-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S/ws4buMQ8t5PW7zBuZYoSjkrJGGJk52SQ8HKXjSBP254UXvmnQGQIkZXYCBpWjF ziXLlFYz9zPauJ6Jl4kDAw== 0000950129-02-000774.txt : 20020414 0000950129-02-000774.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950129-02-000774 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BURLINGTON RESOURCES INC CENTRAL INDEX KEY: 0000833320 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 911413284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09971 FILM NUMBER: 02551466 BUSINESS ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: SUITE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 BUSINESS PHONE: 7136249500 MAIL ADDRESS: STREET 1: 5051 WESTHEIMER STREET 2: STE 1400 CITY: HOUSTON STATE: TX ZIP: 77056 10-K 1 h92808e10-k.txt BURLINGTON RESOURCES INC. - DECEMBER 31, 2001 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-9971 BURLINGTON RESOURCES INC. 5051 WESTHEIMER, SUITE 1400, HOUSTON, TEXAS 77056 TELEPHONE: (713) 624-9500 INCORPORATED IN THE STATE OF DELAWARE EMPLOYER IDENTIFICATION NO. 91-1413284
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE PREFERRED STOCK PURCHASE RIGHTS THE ABOVE SECURITIES ARE REGISTERED ON THE NEW YORK STOCK EXCHANGE. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates of the registrant: Common Stock aggregate market value as of January 31, 2002: $6,878,464,321 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class: Common Stock, par value $.01 per share, on January 31, 2002, Shares Outstanding: 200,889,729 DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: Burlington Resources Inc. definitive proxy statement, to be filed not later than 120 days after the end of the fiscal year covered by this report, is incorporated by reference into Part III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Below are certain definitions of key terms used in this Form 10-K.
Bbls Barrels BCF Billion Cubic Feet BCFE Billion Cubic Feet of Gas Equivalent MBbls Thousands of Barrels MMBbls Millions of Barrels MCF Thousand Cubic Feet MMCF Million Cubic Feet MCFE Thousand Cubic Feet of Gas Equivalent MMCFE Million Cubic Feet of Gas Equivalent MMBTU Million British Thermal Units TCF Trillion Cubic Feet TCFE Trillion Cubic Feet of Gas Equivalent 2-D Two Dimensional 3-D Three Dimensional DD&A Depreciation, Depletion and Amortization NGLs Natural Gas Liquids Deepwater Water Depths of 1,000 Feet or Greater in the Gulf of Mexico Shelf Shallow Waters of the Outer Continental Shelf in the Gulf of Mexico
Developed Acreage is the number of acres that are allocated or assignable to producing wells or wells capable of production. Development well is a well drilled within the proved area of an oil or natural gas field to the depth of a stratigraphic horizon known to be productive. Dry Hole is a well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes. Exploratory well is a well drilled to find and produce oil or natural gas reserves that is not a development well. Farm-in or farm-out is an agreement whereby the owner of a working interest in an oil and gas lease assigns the working interest or a portion thereof to another party who desires to drill on the leased acreage. Generally, the assignee is required to drill one or more wells in order to earn its interest in the acreage. The assignor usually retains a royalty or reversionary interest in the lease. The interest received by an assignee is a "farm-in," while the interest transferred by the assignor is a "farm-out." Field is an area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature or stratigraphic condition. Gross acres or gross wells are the total acres or wells in which a working interest is owned. Net acreage and net oil and gas wells are obtained by multiplying gross acreage and gross oil and gas wells by the Company's working interest percentage in the properties. Oil and NGLs are converted into cubic feet of gas equivalent based on 6 MCF of gas to one barrel of oil or NGLs. Productive well is a well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes. Proved reserves represent estimated quantities of oil and gas which geological and engineering data demonstrate, with reasonable certainty, can be recovered in future years from known reservoirs under existing economic and operating conditions. Reservoirs are considered proved if shown to be economically producible by either actual production or conclusive formation tests. Proved developed reserves are the portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves are the portion of proved reserves which can be expected to be recovered from new wells on undrilled proved acreage, or from existing wells where a relatively major expenditure is required for completion. Undeveloped acreage is lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and natural gas. Working interest is the operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production. Workover is operations on a producing well to restore or increase production. BURLINGTON RESOURCES INC. TABLE OF CONTENTS
PAGE PART I Items One and Two Business and Properties................................ 1 Employees.............................................. 13 Item Three Legal Proceedings...................................... 13 Item Four Submission of Matters to a Vote of Security Holders.... 14 PART II Item Five Market for Registrant's Common Equity and Related Stockholder Matters................................... 14 Item Six Selected Financial Data................................ 15 Items Seven and Seven A Management's Discussion and Analysis of Financial Condition and Results of Operations and Quantitative and Qualitative Disclosures About Market Risk......... 15 Item Eight Financial Statements and Supplementary Financial Information........................................... 27 Item Nine Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 60 PART III Items Ten and Eleven Directors and Executive Officers of the Registrant and Executive Compensation................................ 61 Item Twelve Security Ownership of Certain Beneficial Owners and Management............................................ 61 Item Thirteen Certain Relationships and Related Transactions......... 61 PART IV Item Fourteen Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 62
