of a case proceeding under Title 11 of the U.S. Bankruptcy Code or any other insolvency law or similar law, the counterparty may not perform its obligations under the agreement and we may be responsible for the cost of the obligations assumed by the counterparties. As a result, after a divestiture, the Company may remain secondarily liable for the obligations guaranteed or supported to the extent that the buyer of the assets fails to perform these obligations, which could also result in impairments to the associated assets retained by the Company.
If any of these risks materialize, the benefits of such acquisition or divestiture may not be fully realized, if at all, and our business, financial condition, and results of operations could be negatively impacted.


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OTHER INFORMATION




Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
The following sets forth information with respect to repurchases made by the Company of its shares of common stock during the second quarter of 2019:
Period
Total number of shares purchased (1)

 
Average price paid per share

Total number of shares purchased as part of publicly announced plans or programs (2)

Approximate dollar value of shares that may yet be purchased under the plans or programs (2)(3)
 
April 1 - 30, 2019
164,077

 
$
61.07


 
$
1,250,000,064

May 1 - 31, 2019
4,298

 
$
73.08


 
$
1,250,000,064

June 1 - 30, 2019
8,825

 
$
70.40


 
$
1,250,000,064

Total
177,200

 
$
61.83


 


(1) 
During the second quarter of 2019, 177 thousand shares were repurchased related to stock received by the Company for the payment of withholding taxes due on employee share issuances under share-based compensation plans.
(2) 
For additional information, see Note 15—Stockholders’ Equity in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10‑Q.
(3) 
The Company announced a $2.5 billion Share-Repurchase Program in September 2017, which was expanded to $3.0 billion in February 2018 and $4.0 billion in July 2018. In November 2018, the program was further expanded to $5.0 billion and extended through June 30, 2020. No additional share repurchases are anticipated pursuant to the terms of the Occidental Merger Agreement. For additional information, see Note 15—Stockholders’ Equity in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10‑Q.
 

65 | APC 2019 FORM 10-Q


Item 6.  Exhibits

Exhibits designated by an asterisk (*) are filed herewith; exhibits designated by a double asterisk (**) are furnished herewith; all exhibits not so designated are incorporated herein by reference to a prior filing under File Number 1-8968 as indicated.
Exhibit Number
 
Description
2
(i)
 
2
(ii)
 
 
3
(i)
 
 
 
(ii)
 
*
10
(i)
 
*
 
(ii)
 
*

(iii)
 
*
 
(iv)
 
*
31
(i)
 
*
31
(ii)
 
**
32
 
 
 
101
.INS
 
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*
101
.SCH
 
XBRL Schema Document
*
101
.CAL
 
XBRL Calculation Linkbase Document
*
101
.DEF
 
XBRL Definition Linkbase Document
*
101
.LAB
 
XBRL Label Linkbase Document
*
101
.PRE
 
XBRL Presentation Linkbase Document
Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request

APC 2019 FORM 10-Q | 66


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
ANADARKO PETROLEUM CORPORATION
 
 
                             (Registrant)
 
 
 
 
July 30, 2019
By:
/s/ BENJAMIN M. FINK
 
 
Benjamin M. Fink
Executive Vice President, Finance and Chief Financial Officer

67 | APC 2019 FORM 10-Q
EXHIBIT 10(i)


AMENDED AND RESTATED SEVERANCE AGREEMENT
This Amended and Restated Severance Agreement (this “Agreement”) is made and entered into by and between Anadarko Petroleum Corporation (the “Company”) and R. A. Walker (the “Executive”), effective as of April 11, 2019 (the “Effective Date”). The Company and the Executive may be collectively referred to herein as the “Parties.”
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company as the President and Chief Executive Officer of the Company;
WHEREAS, the Company and the Executive previously entered into a Severance Agreement effective as of May 15, 2012 (the “Prior Agreement”); and
WHEREAS, the Company and the Executive desire to enter into this Agreement to update certain Change of Control Bonus and severance provisions under the Prior Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, the Company and the Executive agree as follows, effective as of the Effective Date:
1.Certain Definitions. In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following words and terms shall have the meanings indicated below:
(a)The term “affiliated companies” shall mean any company controlled by, controlling or under common control with the Company.
(b)Board” shall mean the Board of Directors of the Company.
(c)Change of Control” shall mean:
(A)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (A), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 1(c)(C); or
(B)Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided,

1


however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(C)Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(D)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
(d)Change of Control Date” shall mean the first date during the term of this Agreement (as provided in Section 2(a)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Change of Control Date” shall mean the date immediately prior to the date of such termination of employment.
(e)Change of Control Period” shall mean the three-year period commencing on the Change of Control Date.

2


(f)Code” shall mean the Internal Revenue Code of 1986, as amended.
(g)Compensation Committee” shall mean the Compensation and Benefits Committee of the Board (or any successor committee of the Board succeeding to the functions of the Compensation and Benefits Committee).
(h)Disability” shall mean the Executive’s disability under circumstances entitling him to benefits under the Company’s short-term or long-term disability plans; provided, however, that, during a Change of Control Period, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.
(i)Proration Fraction” shall mean a fraction, the numerator of which is the number of days in the fiscal year during which the Date of Termination (as defined in Section 4(f)) occurs through the Date of Termination, and the denominator of which is 365.
2.Term.
(a)Initial Term and Renewals. The initial term of this Agreement shall begin on the Effective Date and shall end on the second anniversary of the Effective Date; provided, however, that commencing on the date one year after the Effective Date, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, this Agreement shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 90 days prior to the Renewal Date the Company shall give notice to the Executive that the term of this Agreement shall not be so extended. Notwithstanding the provisions of the preceding sentence, if a Change of Control occurs while this Agreement is in effect, then this Agreement shall not be subject to non-renewal by the Company pursuant to the preceding sentence but, rather, (i) this Agreement shall remain in effect until the end of the Change of Control Period, (ii) the last day of the Change of Control Period shall be considered the first Renewal Date after such Change of Control (and each annual anniversary thereof shall be considered another Renewal Date), and (iii) this Agreement shall be automatically extended on the last day of the Change of Control Period, and on each anniversary of such date, so as to terminate two years from such Renewal Date unless at least 90 days prior to the Renewal Date the Company shall give notice to the Executive that the term of this Agreement shall not be so extended. If during the Change of Control Period the contingency factors occur which would entitle the Executive to the benefits as provided herein, then this Agreement shall remain in effect in accordance with its terms. The provisions of Sections 4 through 16, and those provisions necessary to interpret and enforce them, shall survive any termination of the employment relationship between the Company and the Executive that occurs while this Agreement is in effect (and any subsequent termination of this Agreement).
(b)Condition to this Agreement Becoming Effective. Notwithstanding anything in this Agreement to the contrary, if the Executive is unable to or otherwise does not assume the position of Chief Executive Officer of the Company effective as of the Effective Date, then this Agreement shall be void ab initio.


3


3.Services. The Executive agrees that he will render services to the Company (as well as any subsidiary thereof or successor thereto) during the period of his employment to the best of his ability and in a prudent and businesslike manner and that he will devote substantially the same time, efforts and dedication to his duties as heretofore devoted. Notwithstanding the foregoing, during a Change of Control Period, and excluding any periods of vacation and sick leave (collectively referred to herein as paid time off or “PTO”) to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During a Change of Control Period it shall not be a violation of this Agreement for the Executive to (a) serve on corporate, civic or charitable boards or committees, (b) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (c) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to a Change of Control Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) during the related Change of Control Period shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.
4.Termination of Employment.
(a)Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the term of this Agreement. If the Company determines in good faith that the Disability of the Executive has occurred during the term of this Agreement, it may give to the Executive written notice in accordance with Section 16(d) of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties.
(b)Retirement. The Executive’s employment shall terminate automatically upon the Executive’s Retirement during the term of this Agreement. For purposes of this Agreement, “Retirement” shall mean termination of the Executive’s employment by the Company for any reason or for no reason on or after the first day of the month next following the Executive’s 65th birthday (the “Normal Retirement Date”) or termination by the Executive of the Executive’s employment with the Company upon the satisfaction of the requirements for early retirement (the “Early Retirement Date”) under the provisions of any tax-qualified defined benefit plan of the Company or any affiliated company in which the Executive participates (the “Retirement Plan”). Notwithstanding anything to the contrary, if the Executive terminates employment for Good Reason (as defined in Section 4(d)) during a Change of Control Period, such termination shall not be deemed to be a Retirement for purposes of this Agreement only despite the fact that the Executive may qualify for early retirement under the Retirement Plan.
(c)Termination by the Company. The Company may terminate the Executive’s employment during the term of this Agreement at any time for any reason or for no reason, including for Cause or without Cause. For purposes of this Agreement, “Cause” shall mean:


4


(i)with respect to a termination of employment that does not occur during a Change of Control Period, the Executive’s (A) conviction of, or pleading no contest to or receiving adjudicated probation or deferred adjudication in connection with, a misdemeanor involving moral turpitude or of any felony, (B) willful failure to perform his duties or responsibilities, (C) engagement in conduct which is injurious (monetarily or otherwise) to the Company or any of its affiliated companies (including, without limitation, misuse of the Company’s or an affiliated company’s funds or other property), (D) engagement in business activities which are in conflict with the business interests of the Company, (E) insubordination, (F) engagement in conduct which is in violation of the Company’s safety rules or standards or which otherwise causes or may cause injury to another employee or any other person, (G) engagement in conduct which is in violation of any policy or work rule of the Company or (H) engagement in conduct which is in violation of the Company’s Code of Business Conduct and Ethics or which is otherwise inappropriate in the office or work environment; and
(ii)with respect to a termination of employment that occurs during a Change of Control Period:
(A)
the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliated companies (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or
(B)
the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or any of its affiliated companies.
For purposes of Section 4(c)(ii): (1) no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company; (2) any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company; and (3) the cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (A) or (B) of Section 4(c)(ii), and specifying the particulars thereof in detail.
(d)Termination by the Executive. The Executive’s employment with the Company may be terminated by the Executive at any time for any reason or for no reason; provided, however,

5


that the Executive may terminate his employment with the Company for Good Reason only during a Change of Control Period. For purposes of this Agreement, “Good Reason” shall mean:
(i)the assignment to the Executive during the Change of Control Period of any duties inconsistent in any material respect with the most significant of the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities held, exercised and assigned to the Executive at any time during the 120-day period immediately preceding the Change of Control Date, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii)any failure by the Company to:
(A)
provide the Executive during the Change of Control Period with an annual base salary, which shall be paid at a monthly rate, at least equal to 12 times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the 12-month period immediately preceding the month in which the Change of Control Date occurs (which annual base salary may be increased, but not decreased (nor may it be decreased after any increase thereto), and which annual base salary (as may be so increased) shall be referred to herein as the “Annual Base Salary”);
(B)
award to the Executive, for each fiscal year ending during the Change of Control Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s target annual bonus under the Company’s Annual Incentive Bonus Program, or any comparable bonus under any predecessor or successor plan, for the fiscal year in which the Change of Control Date occurs, which shall be calculated as follows: (1) the target bonus percentage as established by the Board (or the Compensation Committee) prior to the Change of Control Date for the fiscal year in which the Change of Control Date occurs, multiplied by (2) the Annual Base Salary in effect at the beginning of the applicable fiscal year (the “Recent Annual Bonus”). In the event that, prior to the Change of Control Date, the Executive’s target bonus percentage described in clause (1) of the preceding sentence has not been established by the Board (or the Compensation Committee) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan, then for purposes of this Agreement, the Executive’s Recent Annual Bonus shall be calculated by using the Executive’s target bonus percentage that applied to the fiscal year immediately preceding the fiscal year in which the Change of Control Date occurs;
(C)
pay to the Executive any Annual Bonus described in clause (B) of Section 4(d)(ii) on or before January 31 of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall

6


elect to defer the receipt of such Annual Bonus in accordance with procedures established by the Company that comply with the requirements of Code Section 409A;
(D)
provide to the Executive during the Change of Control Period opportunities to participate in incentive, savings and retirement plans, practices, policies and programs that are, in each case, not less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control Date or if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other executives of the Company and its affiliated companies;
(E)
provide to the Executive and/or the Executive’s family, as the case may be, during the Change of Control Period opportunities to participate in welfare benefit plans, practices, policies and programs (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) that are not less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other executives of the Company and its affiliated companies;
(F)
provide prompt reimbursement to the Executive during the Change of Control Period for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other executives of the Company and its affiliated companies;
(G)
provide the Executive during the Change of Control Period with fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other executives of the Company and its affiliated companies;
(H)
provide the Executive during the Change of Control Period with an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and

7


its affiliated companies at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other executives of the Company and its affiliated companies; and
(I)
provide the Executive during the Change of Control Period with PTO in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other executives of the Company and its affiliated companies;
in each case under clauses (A) through (I) of this Section 4(d)(ii) other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii)the Company requiring the Executive to be based during the Change of Control Period at any office or location that is 50 miles or more from the office or location where the Executive was based immediately preceding the Change of Control Date, or the Company requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control Date;
(iv)any purported termination by the Company of the Executive’s employment during the Change of Control Period otherwise than as expressly permitted by this Agreement; or
(v)any failure by the Company to comply with and satisfy the requirements of Section 15(b).
For purposes of this Section 4(d), any good faith determination of “Good Reason” made by the Executive shall be conclusive.
(e)Notice of Termination. If the Company or the Executive desires to terminate the Executive’s employment with the Company at any time during the term of this Agreement, it or he shall do so by providing a Notice of Termination to the other Party in accordance with Section 16(d). For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.


