Indemnification Agreement between San Juan Basin Royalty Trust and Lee Ann Anderson

Summary

This agreement, effective July 30, 2002, is between San Juan Basin Royalty Trust and Lee Ann Anderson, an officer of TexasBank who manages the Trust’s daily operations. The Trust agrees to indemnify Anderson to the fullest extent allowed by law for any claims, expenses, or liabilities arising from her management duties, provided certain legal conditions are met. The agreement aims to protect Anderson from personal financial loss due to her role, ensuring she is covered for legal costs and other liabilities related to her service.

EX-10.(A) 3 d05906exv10wxay.txt INDEMNIFICATION AGREEMENT EXHIBIT 10(a) EXECUTION COPY INDEMNIFICATION AGREEMENT This INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered into as of the 13th day of May, 2003, with effectiveness as of July 30, 2002, by and between San Juan Basin Royalty Trust, a trust organized under the laws of the State of Texas (including any successors thereto, the "Trust"), and Lee Ann Anderson ("Indemnitee"). RECITALS: 1. TexasBank, a bank chartered under the laws of the State of Texas (the "Bank"), serves as trustee of the Trust pursuant to the terms of that certain Amended and Restated Royalty Trust Indenture, dated September 30, 2002, between Burlington Resources Oil & Gas Company LP and the Bank (the "Indenture"). 2. Indemnitee is an officer of the Bank and is primarily responsible for managing the day-to-day activities of the Trust. 3. Competent and experienced persons (such as Indemnitee) are reluctant to serve or to continue to serve institutions (such as the Trust and the Bank) as directors, officers, or in other capacities unless they are provided with adequate protection through insurance or indemnification (or both) against claims and actions against them arising out of their service to and activities on behalf of those institutions. 4. The current uncertainties relating to the availability of adequate insurance have increased the difficulty for institutions to attract and retain competent and experienced persons. 5. The reluctance of knowledgeable and experienced persons to serve institutions has increased since the passage of the Sarbanes-Oxley Act on July 30, 2002, which imposed additional civil and criminal penalties for such persons acting in their individual capacities. 6. The Bank, in its capacity as trustee of the Trust, has determined that the continuation of present trends in litigation will make it more difficult to attract and retain competent and experienced persons to manage the day-to-day affairs of the Trust, that this situation is detrimental to the best interests of the Trust's unit holders, and that the Trust should act to assure the employees of the Bank who manage the operations of the Trust, including the Indemnitee, that there will be increased certainty of adequate protection in the future. 7. It is reasonable, prudent, and necessary for the Trust to obligate itself contractually to indemnify the employees of the Bank who manage the operations of the Trust, including the Indemnitee, to the fullest extent permitted by applicable law in order to induce them to serve or continue to serve the Trust. 8. Indemnitee is willing to serve and continue to serve the Trust on the condition that she be indemnified to the fullest extent permitted by law, including, but not limited to, any actions taken individually on behalf of the Trust or for the Bank in its capacity as trustee of the Trust. EXECUTION COPY AGREEMENTS: NOW, THEREFORE, in consideration of the foregoing premises, Indemnitee's agreement to serve or continue to serve as a director or officer of the Bank and to be primarily responsible for managing the day-to-day activities of the Trust, and the covenants contained in this Agreement, the Trust and Indemnitee hereby covenant and agree as follows: 1. Certain Definitions. For purposes of this Agreement: (a) Affiliate: shall mean any Person that directly, or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Person specified. (b) Change of Control: shall mean the occurrence of any of the following events: (i) The acquisition after the date of this Agreement 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 (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the units of beneficial interest of the Trust (the "Outstanding Units"); (ii) TexasBank ceases for any reason to be the trustee of the Trust; or (iii) Consummation of a sale, lease, exchange, or other disposition of all or substantially all of the assets of the Trust to any Person. (c) Claim: shall mean any threatened, pending, or completed action, suit, or proceeding (including, without limitation, securities laws actions, suits, and proceedings and also any cross claim or counterclaim in any action, suit, or proceeding), whether civil, criminal, arbitral, administrative, or investigative in nature, or any inquiry or investigation (including discovery), whether conducted by the Trust or any other Person, that Indemnitee in good faith believes might lead to the institution of any action, suit, or proceeding. (d) Expenses: shall mean all costs, expenses (including attorneys' and expert witnesses' fees), and obligations paid or incurred in connection with investigating, defending (including affirmative defenses and counterclaims), being a witness in, or participating in (including on appeal), or preparing to defend, be a witness in, or participate in, any Claim relating to any Indemnifiable Event. (e) Indemnifiable Event: shall mean any actual or alleged act, omission, statement, misstatement, event, or occurrence arising out of or related to Indemnitee's day-to-day management of the Trust's affairs, or by reason of any actual or alleged thing done or not done by Indemnitee in any such capacity (i) on behalf of the Trust or the Bank in its capacity as trustee of the Trust or (ii) for the benefit of the Trust or the Trust's unit holders while the Bank is trustee of the Trust. 