8


(f)Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for any reason or for no reason, the date of receipt of the Notice of Termination or (subject to Section 4(e)) any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, (iii) if the Executive’s employment is terminated by reason of Retirement, either the date on which the Company notifies the Executive of such termination (on or after the Normal Retirement Date) or the date on which the Executive ceases employment with the Company (on or after the Executive’s Early Retirement Date), as the case may be, and (iv) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.
5.Obligations of the Company upon Termination during a Change of Control Period.
(a)Good Reason; Other Than for Cause, Retirement, Death or Disability. If, during the Change of Control Period, the Company shall terminate the Executive’s employment other than for Cause, Retirement, Death or Disability or the Executive shall terminate employment for Good Reason, then the Company shall provide the Executive with the following compensation and benefits:
(i)Subject to the provisions of Sections 7 and 8, the Company shall pay to the Executive in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year) the aggregate of the amounts set forth in the following subsections (A) through (F):
(A)
the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid and (2) any accrued PTO pay to the extent not theretofore paid (the sum of the amounts described in clauses (1) and (2) shall be hereinafter referred to as the “Accrued Obligations”);
(B)
the “Change of Control Bonus,” which shall equal the product of (1) the Annual Base Salary in effect at the beginning of the fiscal year during which the Date of Termination occurs multiplied by (2) the Executive’s incentive target bonus percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan (which shall be expressed as a percentage of Annual Base Salary) for the fiscal year in which the Date of Termination occurs (provided, however, that if such incentive target bonus percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the Executive’s incentive target bonus percentage that applied to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs) (the “Next Preceding Fiscal Year”) multiplied by (3) the higher of (x) the bonus performance percentage for the portion of the fiscal year ending on the Date of Termination as determined by and in the sole discretion of the

9


Board (or the Compensation Committee) on or before the Date of Termination without negative adjustment for individual performance which for calendar year 2019 shall be the highest bonus performance percentage under the annual bonus plan and (y) the actual bonus performance percentage assigned by the Board (or the Compensation Committee) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan that applied to the Next Preceding Fiscal Year it being understood and agreed that for purposes of this Agreement, the bonus performance percentage for fiscal year 2019 shall be the highest bonus performance percentage under the Company’s Annual Incentive Bonus Program;
(C)
an amount equal to the product of (1) 2.5 and (2) the sum of (x) the Executive’s Annual Base Salary in effect immediately prior to the Date of Termination and (y) the greater of (I) the average of the annual bonuses earned by the Executive for the two most recently completed fiscal years ending prior to the Date of Termination (in each case, including any bonus or portion thereof which has been earned but deferred) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan and (II) the Executive’s target annual bonus for the year in which the Date of Termination occurs (which target annual bonus shall be deemed to be equal to the product of the amounts described in subparagraphs (1), (2) and (3) of Section 5(a)(i)(B));
(D)
an amount equal to the total value of the Executive’s Account (as defined in the Company’s Savings Restoration Plan (the “SRP”)), with such amount being the higher of (1) the value of the Executive’s Account on the Executive’s Date of Termination or (2) the value of the Executive’s Account on the Change of Control Date, in each case with “value” determined under the applicable change of control provisions in the SRP, if any. The amount payable under this Section 5(a)(i)(D) shall represent the payment of the amount due to the Executive under the SRP, and shall not be duplicative thereof. Notwithstanding the preceding provisions of this Section 5(a)(i)(D), the Company shall pay the lump sum cash payment as set forth herein above only if such payment would not be considered to be an impermissible acceleration of benefits under the SRP under Code Section 409A. In the event that the payment of the benefits payment in a lump sum would constitute an impermissible acceleration of benefits under the SRP under Code Section 409A, then the portion of the benefit payable under this Section 5(a)(i)(D) that is equal to the benefits payable under the SRP shall be payable in the same form and at the time specified in the SRP, and any excess amount determined under this paragraph shall, subject to the provisions of Sections 7 and 8, be paid in a cash lump sum within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year);


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(E)
an amount equal to the additional Company matching contributions which would have been made on the Executive’s behalf in the Company’s Employee Savings Plan (the “ESP”) (assuming continued participation on the same basis as immediately prior to the Change of Control Date), plus the additional amount of any benefit the Executive would have accrued under the SRP as a result of contribution limitations in the ESP, for the period beginning on the Date of Termination and ending on the earliest to occur of (1) the expiration of the 36-month period following the Date of Termination and (2) the Executive’s Normal Retirement Date (with the Company’s matching contributions being determined pursuant to the applicable provisions of the ESP and the SRP and based upon the Executive’s compensation (including any amounts deferred pursuant to any deferred compensation program) in effect for the 12-month period immediately prior to the Change of Control Date); and
(F)
an amount equal to the sum of the present values, as of the Date of Termination, of (1) the accrued retirement benefit payable under the Company’s Retirement Restoration Plan (or, if the Executive participates in another plan that, in the sole determination of the Company, is intended to provide benefits similar to those under the Company’s Retirement Restoration Plan, such other plan) (each referred to herein as the “RRP”) and (2) the additional retirement benefits that the Executive would have accrued under the Retirement Plan and the RRP if the Executive had continued employment until the earliest to occur of (a) the expiration of the three-year period following the Date of Termination and (b) the Executive’s Normal Retirement Date (assuming that the Executive’s compensation in each of the additional years is that required by Section 4(d)(ii)(A) and Section 4(d)(ii)(B)), with the present values being computed by discounting to the Date of Termination the accrued benefit and the additional retirement benefits payable as lump sums at an assumed benefit commencement date of the later of (i) the date the Executive attains age 55 and (ii) the date three years after the Date of Termination (but in no event later than Normal Retirement Date), at the rate of interest used for valuing lump-sum payments in excess of $25,000 for participants with retirement benefits commencing immediately under the Retirement Plan, as in effect as of the Change of Control Date with such amount to be fully offset and reduced by the amount of any additional benefit provided under the Retirement Plan or the RRP in connection with the Change of Control or the Executive’s termination of employment in connection with the Change of Control, including an amount that the Company determines, in its sole discretion, is intended to provide a similar or supplemental benefit (or, if the Executive does not participate in a Retirement Plan or RRP as of the date of the Executive’s termination of employment, such other amount as the Company may chose, in its sole discretion, to approximate this benefit);
(ii)Subject to the provisions of Sections 7 and 8, the Company shall, at its sole expense as incurred, provide the Executive with outplacement services at a cost to the Company

11


not to exceed $30,000, the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion; provided, however, that such outplacement services as provided in this Section 5(a)(ii) shall be limited to qualifying expenses incurred, or services provided by the Company, during the period ending on the last day of the second calendar year following the calendar year containing the Date of Termination, and any reimbursements by the Company shall be made not later than the last day of the third calendar year following the calendar year containing the Date of Termination;
(iii)Subject to the provisions of Sections 7 and 8, until the earlier of (A) the third anniversary of the Date of Termination and (B) the Executive’s reaching the Normal Retirement Date, the Company shall maintain in full force and effect for the Executive all life, accident, disability, medical and health care benefit plans and programs or arrangements in which the Executive was entitled to participate, at the same levels and rates, in which the Executive was participating immediately prior to the Change of Control Date, provided that the Executive’s continued participation is possible under the general terms and provisions of such plans and programs; and further provided that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. In the event that the Executive’s participation in any such plan or program is barred due to the eligibility and participation requirements of such plan or program as then in effect, the Company shall arrange to provide benefits substantially similar to those to which the Executive was entitled to receive under such plans and programs of the Company prior to the Change of Control Date. In such event, appropriate adjustments shall be made so that the after-tax value thereof to the Executive is similar to the after-tax value of the benefit plans in which participation is barred.
Benefits provided pursuant to this Section 5(a)(iii) are contractual only and are not to be considered a continuation of coverage as provided under Code Section 4980B (i.e., COBRA continuation coverage). For purposes of determining the Executive’s eligibility (but not the time of commencement of coverage) for retiree benefits pursuant to such plans and programs, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period, and, if the Executive satisfies the eligibility requirements, such benefits shall commence no later than the expiration of the three year continuation period provided in clause (A) of this Section 5(a)(iii).
The continued coverage under this Section 5(a)(iii) shall be provided at the Company’s discretion in a manner that is intended to satisfy an exception to Code Section 409A, and therefore not be treated as an arrangement providing for nonqualified deferred compensation that is subject to taxation under Code Section 409A, including (1) providing such benefits on a nontaxable basis to Executive, (2) providing for the reimbursement of medical expenses incurred during the period of time during which Executive would be entitled to continuation coverage under a group health plan of the Company under Code Section 4980B (i.e., COBRA continuation coverage), (3) providing that such benefits constitute the reimbursement or provision of in-kind benefits payable at a specified time or pursuant to a fixed schedule as permitted under Code Section 409A and the authoritative guidance thereunder, or (4) such other manner as determined by the Company in compliance with Code Section 409A; and

12


(iv)To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).
(b)Death. If the Executive’s employment is terminated by reason of the Executive’s death during a Change of Control Period, the Company shall have no further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations, the Prorated Change of Control Bonus and the timely payment or provision of Other Benefits. Accrued Obligations and the Prorated Change of Control Bonus shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year). With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of other senior executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other senior executives and their beneficiaries at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other senior executives of the Company and its affiliated companies and their beneficiaries.
(c)Disability. Subject to the provisions of Sections 7 and 8, if the Executive’s employment is terminated by reason of the Executive’s Disability during the Change of Control Period, the Company shall have no further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations, the Prorated Change of Control Bonus and the timely payment or provision of Other Benefits. Accrued Obligations and the Prorated Change of Control Bonus shall be paid to the Executive in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year). With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 5(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other senior executives and their families at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other senior executives of the Company and its affiliated companies and their families.
(d)Retirement. Subject to the provisions of Sections 7 and 8, if the Executive’s employment is terminated by reason of Retirement during the Change of Control Period, the Company shall have no further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations, the Prorated Change of Control Bonus and the timely payment

13


or provision of Other Benefits. In such case, all Accrued Obligations and the Prorated Change of Control Bonus shall be paid to the Executive in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year).
(e)Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Change of Control Period, the Company shall have no further obligations to the Executive under this Agreement, other than the obligation to pay to the Executive (i) the Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid. Subject to the provisions of Sections 7 and 8, if the Executive voluntarily terminates employment during the Change of Control Period, excluding a termination for Good Reason, the Company shall have no further obligations to the Executive under this Agreement, other than for payment of Accrued Obligations, the Prorated Change of Control Bonus and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations and the Prorated Change of Control Bonus shall be paid to the Executive in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year).
6.Obligations of the Company upon Termination that does not occur within a Change of Control Period.
(a)Termination by the Company other than for Cause, Retirement, Death or Disability. If, at any time other than during a Change of Control Period, the Company shall terminate the Executive’s employment other than for Cause, Retirement, Death or Disability, then the Company shall provide the Executive with the following compensation and benefits:
(i)Subject to the provisions of Sections 7 and 8, the Company shall pay to the Executive the amounts set forth in the following subsections (A) through (C):
(A)
the Accrued Obligations, which shall be paid in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year);
(B)
the “Prorated Non-Change of Control Bonus,” which shall be in an amount equal to the product of (1) the Proration Fraction multiplied by (2) the Executive’s annual base salary in effect at the beginning of the fiscal year during which the Date of Termination occurs multiplied by (3) the Executive’s incentive target bonus percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan (which shall be expressed as a percentage of the Executive’s annual base salary) for the fiscal year in which the Date of Termination occurs (provided, however, that if such incentive target bonus percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the Executive’s incentive target bonus percentage that applied