2 EXECUTION COPY (f) Indemnifiable Liabilities: shall mean all Expenses and all other liabilities, damages (including, without limitation, punitive, exemplary, and the multiplied portion of any damages), judgments, payments, fines, penalties, amounts paid in settlement, and awards paid or incurred that arise out of, or in any way relate to, any Indemnifiable Event. (g) Potential Change of Control: shall be deemed to have occurred if (i) the Trust enters into an agreement, the consummation of which would result in the occurrence of a Change of Control or (ii) any Person publicly announces an intention to take or to consider taking actions that, if consummated, would constitute a Change of Control. (h) Reviewing Party: shall mean (i) an officer of the Bank (acting in its capacity as trustee of the Trust) who is not a party to the particular Claim for which Indemnitee is seeking indemnification or (ii) if a Change of Control has occurred and Indemnitee so requests, or if the Bank in its capacity as trustee of the Trust so elects, or if the Bank is a party to such Claim, Special Counsel. (i) Special Counsel: shall mean special, independent legal counsel selected by Indemnitee and approved by the Trust (which approval shall not be unreasonably withheld), and who has not otherwise performed material services for the Trust or for Indemnitee within the last three years (other than as Special Counsel under this Agreement or similar agreements). 2. Indemnification and Expense Advancement. (a) The Trust shall indemnify Indemnitee and hold Indemnitee harmless to the fullest extent permitted by law, as soon as practicable but in any event no later than 30 days after written demand is presented to the Trust, from and against any and all Indemnifiable Liabilities. Notwithstanding the foregoing, the obligations of the Trust under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which Special Counsel is involved) that Indemnitee is not permitted to be indemnified under applicable law. Any determination under this Section 2(a) shall be made promptly by the Reviewing Party. (b) If so requested by Indemnitee, the Trust shall advance to Indemnitee all reasonable Expenses incurred by Indemnitee to the fullest extent permitted by law (or, if applicable, reimburse Indemnitee for any and all reasonable Expenses incurred by Indemnitee and previously paid by Indemnitee) within ten business days after such request (an "Expense Advance"). The Trust shall be obligated from time to time at the request of Indemnitee to make or pay an Expense Advance in advance of the final disposition or conclusion of any Claim. In connection with any request for an Expense Advance, if requested by the Trust, Indemnitee or Indemnitee's counsel shall submit an affidavit stating that the Expenses to which the Expense Advances relate are reasonable. Any dispute as to the reasonableness of any Expense shall not delay an Expense Advance by the Trust. If, when, and to the extent that the Reviewing Party determines that (i) Indemnitee would not be permitted to be indemnified with respect to a Claim under applicable law or (ii) the amount of the Expense Advance was not reasonable, the Trust shall be entitled to be reimbursed by Indemnitee and Indemnitee hereby agrees to reimburse the Trust without interest (which agreement shall be an unsecured obligation of Indemnitee) for (x) all related Expense Advances theretofore made or paid by the Trust in the event that it is 3 EXECUTION COPY determined that indemnification would not be permitted or (y) the excessive portion of any Expense Advances in the event that it is determined that such Expenses Advances were unreasonable, in either case, if and to the extent such reimbursement is required by applicable law; provided, however, that if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee could be indemnified under applicable law, or that the Expense Advances were reasonable, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law or that the Expense Advances were unreasonable shall not be binding, and the Trust shall be obligated to continue to make Expense Advances, until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed), which determination shall be conclusive and binding. If there has been a Change of Control, the Reviewing Party shall be Special Counsel, if Indemnitee so requests. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively is not permitted to be indemnified in whole or part under applicable law or that any Expense Advances were unreasonable, Indemnitee shall have the right to commence litigation in any court in the state of Texas having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, and the Trust hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Trust and Indemnitee. (c) Nothing in this Agreement, however, shall require the Trust to indemnify Indemnitee with respect to any Claim initiated by Indemnitee, other than a Claim solely seeking enforcement of the Trust's indemnification obligations to Indemnitee or a Claim authorized by the Bank acting in its capacity as trustee of the Trust. 3. Change of Control. The Trust agrees that, if there is a Potential Change in Control or a Change of Control and if Indemnitee requests in writing that Special Counsel be the Reviewing Party, then Special Counsel shall be the Reviewing Party. In such a case, the Trust agrees not to request or seek reimbursement from Indemnitee of any indemnification payment or Expense Advances unless Special Counsel has rendered its written opinion to the Trust and Indemnitee that the Trust was not or is not permitted under applicable law to indemnify Indemnitee or that such Expense Advances were unreasonable. However, if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee could be indemnified under applicable law or that the Expense Advances were reasonable, any determination made by Special Counsel that Indemnitee would not be permitted to be indemnified under applicable law or that the Expense Advances were unreasonable shall not be binding, and the Trust shall be obligated to continue to make Expense Advances, until a final judicial determination is made with respect thereto (as to which all rights of appeal therefore have been exhausted or lapsed), which determination shall be conclusive and binding. The Trust agrees to pay the reasonable fees of Special Counsel and to indemnify Special Counsel against any and all expenses (including attorneys' fees), claims, liabilities, and damages arising out of or relating to this Agreement or Special Counsel's engagement pursuant hereto. 4. Indemnification for Additional Expenses. The Trust shall indemnify Indemnitee against any and all costs and expenses (including attorneys' and expert witnesses' fees) and, if requested by Indemnitee, shall (within two business days of that request) advance those costs and 4 EXECUTION COPY expenses to Indemnitee, that are incurred by Indemnitee if Indemnitee, whether by formal proceedings or through demand and negotiation without formal proceedings: (a) seeks to enforce Indemnitee's rights under this Agreement, (b) seeks to enforce Indemnitee's rights to expense advancement or indemnification under any other agreement, including, without limitation, the Indenture, now or hereafter in effect relating to Claims for Indemnifiable Events, or (c) seeks recovery under any directors' and officers' liability insurance policies maintained by the Bank or the Trust, in each case regardless of whether Indemnitee ultimately prevails; provided that a court of competent jurisdiction has not found Indemnitee's claim for indemnification or expense advancements under the foregoing clauses (a), (b) or (c) to be frivolous, presented for an improper purpose, without evidentiary support, or otherwise sanctionable under Federal Rule of Civil Procedure No. 11 or an analogous rule or law, and provided further, that if a court makes such a finding, Indemnitee shall reimburse the Trust for all amounts previously advanced to Indemnitee pursuant to this Section 4. Subject to the provisos contained in the preceding sentence, to the fullest extent permitted by law, the Trust waives any and all rights that it may have to recover its costs and expenses from Indemnitee. 5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Trust for some, but not all, of Indemnitee's Indemnifiable Liabilities, the Trust shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. 6. Contribution. (a) Contribution Payment. To the extent the indemnification provided for under any provision of this Agreement is determined (in the manner hereinabove provided) not to be permitted under applicable law, the Trust, in lieu of indemnifying Indemnitee, shall, to the extent permitted by law, contribute to the amount of any and all Indemnifiable Liabilities incurred or paid by Indemnitee for which such indemnification is not permitted. The amount the Trust contributes shall be in such proportion as is appropriate to reflect the relative fault of Indemnitee, on the one hand, and of the Trust and any and all other parties who may be at fault (collectively, including the Trust, the "Third Parties"), on the other hand. (b) Relative Fault. The relative fault of the Third Parties and the Indemnitee shall be determined (i) by reference to the relative fault of Indemnitee as determined by the court or other governmental agency or (ii) to the extent such court or other governmental agency does not apportion relative fault, by the Reviewing Party after giving effect to, among other things, the relative intent, knowledge, access to information, and opportunity to prevent or correct the relevant events, of each party, and other relevant equitable considerations. The Trust and Indemnitee agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 6(b). 7. Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified under any provision of this Agreement or to receive contribution pursuant to Section 6 of this Agreement, to the extent permitted by law the burden of proof shall be on the Trust to establish that Indemnitee is not so entitled. 5 EXECUTION COPY 8. No Presumption. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval), or conviction, or upon a plea of nolo contendere, or its equivalent, or an entry of an order of probation prior to judgment shall not create a presumption (other than any presumption arising as a matter of law that the parties may not contractually agree to disregard) that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 9. Non-exclusivity. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Indenture or the laws of the State of Texas or otherwise. To the extent that a change in the laws of the State of Texas (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by that change. Indemnitee's rights under this Agreement shall not be diminished by any amendment to the Indenture, or of any other agreement or instrument to which Indemnitee is not a party, and shall not diminish any other rights that Indemnitee now or in the future has against the Bank or the Trust. 10. Liability Insurance. Except as otherwise agreed to by the Trust and Indemnitee in a written agreement, to the extent the Trust maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by that policy or those policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Person under such policy. 11. Period of Limitations. No action, lawsuit, or proceeding may be brought against Indemnitee or Indemnitee's spouse, heirs, executors, or personal or legal representatives, nor may any cause of action be asserted in any such action, lawsuit, or proceeding, by or on behalf of the Trust, after the expiration of two years after the statute of limitations commences with respect to Indemnitee's act or omission that gave rise to the action, lawsuit, proceeding, or cause of action; provided, however, that, if any shorter period of limitations is otherwise applicable to any such action, lawsuit, proceeding, or cause of action, the shorter period shall govern. 12. Amendments. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any provision of this Agreement shall be effective unless in a writing signed by the party granting the waiver. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall that waiver constitute a continuing waiver. 13. Other Sources. Indemnitee shall not be required to exercise any rights that Indemnitee may have against any other Person (for example, under an insurance policy) before Indemnitee enforces his rights under this Agreement. However, to the extent the Trust actually indemnifies Indemnitee or advances her Expenses, the Trust shall be subrogated to the rights of Indemnitee and shall be entitled to enforce any such rights which Indemnitee may have against third parties. Indemnitee shall assist the Trust in enforcing those rights if it pays her costs and expenses of doing so. If Indemnitee is actually indemnified or advanced Expenses by any third party, then, for so long as Indemnitee is not required to disgorge the amounts so received, to that 6 EXECUTION COPY extent the Trust shall be relieved of its obligation to indemnify Indemnitee or advance Indemnitee Expenses. 14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by merger or consolidation), spouses, heirs, and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Bank or manage the day-to-day operations of the Trust. 15. Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, that provision shall be fully severable; this Agreement shall be construed and enforced as if that illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of that illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Agreement a provision as similar in terms to the illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. 16. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas applicable to contracts made and to be performed in that state without giving effect to the principles of conflicts of laws. 17. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 18. Notices. Whenever this Agreement requires or permits notice to be given by one party to the other, such notice must be in writing to be effective and shall be deemed delivered and received by the party to whom it is sent upon actual receipt (by any means) of such notice. Receipt of a notice by the Bank shall be deemed receipt of such notice by the Trust. 19. Complete Agreement. This Agreement constitutes the complete understanding and agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof, other than any indemnification rights that Indemnitee may enjoy under the Indenture or the laws of the State of Texas. 20. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but in making proof hereof it shall not be necessary to produce or account for more than one such counterpart. [Signature page follows] 7 EXECUTION COPY EXECUTED as of the date first written above. SAN JUAN BASIN ROYALTY TRUST BY: TEXASBANK, AS TRUSTEE By: /s/ W. D. CRANZ, JR. ----------------------------------------- Name: W. D. Cranz, Jr. ---------------------------------------- Title: Executive Vice President --------------------------------------- INDEMNITEE /s/ LEE ANN ANDERSON --------------------------------------------- LEE ANN ANDERSON