14


to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs) multiplied by (4) the actual bonus performance percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan for the fiscal year in which the Date of Termination occurs as determined and certified by the Board (or the Compensation Committee) following the fiscal year without adjustment for individual performance. The Prorated Non-Change of Control Bonus shall be paid in a lump sum in cash within 10 days after the determination of such amount by the Board (or the Compensation Committee), but not later than March 15 of the calendar year following the calendar year in which the Date of Termination occurs; and
(C)
an amount equal to the product of (1) the lesser of (x) 2.0 and (y) the number of years (with partial years expressed as a fraction thereof) remaining until the Executive reaches the Normal Retirement Date and (2) the sum of (x) the Executive’s annual base salary in effect immediately prior to the Date of Termination and (y) the Executive’s target annual bonus for the year in which the Date of Termination occurs (which target annual bonus shall be deemed to be equal to the product of (I) the Executive’s annual base salary in effect at the beginning of the fiscal year during which the Date of Termination occurs multiplied by (II) the Executive’s incentive target bonus percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan (which shall be expressed as a percentage of the Executive’s annual base salary) for the fiscal year in which the Date of Termination occurs (provided, however, that if such incentive target bonus percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the Executive’s incentive target bonus percentage that applied to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs) multiplied by (III) the bonus performance percentage assigned by the Board (or the Compensation Committee) for target performance under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan for the fiscal year in which the Date of Termination occurs (provided, however, that if such bonus performance percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the bonus performance percentage assigned by the Board (or the Compensation Committee) for target performance under such plan that applied to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs)). The amount described in this Section 6(a)(i)(C) shall be paid in a lump sum in cash within 20 days after the Date of Termination (provided that such payment shall be made in the second taxable year if such 20-day period begins in one taxable year and ends in a subsequent taxable year);


15


(ii)Subject to the provisions of Sections 7 and 8, until the earlier of (A) the date that is six months after the Date of Termination and (B) the Executive’s reaching the Normal Retirement Date, the Executive shall be permitted to participate in the Company’s medical and dental care benefit plans and programs or arrangements at active employee levels and rates, provided that the Executive’s continued participation is possible under the general terms and provisions of such plans and programs; and further provided that if the Executive becomes reemployed with another employer and is eligible to receive medical or dental benefits under another employer-provided plan, the medical and dental benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. In the event that the Executive’s participation in any such plan or program is barred due to the eligibility and participation requirements of such plan or program as then in effect, the Company shall arrange to provide benefits substantially similar to those to which the Executive was entitled to receive under such plans and programs of the Company. In such event, appropriate adjustments shall be made so that the after-tax value thereof to the Executive is similar to the after-tax value of the benefit plans in which participation is barred.
After the expiration of the continuation of coverage period referred to in the preceding paragraph and until the earlier of (A) the date that is two years after the Date of Termination, (B) the Executive’s reaching the Normal Retirement Date and (C) the occurrence of an event that results in the loss of COBRA continuation coverage under Code Section 4980B, the Company shall reimburse the Executive on a monthly basis for the cost of COBRA continuation coverage elected by the Executive for existing group medical and dental plan coverage.
The continued coverage under this Section 6(a)(ii) shall be provided at the Company’s discretion in a manner that is intended to satisfy an exception to Code Section 409A, and therefore not be treated as an arrangement providing for nonqualified deferred compensation that is subject to taxation under Code Section 409A, including (1) providing such benefits on a nontaxable basis to Executive, (2) providing for the reimbursement of medical expenses incurred during the period of time during which Executive would be entitled to COBRA continuation coverage, (3) providing that such benefits constitute the reimbursement or provision of in-kind benefits payable at a specified time or pursuant to a fixed schedule as permitted under Code Section 409A and the authoritative guidance thereunder, or (4) such other manner as determined by the Company in compliance with Code Section 409A; and
(iii)To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive the Other Benefits.
(b)Any Other Termination. If, at any time other than during a Change of Control Period, the Executive’s employment with the Company shall terminate for any reason (other than as described in Section 6(a)) or for no reason, the Company shall have no further obligations to the Executive under this Agreement, other than the obligation to pay to the Executive (i) the Executive’s annual base salary through the Date of Termination, (ii) the amount of any compensation previously deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid.
7.Matters Relating to Code Section 409A. Notwithstanding any provision in this Agreement to the contrary, if the payment of any benefit hereunder (including, without limitation,

16


any severance benefit) would be subject to additional taxes and interest under Code Section 409A because the timing of such payment is not delayed as provided in Code Section 409A for a “specified employee,” then, if the Executive is a “specified employee” under Code Section 409A, any such payment that the Executive would otherwise be entitled to receive during the first six months following the Date of Termination shall be accumulated and paid or provided, as applicable, on the 10th day (or the next succeeding day if the 10 day is a holiday or weekend) after the date that is six months following the Date of Termination, or such earlier date upon which such amount can be paid or provided under Code Section 409A without being subject to such additional taxes and interest. For all purposes of this Agreement, the Executive shall be considered to have terminated employment with the Company when the Executive incurs a “separation from service” with the Company within the meaning of Code Section 409A(a)(2)(A)(i). The Executive agrees to be bound by the Company’s determination of its “specified employees” (as defined in Code Section 409A). Any payment or benefit (including any severance payment or benefit) provided under this Agreement to which Code Section 409A applies that constitutes a reimbursement of expenses incurred by the Executive or the provision of an in-kind benefit to the Executive shall be subject to the following: (a) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during the Executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; (b) the reimbursement of an eligible expense shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred; and (c) the right to reimbursement or to receive an in-kind benefit shall not be subject to liquidation or exchange by the Executive for another payment or benefit.
8.Release. As a condition to the receipt of any compensation or benefits described in Section 5 or Section 6 (in each case, other than Accrued Obligations and Other Benefits and other than in the case of the Executive’s death), the Executive shall execute and deliver, and not revoke, a release agreement in the form attached hereto as Exhibit A (with such changes thereto as the Company may determine to reflect the circumstances relating to the Executive’s termination of employment and any changes required by law). The release described in the preceding sentence must be effective and irrevocable by the earlier of (a) the 60th day after the Date of Termination or (b) the first day any cash compensation payment is due to be paid to the Executive under the provisions of Section 5 or Section 6 (which due date shall be determined after taking into consideration any payment delay required under Section 7).
9.Non-exclusivity of Rights. Subject to Section 16(i), nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 16(i) and Section 16(j), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies, including, but not limited to, the Company’s Management Life Insurance Plan, at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Without limiting the generality of the foregoing, there shall be no duplication of any of the payments or benefits described in Section 5 or Section 6, and payments under the applicable provisions of Section 5(a)(i) shall be in full satisfaction of the

17


amounts otherwise payable under the SRP, the RRP and the executive deferred compensation plans, respectively.
10.Full Settlement; Legal Fees. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 5(a)(iii) and Section 6(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other employment. Except as provided in Section 14(f), the Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability or entitlement under, any provision of this Agreement or any guarantee of performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872(f)(2)(A).
11.Parachute Payment Limitation. Anything in this Agreement to the contrary notwithstanding, if the Executive is a “disqualified individual” (as defined in Section 280G of the Code), and the payments and benefits provided in for in this Agreement, together with any other payments and benefits which the Executive has the right to receive (collectively, the “Payments”), would constitute a “parachute payment” (as defined in Section 280G of the Code), then the Payments shall be either (a) reduced (but not below zero) so that the aggregate present value of the Payments will be one dollar ($1.00) less than three times the Executive’s “base amount” (as defined in Section 280G of the Code) and so that no portion of the Payments shall be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full, whichever produces the better net after-tax result for the Executive (taking into account any applicable excise tax under Section 4999 of the Code and any applicable income tax). The reduction of Payments, if any, shall be made by reducing the Payments in the reverse order in which the Payments would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time). The determination as to whether any such reduction in the Payments is necessary shall be made by the Company in good faith, and such determination shall be conclusive and binding on the Executive. If a reduced Payment is made or provided and, through error or otherwise, that Payment, when aggregated with other payments and benefits from the Company (or its affiliated companies) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three (3) times the Executive’s base amount, then the Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made.
12.Statements Concerning the Company or the Executive. The Executive and the Company and its affiliated companies shall refrain from any criticisms or disparaging comments about each other or in any way relating to the Executive’s employment or separation from employment; provided, however, that nothing in this Agreement shall apply to or restrict in any way the communication of information by the Company or any of its affiliated companies or the

18


Executive to any state or federal law enforcement agency or require notice to the Company or the Executive thereof, and none of the Executive, the Company or any of its affiliated companies will be in breach of the covenant contained above solely by reason of testimony or disclosure which is compelled by applicable law or regulation or process of law. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded under this provision are in addition to any and all rights and remedies otherwise afforded by law.
13.Confidentiality.
(a)Confidential Information. For purposes of this Section 13, the term “Company” shall include the Company and its affiliated companies. During the course of the Executive’s employment with the Company, the Company will (i) disclose or entrust to the Executive, and provide the Executive with access to, Confidential Information, (ii) place the Executive in a position to develop business goodwill belonging to the Company, and (iii) disclose or entrust to the Executive business opportunities to be developed for the Company. For purposes of this Agreement, “Confidential Information” means any and all confidential or proprietary information and materials, as well as all trade secrets, belonging to the Company, its partners, its customers, or other third parties who furnished such information, materials, and/or trade secrets to the Company with expectations of confidentiality. Confidential Information includes, regardless of whether such information or materials are expressly identified or marked as confidential or proprietary, and whether or not patentable: (A) technical information and materials of the Company, its partners, its customers, or other third parties; (B) business information and materials of the Company, its partners, its customers or other third parties; (C) any information or material that gives the Company an advantage with respect to its competitors by virtue of not being known by those competitors; and (D) other valuable, confidential information and materials and/or trade secrets of the Company, its partners, its customers, or other third parties. Notwithstanding the foregoing, Confidential Information shall not include information that (1) is already properly in the public domain or enters the public domain with the express consent of the Company, or (2) is intentionally made available by the Company to third parties without any expectation of confidentiality.
(b)Protection of Confidential Information. (i) The Executive acknowledges that Confidential Information has been and will be developed or acquired by the Company through the expenditure of substantial time, effort and money and provides the Company with an advantage over competitors who do not know or use such Confidential Information. The Executive further acknowledges and agrees that the nature of the Confidential Information which the Company shall provide the Executive during the Executive’s employment would make it difficult, if not impossible, for the Executive to perform in a similar capacity for a business competitive with the Company without disclosing or utilizing Confidential Information.
(ii)During and following the Executive’s employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any Confidential Information except to the extent necessary to carry out the Executive’s duties on behalf of the Company. The Executive agrees to give the Company notice of any and all attempts to compel disclosure of any Confidential Information within one business day after the Executive is informed that such disclosure is being, or will be, compelled. Such written notice shall include a description of the information to be disclosed, the court, government agency, or

19


other forum through which the disclosure is sought, and the date by which the Confidential Information is to be disclosed, and shall contain a copy of the subpoena, order or other process used to compel disclosure.
(iii)Upon the termination of the Executive’s employment with the Company, the Executive promises to promptly return to the Company all Confidential Information, and all documents and materials (including electronically stored information) in the Executive’s possession, custody or control that constitutes or reflects Confidential Information.
(iv)In no event shall an asserted violation of the provisions of this Section 13 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
14.Restriction on Solicitation of Employees.
(a)In General. For purposes of this Section 14, the term “Company” shall include the Company and its affiliated companies. The Executive agrees to the provisions of this Section 14 in consideration of the Company’s promise to provide the Executive with Confidential Information, and so as to protect the Company’s legitimate business interests (including the goodwill with which the Executive will be associated, and that the Executive will help build, during the Executive’s employment) and to enforce the Executive’s promises regarding Confidential Information contained in Section 13 of this Agreement. Notwithstanding any provision in this Section 14 to the contrary, the obligations described in this Section 14 shall not apply during any period after the date of the Executive’s termination of employment if the Executive is entitled to the benefits described in Section 5 in connection with such termination of employment.
(b)Non-Solicitation of Employees. During the period of the Executive’s employment with the Company and thereafter for a period of one year immediately following the termination of such employment for whatever reason, the Executive will not engage or employ, or solicit or contact with a view to the engagement or employment of, any person who is an officer or employee of the Company and was employed in that capacity at any time during the last 12 months of the Executive’s employment with the Company.
(c)Value and Reasonableness. The Executive agrees that the Company’s substantial investments in its business interests, goodwill, and Confidential Information are worthy of protection, and that the Company’s need for the protection afforded by this Section 14 is greater than any hardship the Executive might experience by complying with its terms. The Executive agrees that the limitations as to time and scope of activity to be restrained contained in this Agreement are reasonable and are not greater than necessary to protect the Confidential Information, goodwill and other legitimate business interests of the Company.
(d)Reformation. The Executive and the Company agree that the foregoing restrictions are reasonable under the circumstances and that the limitations as to time and scope of activity contained in this Section 14 do not impose a greater restraint than necessary to protect the Company’s Confidential Information and legitimate business interests. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly

20


broad as to time, or otherwise unenforceable, the Parties intend for the restrictions in this Section 14 to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. By agreeing to this contractual modification prospectively at this time, the Company and the Executive intend to make this provision enforceable under the law or laws of all applicable states and other jurisdictions so that the entire agreement not to solicit employees and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal.
(e)Enforcement and Remedies. The Executive acknowledges that the Executive’s violation or threatened or attempted violation of the covenants contained in this Section 14 will cause irreparable harm to the Company and that money damages would not be sufficient remedy for any breach of this Section 14. The Executive agrees that the Company shall be entitled as a matter of right to specific performance of the covenants contained in this Section 14, including entry of an ex parte temporary restraining order in state or federal court, preliminary and permanent injunctive relief against activities in violation of this Section 14, or both, or other appropriate judicial remedy, writ or order, in any court of competent jurisdiction, restraining any violation or further violation of such agreements by the Executive or others acting on the Executive’s behalf, without any showing of irreparable harm and without any showing that the Company does not have an adequate remedy at law. Such remedies shall not be deemed the exclusive remedies for a breach of this Section 14 but shall be in addition to all remedies available at law or in equity, including the recovery of damages from the Executive and the Executive’s agents.
(f)Attorneys’ Fees. In the event that it is necessary to employ the services of an attorney to enforce the restrictions set forth in this Section 14, the Company shall be entitled to recover from the Executive all attorneys’ fees, costs and expenses incurred by the Company in connection therewith.
15.Successors.
(a)Assignment. This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(b)Assumption by the Company’s Successor. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
16.Miscellaneous.
(a)Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws.


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(b)Headings. The Section and subsection headings and captions of this Agreement have been inserted for purposes of convenience and shall not be used for interpretive purposes.
(c)Amendment. This Agreement may not be amended or modified otherwise than by a written agreement executed by the Parties or their respective successors and legal representatives.
(d)Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other Party or by registered or certified mail, return receipt requested, postage prepaid, addressed, in the case of the Executive, to the Executive’s home address registered with the Company or, if to the Company, to the attention of the General Counsel at the Company’s home office address or to such other address as either Party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(e)Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(f)Withholding. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(g)No Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 4, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(h)At Will Employment. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and the Executive’s employment may be terminated by either the Executive or the Company at any time and for any reason or for no reason.
(i)Officer Severance Plan. The Executive acknowledges and agrees that, from and after the Effective Date, he shall not be a participant in, and he hereby waives any right to participate in, the Officer Severance Plan, or any successor plan thereto designed to provide similar benefits.
(j)Entire Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the Parties with respect to the subject matter hereof. Without limiting the scope of the preceding sentence, as of the Effective Date, all prior understandings and agreements between the Parties relating to the subject matter hereof (including, without limitation, the Change of Control Contract) are hereby null and void and of no further force and effect.

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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused this Agreement to be executed in its name and on its behalf, to be effective as of the Effective Date.
EXECUTIVE
 
 
 
 
By:
/s/ R. A. WALKER
Name:
R.A. Walker
 
 
Date:
April 11, 2019
 
 
ANADARKO PETROLEUM CORPORATION
 
 
 
 
By:
/s/ AMANDA M. MCMILLIAN
Name:
Amanda M. McMillian
Title:
Executive Vice President and General
 
Counsel
 
 
Date:
April 11, 2019


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EXHIBIT A
TO
AMENDED AND RESTATED SEVERANCE AGREEMENT DATED EFFECTIVE AS OF April 11, 2019

RELEASE AGREEMENT

This Release Agreement (this “Agreement”) constitutes the release agreement referred to in that certain Amended and Restated Severance Agreement (the “Severance Agreement”) dated effective as of April 11, 2019, and as may be amended thereafter, by and between Anadarko Petroleum Corporation (the “Company”) and R. A. Walker (the “Executive”).
1.General Release.
(a)For good and valuable consideration, including the Company’s provision of certain payments and benefits to the Executive in accordance with Sections 5 and 6 of the Severance Agreement, the Executive hereby releases, discharges and forever acquits the Company, its affiliates and subsidiaries, the past, present and future stockholders, members, partners, directors, managers, employees, agents, attorneys, heirs, legal representatives, successors and assigns of the foregoing, as well as all employee benefit plans maintained by the Company or any of its affiliates or subsidiaries and all fiduciaries and administrators of any such plan, in their personal and representative capacities (collectively, the “Released Parties”), from liability for, and hereby waives, any and all claims, rights, damages, or causes of action of any kind related to the Executive’s employment with any Released Party, the termination of such employment, and any other acts or omissions related to any matter on or prior to the date of this Agreement (collectively, the “Released Claims”).
(b)The Released Claims include without limitation those arising under or related to: (i) the Age Discrimination in Employment Act of 1967; (ii) Title VII of the Civil Rights Act of 1964; (iii) the Civil Rights Act of 1991; (iv) sections 1981 through 1988 of Title 42 of the United States Code; (v) the Employee Retirement Income Security Act of 1974, including, but not limited to, sections 502(a)(1)(A), 502(a)(1)(B), 502(a)(2), and 502(a)(3) to the extent the release of such claims is not prohibited by applicable law; (vi) the Immigration Reform Control Act; (vii) the Americans with Disabilities Act of 1990; (viii) the National Labor Relations Act; (ix) the Occupational Safety and Health Act; (x) the Family and Medical Leave Act of 1993; (xi) any state or federal anti-discrimination law; (xii) any state or federal wage and hour law; (xiii) any other local, state or federal law, regulation or ordinance; (xiv) any public policy, contract, tort, or common law; (xv) costs, fees, or other expenses including attorneys’ fees incurred in these matters; (xvi) any employment contract, incentive compensation plan or stock option plan with any Released Party or to any ownership interest in any Released Party except as expressly provided in the Severance Agreement, any stock option agreement, any stockholders agreement or other equity compensation agreement between the Executive and the Company; and (xvii) compensation or benefits of any kind from any Released Party not expressly set forth in the Severance Agreement or any such stock option or other equity compensation agreement.
(c)In no event shall the Released Claims include (i) any claim which arises after the date of this Agreement, (ii) any claims for the payments and benefits payable to the

A-1


Executive under Sections 5 and 6 of the Severance Agreement, (iii) any claims to the equity interests in the Released Parties that the Executive holds as of the date of this Agreement which remain subject to the terms and conditions, as applicable, of any specific equity award agreement between the Executive and a Released Party, (iv) any claim for or right to indemnification under the policies or governing instruments of the Released Parties and for coverage under any directors and officers liability insurance policies maintained by the Released Parties, and (v) any claim with respect to vested and accrued benefits under the Anadarko Petroleum Corporation 2008 Omnibus Incentive Compensation Plan, the Anadarko Petroleum Corporation 1999 Stock Incentive Plan, the Anadarko Petroleum Corporation 1998 Director Stock Plan, the Anadarko Employee Savings Plan, the Anadarko Retirement Plan, the Anadarko Petroleum Corporation Savings Restoration Plan, the Anadarko Retirement Restoration Plan, the Anadarko Petroleum Corporation Deferred Compensation Plan and [to be added: other applicable plans, if any].
4.Notwithstanding this release of liability, nothing in this Agreement prevents the Executive from filing any non-legally waivable claim (including a challenge to the validity of this Agreement) with the Equal Employment Opportunity Commission (“EEOC”) or comparable state or local agency or participating in any investigation or proceeding conducted by the EEOC or comparable state or local agency; however, the Executive understands and agrees that the Executive is waiving any and all rights to recover any monetary or personal relief or recovery as a result of such EEOC, or comparable state or local agency proceeding or subsequent legal actions.
(e)This Agreement is not intended to indicate that any such claims exist or that, if they do exist, they are meritorious. Rather, the Executive is simply agreeing that, in exchange for the consideration recited in the first sentence of Section 1(a) of this Agreement, any and all potential claims of this nature that the Executive may have against the Released Parties, regardless of whether they actually exist, are expressly settled, compromised and waived.
(f)By signing this Agreement, the Executive is bound by it. Anyone who succeeds to the Executive’s rights and responsibilities, such as heirs or the executor of the Executive’s estate, is also bound by this Agreement. This release also applies to any claims brought by any person or agency or class action under which the Executive may have a right or benefit. THIS RELEASE INCLUDES MATTERS ATTRIBUTABLE TO THE SOLE OR PARTIAL NEGLIGENCE (WHETHER GROSS OR SIMPLE) OR OTHER FAULT, INCLUDING STRICT LIABILITY, OF ANY OF THE RELEASED PARTIES.
2.Covenant Not to Sue; Executive’s Representation. The Executive agrees not to bring or join any lawsuit against any of the Released Parties in any court relating to any of the Released Claims. The Executive represents that the Executive has not brought or joined any claim, lawsuit or arbitration against any of the Released Parties in any court or before any administrative agency or arbitral authority and has made no assignment of any rights the Executive has asserted or may have against any of the Released Parties to any person or entity, in each case, with respect to any Released Claims.
3.Certain Continuing Obligations. The Executive acknowledges and agrees that (a) the provisions of Sections 12, 13 and 14 of the Severance Agreement shall survive the termination of the employment relationship, the termination of the Severance Agreement, and the execution of

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this Agreement, and (b) the Executive shall continue to honor his post-employment obligations set forth in such provisions of the Severance Agreement.
4.    Acknowledgments. By executing and delivering this Agreement, the Executive acknowledges that:
(a)The Executive has carefully read this Agreement;
(b)The Executive has had at least [twenty-one (21)] [forty-five (45)] days to consider this Agreement before the execution and delivery hereof to the Company [Add if 45 days applies: , and the Executive acknowledges that attached to this Agreement is a list provided to the Executive by the Company of (i) the job titles and ages of all employees selected for participation in the employment termination or exit incentive program pursuant to which the Executive is being offered this Agreement, (ii) the job titles and ages of all employees in the same job classification or organizational unit who were not selected for participation in the program, and (iii) information about the unit affected by the program, including any eligibility factors for such program and any time limits applicable to such program];
(c)The Executive has been and hereby is advised in writing that the Executive may, at the Executive’s option, discuss this Agreement with an attorney of the Executive’s choice and that the Executive has had adequate opportunity to do so; and
(d)The Executive fully understands the final and binding effect of this Agreement; the only promises made to the Executive to sign this Agreement are those stated in the Severance Agreement and herein; and the Executive is signing this Agreement voluntarily and of the Executive’s own free will, and that the Executive understands and agrees to each of the terms of this Agreement.
5.Revocation Right. The Executive may revoke this Agreement within the seven-day period beginning on the date the Executive signs this Agreement (such seven-day period being referred to herein as the “Release Revocation Period”). To be effective, such revocation must be in writing signed by the Executive and must be delivered to the General Counsel of the Company before 11:59 p.m., Houston, Texas time, on the last day of the Release Revocation Period. This Agreement is not effective, and no consideration shall be paid to the Executive, until the expiration of the Release Revocation Period without the Executive’s revocation. If an effective revocation is delivered in the foregoing manner and timeframe, this Agreement shall be of no force or effect and shall be null and void ab initio.
[Signature page follows.]



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Executed on this _____ day of __________,____.
 
R.A. Walker
STATE OF __________    §
§
COUNTY OF __________    §
BEFORE ME, the undersigned authority, personally appeared R. A. Walker, by me known or who produced valid identification as described below, who executed the foregoing instrument and acknowledged before me that he subscribed to such instrument on this _____ day of __________, ____.
 
NORARY PUBLIC in and for the
State of
 
My Commission Expires:
 
Identification produced:
 


A-4
EXHIBIT 10(ii)


AMENDED AND RESTATED
KEY EMPLOYEE CHANGE OF CONTROL CONTRACT
This Amended and Restated Key Employee Change of Control Contract (the “Agreement”) is made and entered into by and between Anadarko Petroleum Corporation, a Delaware corporation (the “Company”) and Robert G. Gwin (the “Executive”), effective as of April 11, 2019.
WHEREAS, The Board of Directors of the Company (the “Board”) previously determined that it was in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement;
WHEREAS, the Company and the Executive previously entered into a Key Employee Change of Control Contract (the “Original Agreement”) effective January 16, 2006, and the Original Agreement was amended on December 31, 2008 (the “First Amendment”); and
WHEREAS, the Company and the Executive desire to enter into this Agreement to update certain Change of Control bonus and severance provisions under the Original Agreement as amended by the First Amendment.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.Certain Definitions.
(a)The “Change of Control Date” shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Change of Control Date” shall mean the date immediately prior to the date of such termination of employment.
(b)The “Change of Control Period” shall mean the period commencing on the Effective Date hereof and ending on the third anniversary of the Effective Date; provided, however, that commencing on the date one year after the Effective Date, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Change of Control Period



shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 90 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.
2.Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:
(a)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (4) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 2(c); or
(b)Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c)Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business

2


Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
3.Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Change of Control Date and ending on the third anniversary of such date (the “Employment Period”).
4.Terms of Employment.
(a)Position and Duties.
(i)During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned to the Executive at any time during the 120-day period immediately preceding the Change of Control Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Change of Control Date or any office or location less than 35 miles from such location.
(ii)During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Change of Control Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Change of Control Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.
(b)Compensation.
(i)Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which

3


has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Change of Control Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Change of Control Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.
(ii)Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s target annual bonus under the Company’s Annual Incentive Bonus Plan, or any comparable bonus under any predecessor or successor plan, for the fiscal year in which the Change of Control Date occurs, which shall be calculated as follows: (A) the target bonus percentage as established by the Board prior to the Change of Control Date for the fiscal year in which the Change of Control Date occurs, multiplied by (B) the Executive’s Annual Base Salary (the “Recent Annual Bonus”). In the event that, prior to the Change of Control Date, the Executive’s target bonus percentage has not been established by the Board under the Annual Incentive Bonus Plan or any comparable bonus under any predecessor or successor plan, then for purposes of this Agreement, the Executive’s Recent Annual Bonus shall be calculated by using the target bonus percentage for the other executives in the Executive’s peer group (determined based on title, responsibilities and duties) who are parties to a Key Employee Change of Control Contract with the Company. Such Annual Bonus shall be paid no later than January 31 of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus in accordance with procedures established by the Company that comply with the requirements of Code Section 409A.
(iii)Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to regular, annual incentive opportunities), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control Date or if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other peer executives of the Company and its affiliated companies.
(iv)Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the

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Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other peer executives of the Company and its affiliated companies.
(v)Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vi)Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vii)Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(viii)Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
5.Termination of Employment.
(a)Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall

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terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.
(b)Retirement. The Executive’s employment shall terminate automatically upon the Executive’s Retirement. For purposes of this Agreement, “Retirement” shall mean termination of the Executive’s employment by the Company for any reason on or after the first day of the month next following the Executive’s 65th birthday (the “Normal Retirement Date”) or termination by the Executive upon the satisfaction of the requirements for early retirement (the “Early Retirement Date”) under the early retirement provisions of the Company’s Retirement Plan (the “Retirement Plan”) Notwithstanding anything to the contrary, if the Executive terminates employment for Good Reason, such termination shall not be deemed to be a Retirement for purposes of this Agreement despite the fact that the Executive may qualify for early retirement under the Company’s Retirement Plan.
(c)Cause. The Company may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean:
(i)the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or
(ii)the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.


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(d)Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, Good Reason shall mean:
(i)the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii)any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii)the Company requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof, or the Company requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control Date;
(iv)any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or
(v)any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(d), any good faith determination of “Good Reason” made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Change of Control Date (unless such Change of Control Date is attributable to the consummation by the Company of a Business Combination which constitutes a Change of Control and as set out in Section 2(c)(iii), at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination) shall be deemed to be a termination for Good Reason for all purposes of this Agreement.
(e)Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive

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or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.
(f)Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, (iii) if the Executive’s employment is terminated by reason of Retirement, either the date on which the Company notifies the Executive of such termination (on or after the Normal Retirement Date) or the date on which the Executive ceases employment with the Company (on or after the Executive’s Early Retirement Date), as the case may be, and (iv) if the Executive’s employment is terminated by reason of death Or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.
6.Obligations of the Company upon Termination.
(a)Good Reason; Other Than for Cause, Retirement, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause, Retirement, Death or Disability or the Executive shall terminate employment for Good Reason, the Company shall provide the Executive with the following compensation and benefits.
(i)The Company shall pay to the Executive in a lump sum in cash within 20 days after the Date of Termination the aggregate of the amounts set forth in the following subsections (A) through (E), except as provided in Section 6(f):
(A)
the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Annual Base Salary in effect at the beginning of the fiscal year during which the Date of Termination occurs multiplied by (y) the Executive’s incentive target bonus percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan (which shall be expressed as a percentage of Annual Base Salary) for the fiscal year in which the Date of Termination occurs (provided, however, that if such incentive target bonus percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the Executive’s incentive target bonus percentage that applied to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs (the “Next Preceding Fiscal Year”) or, if Executive was not employed by the Company and its affiliated companies for the entirety of the Next Preceding Fiscal Year, then

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such percentage shall be deemed to be the incentive target bonus percentage for the Next Preceding Fiscal Year for other executives in the Executive’s peer group (determined based on title, responsibilities and duties) who are parties to the Key Employee Change of Control Contracts with the Company) multiplied by (z) the higher of (I) the bonus performance percentage for the portion of the fiscal year ending on the Date of Termination as determined by and in the sole discretion of the Board (or the Compensation Committee) on or before the Date of Termination without negative adjustment for individual performance, which for calendar year 2019 shall be the highest bonus performance percentage under the annual bonus plan and (II) the actual bonus performance percentage assigned by the Board (or the Compensation Committee) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan that applied to the Next Preceding Fiscal Year, it being understood and agreed that for purposes of this Agreement, the bonus performance percentage for fiscal year 2019 shall be the highest bonus performance percentage under the Company’s Annual Incentive Bonus Program, and (3) any accrued vacation pay, to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”); and
(B)
an amount equal to the product of (1) 2.9 and (2) the sum of (x) the Executive’s Annual Base Salary in effect immediately prior to the Date of Termination and (y) the greater of (I) the average of the annual bonuses earned by the Executive for the two most recently completed fiscal years ending prior to the Date of Termination (in each case, including any bonus or portion thereof which has been earned but deferred) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan and (II) the Executive’s annual bonus for the year in which the Date of Termination occurs (which annual bonus shall be deemed to be equal to the product of the amounts described in clauses (x), (y) and (z) of Section 6(a)(i)(A)(2); and
(C)
an amount equal to the total value of the Executive’s Restoration Account (as defined in the Company’s Savings Restoration Plan (the “SRP”)), with such amount being the higher of (1) the value of the Executive’s Restoration Account on the Executive’s Date of Termination or (2) the value of the Executive’s Restoration Account on the Change of Control Date, in each case with “value” determined under the applicable change of control provisions in the SRP, if any. The amount payable under this Section 6(a)(i)(C) shall represent the payment of the amount due to Executive under the SRP, and shall not be duplicative thereof. Notwithstanding the above provisions of this Section 6(a)(i)(C), the Company shall pay

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the lump sum cash payment as set forth herein above only if such payment would not be considered to be an impermissible acceleration of benefits under the SRP under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). In the event that the payment of the benefits payment in a lump sum would constitute an impermissible acceleration of benefits under the SRP under Code Section 409A, then the portion of the benefit payable under this Section 6(a)(i)(C) that is equal to the benefits payable under the SRP shall be payable in the same form and at the time specified in the SRP, and any excess amount determined under this paragraph shall be paid in a cash lump sum within 20 days after the Date of Termination; and
(D)
an amount equal to the additional Company matching contributions which would have been made on the Executive’s behalf in the Company’s Employee Savings Plan (the “ESP”) (assuming continued participation on the same basis as immediately prior to the Change of Control Date), plus the additional amount of any benefit the Executive would have accrued under the SRP as a result of contribution limitations in the ESP, for the period beginning on the Date of Termination and ending on the earliest to occur of (1) the expiration of the 36-month period following the Date of Termination and (2) the Executive’s Normal Retirement Date (with the Company’s matching contributions being determined pursuant to the applicable provisions of the ESP and the SRP and based upon the Executive’s compensation (including any amounts deferred pursuant to any deferred compensation program) in effect for the 12-month period immediately prior to the Change of Control Date); and
(E)
an amount equal to the sum of the present values, as of the Date of Termination, of (1) the accrued retirement benefit payable under the Company’s Retirement Restoration Plan (the “RRP”) and (2) the additional retirement benefits that the Executive would have accrued under the Retirement Plan and the RRP if the Executive had continued employment until the earliest to occur of (a) the expiration of the three year period following the Date of Termination and (b) the Executive’s Normal Retirement Date (assuming that the Executive’s compensation in each of the additional years is that required by Section 4(b)(i) and Section 4(b)(ii) hereof), with the present values being computed by discounting to the Date of Termination the accrued benefit and the additional retirement benefits payable as lump sums at an assumed benefit commencement date of the later of (i) the date the Executive attains age 55 and (ii) the date three years after the Date of Termination (but in no event later than Normal Retirement Date), at the rate of interest used for valuing lump-sum payments in excess of $25,000 for participants with retirement benefits commencing immediately

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under the Retirement Plan, as in effect as of the Change of Control Date.
(ii)The Company shall, at its sole expense as incurred, provide the Executive with (A) financial planning services until the third anniversary of the Date of Termination on the same basis as was provided immediately prior to the Date of Termination, and (B) outplacement services at a cost to the Company not to exceed $30,000, the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion; provided, however, that (1) financial planning services as provided in this Section 6(a)(ii) shall be limited to qualifying expenses incurred, or services provided by the Company, during the period ending on the third anniversary of the Date of Termination, and any reimbursements by the Company shall be made not later than the last day of the calendar year following the calendar year in which the expense is incurred, and (2) outplacement services as provided in this Section 6(a)(ii) shall be limited to qualifying expenses incurred, or services provided by the Company, during the period ending on the last day of the second calendar year following the calendar year containing the Date of Termination, and any reimbursements by the Company shall be made not later than the last day of the third calendar year following the calendar year containing the Date of Termination; and
(iii)Until the earlier of (A) the third anniversary of the Date of Termination and (B) the Executive’s reaching the Normal Retirement Date, the Company shall maintain in full force and effect for the Executive all life, accident, disability, medical and health care benefit plans and programs or arrangements in which the Executive was entitled to participate, at the same levels and rates, in which the Executive was participating immediately prior to the Change of Control Date, provided that the Executive’s continued participation is possible under the general terms and provisions of such plans and programs; and further provided that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. In the event that the Executive’s participation in any such plan or program is barred due to the eligibility and participation requirements of such plan or program as then in effect, the Company shall arrange to provide benefits substantially similar to those to which the Executive was entitled to receive under such plans and programs of the Company prior to the Change of Control Date. In such event, appropriate adjustments shall be made so that the after-tax value thereof to the Executive is similar to the after-tax value of the benefit plans in which participation is barred.
Benefits provided pursuant to this Section 6(a)(iii) are contractual only and are not to be considered a continuation of coverage as provided under Code Section 4980B (i.e., COBRA continuation coverage). For purposes of determining the Executive’s eligibility (but not the time of commencement of coverage) for retiree benefits pursuant to such plans and programs, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period, and, if the Executive satisfies the eligibility requirements, such benefits shall commence no later than the expiration of the three year continuation period provided in clause (A) of this Section 6(a)(iii).
The continued coverage under this Section 6(a)(iii) shall be provided at the Company’s discretion in a manner that is intended to satisfy an exception to Code Section 409A, and therefore

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not be treated as an arrangement providing for nonqualified deferred compensation that is subject to taxation under Section 409A, including (1) providing such benefits on a nontaxable basis to Executive, (2) providing for the reimbursement of medical expenses incurred during the period of time during which Executive would be entitled to continuation coverage under a group health plan of the Company under Code Section 4980B (i.e., COBRA continuation coverage), (3) providing that such benefits constitute the reimbursement or provision of in-kind benefits payable at a specified time or pursuant to a fixed schedule as permitted under Code Section 409A and the authoritative guidance thereunder, or (4) such other manner as determined by the Company in compliance with Code Section 409A.
(iv)To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).
(b)Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 20 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.
(c)Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.

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(d)Retirement. If the Executive’s employment is terminated by reason of Retirement, this Agreement shall terminate without further obligations to the Executive other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination.
(e)Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (i) the Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination.
(f)Matters Relating to Code Section 409A. Notwithstanding any provision in this Agreement to the contrary, if the payment of any benefit hereunder (including, without limitation, any severance benefit) would be subject to additional taxes and interest under Code Section 409A because the timing of such payment is not delayed as provided in Section 409A for a “specified employee”, then if the Executive is a “specified employee” under Section 409A, any such payment that the Executive would otherwise be entitled to receive during the first six months following the Date of Termination shall be accumulated and paid or provided, as applicable, within ten days after the date that is six months following the Date of Termination, or such earlier date upon which such amount can be paid or provided under Code Section 409A without being subject to such additional taxes and interest.
7.Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies, including, but not limited to, the Company’s Management Life Insurance Plan and Override Pool Bonus Plan, at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Without limiting the generality of the foregoing, there shall be no duplication of any of the payments or benefits described in Section 6 hereof, and payments under the applicable provisions of Section 6(a)(i) shall be in full satisfaction of the amounts otherwise payable under the SRP, the RRP and the executive deferred compensation plans, respectively.
8.Full Settlement; Legal Fees. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action

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which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 6(a)(iii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability or entitlement under, any provision of this Agreement or any guarantee of performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872(f)(2)(A).
9.Certain Additional Payments by the Company.
(a)Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any corresponding provisions of state or local tax laws, or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b)Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG LLP or such other certified public accounting firm as may be designated by the Executive (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Accounting Firm

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hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made consistent with the calculations required to be made hereunder (“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. In no event shall a Gross-Up Payment under this Section 9(b) be made after the end of the Executive’s taxable year next following the taxable year in which the Executive remits the related taxes.
(c)The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i)give the Company any information reasonably requested by the Company relating to such claim,
(ii)take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii)cooperate with the Company in good faith in order effectively to contest such claim, and
(iv)permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the

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Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. In no event shall a reimbursement of expenses incurred under this Section 9(c) be made after the end of the Executive’s taxable year in which the taxes that are the subject of the claim by the Internal Revenue Service (or other taxing authority) are remitted to the taxing authority, or if no taxes are remitted, the end of the Executive’s taxable year following the taxable year in which the claim is completed.
(d)If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
10.Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11.Successors.
(a)This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

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(b)This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c)The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12.Miscellaneous.
(a)This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b)All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed, in the case of the Executive, to the Executive’s home address registered with the Company or, if to the Company, to the attention of the General Counsel at the Company’s home office address or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c)The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d)The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e)The Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5 of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f)The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, prior to the Change of Control Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Change of Control Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.




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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.
 
 
 
 
/s/ ROBERT G. GWIN
Robert G. Gwin
 
 
 
 
ANADARKO PETROLEUM CORPORATION
 
 
 
 
By:
/s/ AMANDA M. MCMILLIAN
Name:
Amanda M. McMillian
Title:
Executive Vice President and General
 
Counsel


[Signature Page]
EXHIBIT 10(iii)

ANADARKO PETROLEUM CORPORATION
AMENDED AND RESTATED KEY EMPLOYEE CHANGE OF CONTROL CONTRACT FOR EXECUTIVE VICE PRESIDENTS
This Anadarko Petroleum Corporation Amended and Restated Key Employee Change of Control Contract for Executive Vice Presidents (this “Agreement”) is made and entered into by and between Anadarko Petroleum Corporation (the “Company”) and _________ (the “Executive”), effective as of April 11, 2019 (the “Effective Date”). Company and Executive may be collectively referred to herein as the “Parties” and individually as a “Party.”
WHEREAS, The Board of Directors of the Company (the “Board”) previously determined that it was in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement;
WHEREAS, the Company and the Executive previously entered into a Key Employee Change of Control Contract (the “Original Agreement”) effective ____________; and
WHEREAS, the Company and the Executive desire to enter into this Agreement to update certain Change of Control bonus and severance provisions under the Original Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.Certain Definitions.
(a)The “Change of Control Date” shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Change of Control Date” shall mean the date immediately prior to the date of such termination of employment.
(b)The “Change of Control Period” shall mean the period commencing on the Effective Date hereof and ending on the second anniversary of such Effective Date; provided, however, that commencing on the date one year after the Effective Date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously terminated, the Change of Control Period



shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 90 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.
(c)The “Compensation Committee” shall mean the Compensation and Benefits Committee of the Board (or any successor committee of the Board succeeding to the functions of the Compensation and Benefits Committee).
2.Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:
(a)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d‑3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 2(c); or
(b)Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c)Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock

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and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such. Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
3.Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Change of Control Date and ending on the third anniversary of such date (the “Employment Period”).
4.Terms of Employment.
(a)Position and Duties.
(i)During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned to the Executive at any time during the 120-day period immediately preceding the Change of Control Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Change of Control Date or any office or location less than 50 miles from such location.
(ii)During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Change of Control Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Change of Control Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.


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(b)Compensation.
(i)Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Change of Control Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Change of Control Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.
(ii)Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s target annual bonus under the Company’s Annual Incentive Bonus Program, or any comparable bonus under any predecessor or successor plan, for the fiscal year in which the Change of Control Date occurs, which shall be calculated as follows: (A) the target bonus percentage as established by the Board prior to the Change of Control Date for the fiscal year in which the Change of Control Date occurs, multiplied by (B) the Executive’s Annual Base Salary (the “Recent Annual Bonus”). In the event that, prior to the Change of Control Date, the Executive’s target bonus percentage has not been established by the Board under the Annual Incentive Bonus Program or any comparable bonus under any predecessor or successor plan, then for purposes of this Agreement, the Executive’s Recent Annual Bonus shall be calculated by using the target bonus percentage for the other executives in the Executive’s peer group (determined based on title, responsibilities and duties) who are parties to a Key Employee Change of Control Contract with the Company. Such Annual Bonus shall be paid no later than January 31 of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus in accordance with procedures established by the Company that comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
(iii)Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to regular, annual incentive opportunities), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control Date or if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other peer executives of the Company and its affiliated companies.


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(iv)Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other peer executives of the Company and its affiliated companies.
(v)Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vi)Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vii)Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(viii)Paid Time Off. During the Employment Period, the Executive shall be entitled to paid time off in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
5.Termination of Employment.
(a)Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company

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determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.
(b)By the Company. The Company may terminate the Executive’s employment during the Employment Period for Cause, or without Cause. For purposes of this Agreement, “Cause” shall mean:
(i)the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or
(ii)the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or any of its affiliated companies.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.
(c)By the Executive. The Executive’s employment may be terminated by the Executive for Good Reason, or without Good Reason. For purposes of this Agreement, Good Reason shall mean:


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(i)the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii)any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii)the Company requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof, or the Company requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control Date;
(iv)any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or
(v)any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of “Good Reason” made by the Executive shall be conclusive.
(d)Notice of Termination. Any termination of the Executive’s employment by the Company for Cause, or voluntary termination of employment by the Executive (whether for Good Reason or without Good Reason), shall be communicated by Notice of Termination to the other Party given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.
(e)Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or

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Disability, the date on which the Company notifies the Executive of such termination, (iii) if the Executive’s employment is terminated by the Executive without Good Reason, the date of receipt of the Notice of Termination or any later date specified therein (which date shall be not later than 30 days after the giving of such notice), and (iv) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.
6.Obligations of the Company upon Termination.
(a)Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, the Company shall provide the Executive with the following compensation and benefits.
(i)The Company shall pay to the Executive in a lump sum in cash within 20 days after the Date of Termination the aggregate of the amounts set forth in the following subsections (A) through (E), except as provided in Section 6(e):
(A)
the sum of the amounts described in clauses (1), (2) and (3) of this Section 6(a)(i)(A) (which sum shall be hereinafter referred to as the “Accrued Obligations”):
(1)the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid;
(2)any accrued paid time off, to the extent not theretofore used or paid; and
(3)the product of (x) the Annual Base Salary in effect at the beginning of the fiscal year during which the Date of Termination occurs multiplied by (y) the Executive’s incentive target bonus percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan (which shall be expressed as a percentage of Annual Base Salary) for the fiscal year in which the Date of Termination occurs (provided, however, that if such incentive target bonus percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the Executive’s incentive target bonus percentage that applied to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs (the “Next Preceding Fiscal Year”) or, if Executive was not employed by the Company and its affiliated companies for the entirety of the Next Preceding Fiscal Year, then such percentage shall be deemed to be the incentive target bonus percentage for the Next Preceding Fiscal Year for other executives in the Executive’s peer group (determined based on title, responsibilities and duties) who are parties to the Key Employee Change of Control Contracts with the Company) multiplied by (z) the higher of (I) the bonus performance percentage for the portion of

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the fiscal year ending on the Date of Termination as determined by and in the sole discretion of the Board (or the Compensation Committee) on or before the Date of Termination without negative adjustment for individual performance, which for calendar year 2019 shall be the highest bonus performance percentage under the annual bonus plan and (II) the actual bonus performance percentage assigned by the Board (or the Compensation Committee) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan that applied to the Next Preceding Fiscal Year, it being understood and agreed that for purposes of this Agreement, the bonus performance percentage for fiscal year 2019 shall be the highest bonus performance percentage under the Company’s Annual Incentive Bonus Program; and
(B)
an amount equal to the product of (1) 2.5 and (2) the sum of (x) the Executive’s Annual Base Salary in effect immediately prior to the Date of Termination and (y) the greater of (I) the average of the annual bonuses earned by the Executive for the two most recently completed fiscal years ending prior to the Date of Termination (in each case, including any bonus or portion thereof which has been earned but deferred) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan and (II) the Executive’s annual bonus for the year in which the Date of Termination occurs (which annual bonus shall be deemed to be equal to the product of the amounts described in clauses (x), (y) and (z) of Section 6(a)(i)(A)(3)); and
(C)
an amount equal to the total value of the Executive’s Account (as defined in the Company’s Savings Restoration Plan (the “SRP”)), with such amount being the higher of (1) the value of the Executive’s Account on the Executive’s Date of Termination or (2) the value of the Executive’s Account on the Change of Control Date, in each case with “value” determined under the applicable change of control provisions in the SRP, if any. The amount payable under this Section 6(a)(i)(C) shall represent the payment of the amount due to the Executive under the SRP, and shall not be duplicative thereof. Notwithstanding the above provisions of this Section 6(a)(i)(C), the Company shall pay the lump sum cash payment as set forth herein above only if such payment would not be considered to be an impermissible acceleration of benefits under the SRP under Code Section 409A. In the event that the payment of the benefits payment in a lump sum would constitute an impermissible acceleration of benefits under the SRP under Code Section 409A, then the portion of the benefit payable under this Section 6(a)(i)(C) that is equal to the benefits payable under the SRP shall be payable in the same form and at the time specified in the SRP, and any excess amount determined under this paragraph shall, subject to Section 6(e), be paid in a cash lump sum within 20 days after the Date of Termination; and


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(D)
an amount equal to the additional Company matching contributions which would have been made on the Executive’s behalf in the Company’s Employee Savings Plan (the “ESP”) (assuming continued participation on the same basis as immediately prior to the Change of Control Date), plus the additional amount of any benefit the Executive would have accrued under the SRP as a result of contribution limitations in the ESP, for the 36-month period beginning on the Date of Termination (with the Company’s matching contributions being determined pursuant to the applicable provisions of the ESP and the SRP and based upon the Executive’s compensation (including any amounts deferred pursuant to any deferred compensation program) in effect for the 12-month period immediately prior to the Change of Control Date); and
(E)
an amount equal to the sum of the present values, as of the Date of Termination, of (1) the accrued retirement benefit payable under the Company’s Retirement Restoration Plan (or, if the Executive participates in another plan that, in the sole determination of the Company, is intended to provide benefits similar to those under the Company’s Retirement Restoration Plan, such other plan) (each referred to herein as the “RRP”) and (2) the additional retirement benefits that the Executive would have accrued under the tax-qualified defined benefit plan of the Company or any Affiliate in which the Executive participates (the “Retirement Plan”) and the RRP if the Executive had continued employment until the expiration of the three-year period following the Date of Termination (assuming that the Executive’s compensation in each of the additional years is that required by Section 4(b)(i) and Section 4(b)(ii) hereof), with the present values being computed by discounting to the Date of Termination the accrued benefit and the additional retirement benefits payable as lump sums at an assumed benefit commencement date of the later of (i) the date the Executive attains age 55 and (ii) the date three years after the Date of Termination, at the rate of interest used for valuing lump-sum payments in excess of $25,000 for participants with retirement benefits commencing immediately under the Retirement Plan, as in effect as of the Change of Control Date with such amount to be fully offset and reduced by the amount of any additional benefit provided under the Retirement Plan or the RRP in connection with the Change of Control or the Executive’s termination of employment in connection with the Change of Control, including an amount that the Company determines, in its sole discretion, is intended to provide a similar or supplemental benefit (or, if the Executive does not participate in a Retirement Plan or RRP as of the date of the Executive’s termination of employment, such other amount as the Company may chose, in its sole discretion, to approximate this benefit).
(ii)The Company shall, at its sole expense as incurred, provide the Executive with outplacement services at a cost to the Company not to exceed $30,000, the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion; provided, however, that such outplacement services as provided in this Section 6(a)(ii) shall be limited to qualifying

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expenses incurred, or services provided by the Company, during the period ending on the last day of the second calendar year following the calendar year containing the Date of Termination, and any reimbursements by the Company shall be made not later than the last day of the third calendar year following the calendar year containing the Date of Termination; and
(iii)Until the third anniversary of the Date of Termination, the Company shall maintain in full force and effect for the Executive all life, accident, disability, medical and health care benefit plans, programs and arrangements in which the Executive was entitled to participate, at the same rates and levels (which levels may vary based on the Executive’s age in accordance with the terms of the applicable plans, programs and arrangements), in which the Executive was participating immediately prior to the Change of Control Date, provided that the Executive’s continued participation is possible under the general terms and provisions of such plans, programs and arrangements; and further provided that (A) if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility, and (B) the medical and other welfare benefits described herein shall be subject to the application of any Medicare or other coordination of benefits provisions under the applicable medical or welfare benefit plan, program or arrangement. In the event that the Executive’s participation in any such plan, program or arrangement is barred due to the eligibility and participation requirements of such plan or program as then in effect, the Company shall arrange to provide benefits substantially similar to those to which the Executive was entitled to receive under such plans and programs of the Company prior to the Change of Control Date. In such event, appropriate adjustments shall be made so that the after-tax value thereof to the Executive is similar to the after-tax value of the benefit plans in which participation is barred.
Benefits provided pursuant to this Section 6(a)(iii) are contractual only and are not to be considered a continuation of coverage as provided under Code Section 4980B (i.e., COBRA continuation coverage). For purposes of determining the Executive’s eligibility (but not the time of commencement of coverage) for retiree benefits pursuant to such plans and programs, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period, and, if the Executive satisfies the eligibility requirements, such benefits shall commence no later than the expiration of the three-year continuation period provided in the first sentence of this Section 6(a)(iii).
The continued coverage under this Section 6(a)(iii) shall be provided at the Company’s discretion in a manner that is intended to satisfy an exception to Code Section 409A, and therefore not be treated as an arrangement providing for nonqualified deferred compensation that is subject to taxation under Code Section 409A, or in a manner that otherwise complies with Code Section 409A, including without limitation (1) providing such benefits on a nontaxable basis to the Executive, (2) providing for the reimbursement of medical expenses incurred during the period of time during which the Executive would be entitled to continuation coverage under a group health plan of the Company under Code Section 4980B (i.e., COBRA continuation coverage), (3) providing that such benefits constitute the reimbursement or provision of in-kind benefits payable at a specified time or pursuant to a fixed schedule as permitted under Code Section 409A and the authoritative guidance thereunder, or (4) requiring the Executive to pay the actual cost of such coverage and having the Company reimburse the Executive for such payments in

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excess of the rates that would otherwise be required to be paid by the Executive under the preceding provisions of this Section 6(a)(iii) (with such reimbursement, less applicable taxes, for a particular calendar year during which the Executive received such coverage to be made within 15 days following the end of such calendar year (but in no event prior to the date that is six months after the Date of Termination)).
(iv)To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).
(b)Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 20 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.
(c)Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Change of Control Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.
(d)Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (i) the Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously

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deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination.
(e)Matters Relating to Code Section 409A. Notwithstanding any provision in this Agreement to the contrary, if the payment of any benefit hereunder (including, without limitation, any severance benefit) would be subject to additional taxes and interest under Code Section 409A because the timing of such payment is not delayed as provided in Code Section 409A for a “specified employee,” then if the Executive is a “specified employee” under Code Section 409A, any such payment that the Executive would otherwise be entitled to receive during the first six months following the Date of Termination shall be accumulated and paid or provided, as applicable, within ten days after the date that is six months following the Date of Termination, or such earlier date upon which such amount can be paid or provided under Code Section 409A without being subject to such additional taxes and interest. For all purposes of this Agreement, the Executive shall be considered to have terminated employment with the Company when the Executive incurs a “separation from service” with the Company within the meaning of Code Section 409A(a)(2)(A)(i). The Executive agrees to be bound by the Company’s determination of its “specified employees” (as defined in Code Section 409A). Any payment or benefit (including any severance payment or benefit) provided under this Agreement to which Code Section 409A applies that constitutes a reimbursement of expenses incurred by the Executive or the provision of an in-kind benefit to the Executive shall be subject to the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during the Executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; (ii) the reimbursement of an eligible expense shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred; and (iii) the right to reimbursement or to receive an in-kind benefit shall not be subject to liquidation or exchange by the Executive for another payment or benefit.
7.Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies, including, but not limited to, the Company’s Management Life Insurance Plan and Override Pool Bonus Plan, at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Without limiting the generality of the foregoing, there shall be no duplication of any of the payments or benefits described in Section 6 hereof, and payments under the applicable provisions of Section 6(a)(i) shall be in full satisfaction of the amounts otherwise payable under the SRP, the RRP and the executive deferred compensation plans, respectively.


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8.Full Settlement; Legal Fees. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 6(a)(iii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability or entitlement under, any provision of this Agreement or any guarantee of performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872(f)(2)(A).
9.Parachute Payment Limitation.
(a)Anything in this Agreement to the contrary notwithstanding, if the Executive is a “disqualified individual” (as defined in Section 280G of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which the Executive has the right to receive (collectively, the “Payments”), would constitute a “parachute payment” (as defined in Section 280G of the Code), then the Payments shall be either (a) reduced (but not below zero) so that the aggregate present value of the Payments will be one dollar ($1.00) less than three times the Executive’s “base amount” (as defined in Section 280G of the Code) and so that no portion of the Payments shall be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full, whichever produces the better net after-tax result for the Executive (taking into account any applicable excise tax under Section 4999 of the Code and any applicable income tax). The reduction of Payments, if any, shall be made by reducing the Payments in the reverse order in which the Payments would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time).
(b)The determinations as to the Payments to be reduced and the amount of reduction shall be made by the Company in good faith, and such determinations shall be conclusive and binding on the Executive. If a reduced Payment is made or provided and, through error or otherwise, that Payment, when aggregated with other payments and benefits from the Company (or its affiliated companies) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three (3) times the Executive’s base amount, the Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made.
10.Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any

14


of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. Nothing in this Agreement will prevent the Executive from making disparaging remarks or disclosing Company confidential and proprietary information when compelled to do so by law or when such communications are intended to comply with any federal or state whistleblower statute including, but not limited to, information provided in a manner described in Section 21F(h)(1)(A) of the Exchange Act, 15 U.S.C. 78u-6(h)(1)(A). Nothing in this Agreement will prevent the Executive from: (a) making a good faith report of possible violations of applicable law to any governmental agency or entity or (b) making disclosures that are protected under the whistleblower provisions of applicable law. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11.Successors.
(a)This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
(b)This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c)The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12.Miscellaneous.
(a)This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the Parties or their respective successors and legal representatives.
(b)All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other Party or by registered or certified mail, return receipt requested, postage prepaid, addressed, in the case of the Executive, to the Executive’s home address registered with the Company or, if to the Company, to the attention of the General Counsel at the Company’s home office address or to such other address as either Party shall have furnished

15


to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c)The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d)The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e)The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5 of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f)The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, prior to the Change of Control Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Change of Control Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the Parties with respect to the subject matter hereof. Without limiting the scope of the preceding sentence, as of the Effective Date, all prior understandings and agreements between the Parties relating to the subject matter hereof are hereby terminated and of no further force and effect.
[Signature page follows.]


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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed in its name and on its behalf, to be effective as of the Effective Date,
EXECUTIVE
 
 
 
 
By:
 
Name:
 
 
 
Date:
 
 
 
ANADARKO PETROLEUM CORPORATION
 
 
 
 
By:
 
Name:
 
Title:
 
 
 
Date:
 

[Signature Page]

EXHIBIT 10(iv)

ANADARKO PETROLEUM CORPORATION
AMENDED AND RESTATED KEY EMPLOYEE CHANGE OF CONTROL
CONTRACT
This Anadarko Petroleum Corporation Amended and Restated Key Employee Change of Control Contract (“Agreement”) is made and entered into by and between Anadarko Petroleum Corporation (“Company”) and Christopher O. Champion (“Executive”), effective as of April 11, 2019 (“Effective Date”). Company and Executive may be collectively referred to herein as the “Parties.”
WHEREAS, The Board of Directors of the Company (the “Board”), previously determined that it was in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement;
WHEREAS, the Company and Executive previously entered into a Key Employee Change of Control Contract (the “Original Agreement”) effective as of June 1, 2015; and
WHEREAS, the Company and Executive desire to enter into this Agreement to update certain Change of Control bonus and severance provisions under the Original Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.Certain Definitions.
(a)The “Change of Control Date” shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Change of Control Date” shall mean the date immediately prior to the date of such termination of employment.
(b)The “Change of Control Period” shall mean the period commencing on the Effective Date hereof and ending on the second anniversary of such Effective Date; provided, however, that commencing on the date one year after the Effective Date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter

1


referred to as the “Renewal Date”), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 90 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended.
2.Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:
(a)The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 2(c); or
(b)Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(c)Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the

2


then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d)Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
3.Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Change of Control Date and ending on the second anniversary of such date (the “Employment Period”).
4.Terms of Employment.
(a)Position and Duties.
(i)During the Employment Period, (A) the Executive’s position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned to the Executive at any time during the 120‑day period immediately preceding the Change of Control Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Change of Control Date or any office or location less than 35 miles from such location.
(ii)During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Change of Control Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Change of Control Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.
(b)Compensation.
(i)Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at

3


least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Change of Control Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Change of Control Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.
(ii)Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in cash at least equal to the Executive’s target annual bonus under the Company’s Annual Incentive Bonus Program, or any comparable bonus under any predecessor or successor plan, for the fiscal year in which the Change of Control Date occurs, which shall be calculated as follows: (A) the target bonus percentage as established by the Board prior to the Change of Control Date for the fiscal year in which the Change of Control Date occurs, multiplied by (B) the Executive’s Annual Base Salary (the “Recent Annual Bonus”). In the event that, prior to the Change of Control Date, the Executive’s target bonus percentage has not been established by the Board under the Annual Incentive Bonus Program or any comparable bonus under any predecessor or successor plan, then for purposes of this Agreement, the Executive’s Recent Annual Bonus shall be calculated by using the target bonus percentage for the other executives in the Executive’s peer group (determined based on title, responsibilities and duties) who are parties to a Key Employee Change of Control Contract with the Company. Such Annual Bonus shall be paid no later than January 31 of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus in accordance with procedures established by the Company that comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
(iii)Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to regular, annual incentive opportunities), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120‑day period immediately preceding the Change of Control Date or if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other peer executives of the Company and its affiliated companies.
(iv)Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription,

4


dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive, those provided generally at any time after the Change of Control Date to other peer executives of the Company and its affiliated companies.
(v)Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vi)Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(vii)Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as provided generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
(viii)Paid Time Off. During the Employment Period, the Executive shall be entitled to paid time off in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.
5.Termination of Employment.
(a)Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall

5


terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.
(b)By the Company. The Company may terminate the Executive’s employment during the Employment Period for Cause, or without Cause. For purposes of this Agreement, “Cause” shall mean:
(i)the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive’s duties, or
(ii)the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.
(c)By the Executive. The Executive’s employment may be terminated by the Executive for Good Reason, or without Good Reason. For purposes of this Agreement, Good Reason shall mean:
(i)the assignment to the Executive of any duties inconsistent in any respect with the Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not

6


taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii)any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii)the Company requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof, or the Company requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Change of Control Date;
(iv)any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or
(v)any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of “Good Reason” made by the Executive shall be conclusive.
(d)Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.
(e)Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the date on which the Company notifies the Executive of such termination, (iii) if the Executive’s employment is terminated by the Executive without Good Reason, the date of receipt of the Notice of Termination or any later date specified therein (which date shall be not later than 30 days after the giving of such notice), and (iv) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the Disability Effective Date, as the case may be.


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6.Obligations of the Company upon Termination.
(a)Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause, Death or Disability or the Executive shall terminate employment for Good Reason, the Company shall provide the Executive with the following compensation and benefits.
(i)The Company shall pay to the Executive in a lump sum in cash within 20 days after the Date of Termination the aggregate of the amounts set forth in the following subsections (A) through (E), except as provided in Section 6(e):
(A)
the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Annual Base Salary in effect at the beginning of (I) the fiscal year during which the Date of Termination occurs or, (II) if greater, the fiscal year during which the Change of Control Date occurs; multiplied by (y) the Executive’s incentive target bonus percentage under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan (which shall be expressed as a percentage of Annual Base Salary) (I) for the fiscal year in which the Date of Termination occurs (provided, however, that if such incentive target bonus percentage has not been established by the Board (or the Compensation Committee) for such fiscal year as of the Date of Termination, then such percentage shall be deemed to be the Executive’s incentive target bonus percentage that applied to the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs (the “Next Preceding Fiscal Year”) or, if Executive was not employed by the Company and its affiliated companies for the entirety of the Next Preceding Fiscal Year, then such percentage shall be deemed to be the incentive target bonus percentage for the Next Preceding Fiscal Year for other executives in the Executive’s peer group (determined based on title, responsibilities and duties) who are parties to the Key Employee Change of Control Contracts with the Company) or (II) if greater, for the fiscal year in which the Change of Control Date occurs; multiplied by (z) the higher of (I) 100%, (II) the bonus performance percentage for the portion of the fiscal year ending on the Date of Termination as determined by and in the sole discretion of the Board (or the Compensation Committee) on or before the Date of Termination without negative adjustment for individual performance, which for calendar year 2019 shall be the highest bonus performance percentage under the Company’s Annual Bonus Program (200%) and (III) the actual bonus performance percentage assigned by the Board (or the Compensation Committee) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan that applied to the Next Preceding Fiscal Year, it being understood and agreed that for purposes of this Agreement, the bonus performance percentage for fiscal year 2019 shall be the highest bonus

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performance percentage under the Company’s Annual Incentive Bonus Program (200%), and (3) any accrued paid time off, to the extent not theretofore used or paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”); and
(B)
an amount equal to the product of (1) two and (2) the sum of (x) the Executive’s Annual Base Salary in effect immediately prior to the Date of Termination and (y) the greater of (I) the average of the annual bonuses earned by the Executive for the two most recently completed fiscal years ending prior to the Date of Termination (in each case, including any bonus or portion thereof which has been earned but deferred) under the Company’s Annual Incentive Bonus Program or any comparable predecessor or successor plan and (II) the Executive’s annual bonus for the year in which the Date of Termination occurs (which annual bonus shall be deemed to be equal to the product of the amounts described in clauses (x), (y) and (z) of Section 6(a)(i)(A)(2); and
(C)
an amount equal to the total value of the Executive’s Account (as defined in the Company’s Savings Restoration Plan (the “SRP”)), with such amount being the higher of (1) the value of the Executive’s Account on the Executive’s Date of Termination or (2) the value of the Executive’s Account on the Change of Control Date, in each case with “value” determined under the applicable change of control provisions in the SRP, if any. The amount payable under this Section 6(a)(i)(C) shall represent the payment of the amount due to the Executive under the SRP, and shall not be duplicative thereof. Notwithstanding the above provisions of this Section 6(a)(i)(C), the Company shall pay the lump sum cash payment as set forth herein above only if such payment would not be considered to be an impermissible acceleration of benefits under the SRP under Code Section 409A. In the event that the payment of the benefits payment in a lump sum would constitute an impermissible acceleration of benefits under the SRP under Code Section 409A, then the portion of the benefit payable under this Section 6(a)(i)(C) that is equal to the benefits payable under the SRP shall be payable in the same form and at the time specified in the SRP, and any excess amount determined under this paragraph shall, subject to Section 6(e), be paid in a cash lump sum within 20 days after the Date of Termination; and
(D)
an amount equal to the additional Company matching contributions which would have been made on the Executive’s behalf in the Company’s Employee Savings Plan (the “ESP”) (assuming continued participation on the same basis as immediately prior to

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the Change of Control Date), plus the additional amount of any benefit the Executive would have accrued under the SRP as a result of contribution limitations in the ESP, for the 24-month period beginning on the Date of Termination (with the Company’s matching contributions being determined pursuant to the applicable provisions of the ESP and the SRP and based upon the Executive’s compensation (including any amounts deferred pursuant to any deferred compensation program) in effect for the 12-month period immediately prior to the Change of Control Date); and
(E)
an amount equal to the sum of the present values, as of the Date of Termination, of (1) the accrued retirement benefit payable under the Company’s Retirement Restoration Plan (or, if the Executive participates in another plan that, in the sole determination of the Company, is intended to provide benefits similar to those under the Company’s Retirement Restoration Plan, such other plan) (each referred to herein as the “RRP”) and (2) the additional retirement benefits that the Executive would have accrued under the tax-qualified defined benefit plan of the Company or any Affiliate in which the Executive participates (the “Retirement Plan”) and the RRP if the Executive had continued employment until the expiration of the two-year period following the Date of Termination (assuming that the Executive’s compensation in each of the additional years is that required by Section 4(b)(i) and Section 4(b)(ii) hereof), with the present values being computed by discounting to the Date of Termination the accrued benefit and the additional retirement benefits payable as lump sums at an assumed benefit commencement date of the later of (i) the date the Executive attains age 55 and (ii) the date two years after the Date of Termination, at the rate of interest used for valuing lump-sum payments in excess of $25,000 for participants with retirement benefits commencing immediately under the Retirement Plan, as in effect as of the Change of Control Date with such amount to be fully offset and reduced by the amount of any additional benefit provided under the Retirement Plan or the RRP in connection with the Change of Control or the Executive’s termination of employment in connection with the Change of Control, including an amount that the Company determines, in its sole discretion, is intended to provide a similar or supplemental benefit (or, if the Executive does not participate in a Retirement Plan or RRP as of the date of the Executive’s termination of employment, such other amount as the Company may chose, in its sole discretion, to approximate this benefit).
(ii)The Company shall, at its sole expense as incurred, provide the Executive with outplacement services at a cost to the Company not to exceed $30,000, the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion; provided, however, that such outplacement services as provided in this Section 6(a)(ii) shall be

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limited to qualifying expenses incurred, or services provided by the Company, during the period ending on the last day of the second calendar year following the calendar year containing the Date of Termination, and any reimbursements by the Company shall be made not later than the last day of the third calendar year following the calendar year containing the Date of Termination; and
(iii)Until the second anniversary of the Date of Termination, the Company shall maintain in full force and effect for the Executive all life, accident, disability, medical and health care benefit plans, programs and arrangements in which the Executive was entitled to participate, at the same rates and levels (which levels may vary based on the Executive’s age in accordance with the terms of the applicable plans, programs and arrangements), in which the Executive was participating immediately prior to the Change of Control Date, provided that the Executive’s continued participation is possible under the general terms and provisions of such plans, programs and arrangements; and further provided that (A) if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility, and (B) the medical and other welfare benefits described herein shall be subject to the application of any Medicare or other coordination of benefits provisions under the applicable medical or welfare benefit plan, program or arrangement. In the event that the Executive’s participation in any such plan, program or arrangement is barred due to the eligibility and participation requirements of such plan or program as then in effect, the Company shall arrange to provide benefits substantially similar to those to which the Executive was entitled to receive under such plans and programs of the Company prior to the Change of Control Date. In such event, appropriate adjustments shall be made so that the after-tax value thereof to the Executive is similar to the after-tax value of the benefit plans in which participation is barred.
Benefits provided pursuant to this Section 6(a)(iii) are contractual only and are not to be considered a continuation of coverage as provided under Code Section 4980B (i.e., COBRA continuation coverage). For purposes of determining the Executive’s eligibility (but not the time of commencement of coverage) for retiree benefits pursuant to such plans and programs, the Executive shall be considered to have remained employed until two years after the Date of Termination and to have retired on the last day of such period, and, if the Executive satisfies the eligibility requirements, such benefits shall commence no later than the expiration of the two-year continuation period provided in the first sentence of this Section 6(a)(iii).
The continued coverage under this Section 6(a)(iii) shall be provided at the Company’s discretion in a manner that is intended to satisfy an exception to Code Section 409A, and therefore not be treated as an arrangement providing for nonqualified deferred compensation that is subject to taxation under Code Section 409A, or in a manner that otherwise complies with Code Section 409A, including without limitation (1) providing such benefits on a nontaxable basis to the Executive, (2) providing for the reimbursement of medical expenses incurred during the period of time during which the Executive would be entitled to continuation coverage under a group health plan of the Company under Code Section 4980B (i.e., COBRA continuation coverage), (3) providing that such benefits constitute the reimbursement or provision of in-kind benefits payable at a specified time or pursuant to a fixed schedule as permitted under Code Section 409A and the authoritative guidance thereunder, or (4) requiring the Executive to pay the actual cost of such coverage and having the Company reimburse the Executive for such payments in excess of the

11


rates that would otherwise be required to be paid by the Executive under the preceding provisions of this Section 6(a)(iii) (with such reimbursement, less applicable taxes, for a particular calendar year during which the Executive received such coverage to be made within 15 days following the end of such calendar year (but in no event prior to the date that is six months after the Date of Termination)).
(iv)To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”).
(b)Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 20 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.
(c)Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120‑day period immediately preceding the Change of Control Date or, if more favorable to the Executive and/or the Executive’s family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.
(d)Cause; Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (i) the Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously

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deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 20 days of the Date of Termination.
(e)Matters Relating to Code Section 409A. Notwithstanding any provision in this Agreement to the contrary, if the payment of any benefit hereunder (including, without limitation, any severance benefit) would be subject to additional taxes and interest under Code Section 409A because the timing of such payment is not delayed as provided in Code Section 409A for a “specified employee”, then if the Executive is a “specified employee” under Code Section 409A, any such payment that the Executive would otherwise be entitled to receive during the first six months following the Date of Termination shall be accumulated and paid or provided, as applicable, within ten days after the date that is six months following the Date of Termination, or such earlier date upon which such amount can be paid or provided under Code Section 409A without being subject to such additional taxes and interest. For all purposes of this Agreement, the Executive shall be considered to have terminated employment with the Company when the Executive incurs a “separation from service” with the Company within the meaning of Code Section 409A(a)(2)(A)(i). The Executive agrees to be bound by the Company’s determination of its “specified employees” (as defined in Code Section 409A). Any payment or benefit (including any severance payment or benefit) provided under this Agreement to which Code Section 409A applies that constitutes a reimbursement of expenses incurred by the Executive or the provision of an in-kind benefit to the Executive shall be subject to the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during the Executive’s taxable year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; (ii) the reimbursement of an eligible expense shall be made on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred; and (iii) the right to reimbursement or to receive an in-kind benefit shall not be subject to liquidation or exchange by the Executive for another payment or benefit.
7.Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies, including, but not limited to, the Company’s Management Life Insurance Plan and Override Pool Bonus Plan, at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. Without limiting the generality of the foregoing, there shall be no duplication of any of the payments or benefits described in Section 6 hereof, and payments under the applicable provisions of Section 6(a)(i) shall be in full satisfaction of the amounts otherwise payable under the SRP, the RRP and the executive deferred compensation plans, respectively.

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8.Full Settlement; Legal Fees. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as specifically provided in Section 6(a)(iii), such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability or entitlement under, any provision of this Agreement or any guarantee of performance thereof (whether such contest is between the Company and the Executive or between either of them and any third party, and including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Code Section 7872(f)(2)(A).
9.Parachute Payment Limitation.
(a)Anything in this Agreement to the contrary notwithstanding, if the Executive is a “disqualified individual” (as defined in Section 280G of the Code), and the payments and benefits provided for in this Agreement, together with any other payments and benefits which the Executive has the right to receive (collectively, the “Payments”), would constitute a “parachute payment” (as defined in Section 280G of the Code), then the Payments shall be either (a) reduced (but not below zero) so that the aggregate present value of the Payments will be one dollar ($1.00) less than three times the Executive’s “base amount” (as defined in Section 280G of the Code) and so that no portion of the Payments shall be subject to the excise tax imposed by Section 4999 of the Code, or (b) paid in full, whichever produces the better net after-tax result for the Executive (taking into account any applicable excise tax under Section 4999 of the Code and any applicable income tax). The reduction of Payments, if any, shall be made by reducing the Payments in the reverse order in which the Payments would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time).
(b)The determinations as to the Payments to be reduced and the amount of reduction shall be made by the Company in good faith, and such determinations shall be conclusive and binding on the Executive. If a reduced Payment is made or provided and, through error or otherwise, that Payment, when aggregated with other payments and benefits from the Company (or its affiliated companies) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three (3) times the Executive’s base amount, the Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made.
10.Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any

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of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11.Successors.
(a)This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.
(b)This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c)The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, the term “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12.Miscellaneous.
(a)This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b)All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed, in the case of the Executive, to the Executive’s home address registered with the Company or, if to the Company, to the attention of the General Counsel at the Company’s home office address or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c)The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

15


(d)The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e)The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5 of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f)The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, prior to the Change of Control Date, the Executive’s employment may be terminated by either the Executive or the Company at any time prior to the Change of Control Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.
[Signature page follows.]


16





IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from its Board of Directors, the Company has caused this Agreement to be executed in its name and on its behalf, to be effective as of the Effective Date.
EXECUTIVE
 
 
 
 
By:
/s/ CHRISTOPHER O. CHAMPION
 
 
Name:
Christopher O. Champion
 
 
Date:
April 11, 2019
 
 
ANADARKO PETROLEUM CORPORATION
 
 
 
 
By:
/s/ AMANDA M. MCMILLIAN
 
 
Name:
Amanda M. McMillian
 
 
Title:
Executive Vice President and General
 
Counsel
 
 
Date:
April 11, 2019



17


EXHIBIT 31(i)
CERTIFICATIONS
I, R. A. Walker, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Anadarko Petroleum Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 30, 2019
 
/s/ R. A. WALKER
R. A. Walker
Chairman and Chief Executive Officer





EXHIBIT 31(ii)
CERTIFICATIONS
I, Benjamin M. Fink, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Anadarko Petroleum Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 30, 2019

/s/ BENJAMIN M. FINK
Benjamin M. Fink
Executive Vice President, Finance and Chief Financial Officer




EXHIBIT 32
SECTION 1350 CERTIFICATION OF PERIODIC REPORT
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, R. A. Walker, Chairman and Chief Executive Officer of Anadarko Petroleum Corporation (Company), and Benjamin M. Fink, Executive Vice President, Finance and Chief Financial Officer of the Company, certify to the best of our knowledge that:
(1)
the Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (Report), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
July 30, 2019
  
 
 
 
 
 
  
/s/ R. A. WALKER
 
  
R. A. Walker
 
  
Chairman and Chief Executive Officer
 
 
 
July 30, 2019
  
 
 
 
 
 
  
/s/ BENJAMIN M. FINK
 
  
Benjamin M. Fink
 
  
Executive Vice President, Finance and Chief Financial Officer
This certification is made solely pursuant to 18 U.S.C. Section 1350, and not for any other purpose. A signed original of this written statement required by Section 906 will be retained by Anadarko and furnished to the Securities and Exchange Commission or its staff upon request.