PART I ITEMS ONE AND TWO BUSINESS AND PROPERTIES Burlington Resources Inc. ("BR") is a holding company engaged, through its principal subsidiaries, Burlington Resources Oil & Gas Company LP (formerly known as Burlington Resources Oil & Gas Company), The Louisiana Land and Exploration Company ("LL&E"), Burlington Resources Canada Ltd. (formerly known as Poco Petroleums Ltd.), Canadian Hunter Exploration Ltd. ("Hunter"), and their affiliated companies (collectively the "Company"), in the exploration for and the development, production and marketing of crude oil, NGLs and natural gas. On September 17, 2001, as part of a reorganization of the Company's Canadian subsidiaries, Burlington Resources Canada Inc., Burlington Resources Canada Energy Ltd. and another wholly-owned Canadian subsidiary of the Company, were amalgamated and are now known as Burlington Resources Canada Ltd. The Company is one of North America's largest producers of natural gas. On October 8, 2001, BR and Hunter entered into an agreement pursuant to which BR agreed to make an offer to purchase all of the outstanding shares of Hunter for cash consideration of C$53 per share representing an aggregate value of approximately U.S. $2.1 billion resulting in an excess purchase price of approximately $793 million which has been reflected as goodwill. On December 5, 2001, the transaction was consummated. This acquisition was funded primarily with proceeds from the issuance of $1.5 billion of fixed-rate notes and $400 million of commercial paper. The transaction was accounted for under the purchase method. The Hunter acquisition added a portfolio of attractive producing properties, long-lived reserves and exploration and exploitation potential. The assets acquired in the acquisition are primarily located in Canada's Western Canadian Sedimentary Basin, an area in which the Company operated prior to the Hunter acquisition. The most significant of the assets is the Deep Basin, North America's third-largest natural gas field, with approximately 1.5 million gross acres and 17 major producing horizons. The Hunter acquisition added estimated proved reserves of 1.3 TCFE along with approximately two million net undeveloped acres. The Hunter properties averaged net production of 364 MMCF of gas per day, 16.7 MBbls of NGLs per day and .5 MBbls of oil per day during December 2001, the period in which the Company owned and operated these assets. See Note 2 of Notes to Consolidated Financial Statements for more information related to this transaction. In October 2001, the Company announced its intent to sell certain non-core, non-strategic properties in order to improve the overall quality of its portfolio. As a result, in December 2001, the Company recorded a pretax impairment charge of $184 million ($116 million after tax) primarily related to these properties resulting in net properties held for sale of $338 million and related restructuring liabilities of $10 million. The $10 million restructuring liability is related to severance and other exit costs and is included in Accounts Payable at December 31, 2001. The held for sale properties are expected to be sold in 2002. The Company expects to use the proceeds from property sales to repay debt. In November 1999, BR consummated the acquisition of Poco Petroleums Ltd. valued at approximately $2.5 billion. In October 1997, BR completed a merger with LL&E valued at approximately $3 billion. Both transactions were accounted for under the pooling of interests method. To reflect the change in the characteristics of its oil and gas properties, in 2001, the Company began reporting its production volumes and reserves in three streams: natural gas, crude oil and NGLs. Under this methodology, gas production and reserves are reported after extracting liquids and eliminating non-hydrocarbon gases from the natural gas stream. This change had no financial impact and no material impact on total equivalent reserves or production volumes. Amounts for prior years have been reclassified to conform to current presentation. Following is a review of the Company's worldwide major operating areas. 1 NORTH AMERICA The Company's asset base is dominated by North American natural gas properties. Its extensive North American lease holdings extend from the USA's Gulf of Mexico to Canada's Mackenzie Delta region in the Northwest Territories of the Canadian Arctic and Alaska's north slope. Reflecting a diverse yet balanced portfolio, the Company's North American operations include a mix of production, exploitation and exploration assets. In 2001, oil and gas capital expenditures for the Company's USA operations totaled $583 million, and consisted of $403 million for development projects, $113 million for exploration and $67 million for proved reserve acquisitions. The Company's USA production in 2001 represented 67 percent of the Company's total or 1,121 MMCF of gas per day, 34.6 MBbls of NGLs per day and 44.0 MBbls of oil per day. At December 31, 2001, USA proved reserves totaled 7.7 TCFE and represented 66 percent of the Company's total. In 2001, oil and gas capital expenditures for the Company's Canadian operations totaled $2,282 million, and consisted of $288 million for development projects, $94 million for exploration and $1,900 million for proved reserve acquisitions, primarily the Hunter acquisition. The Company's Canadian production in 2001 represented 24 percent of the Company's total or 433 MMCF of gas per day, 12.5 MBbls of NGLs per day and 11.9 MBbls of oil per day. At December 31, 2001, Canadian proved reserves totaled 2.8 TCFE and represented 23 percent of the Company's total. USA San Juan Basin The San Juan Basin ("San Juan") is the Company's most prolific operating area in terms of reserves and production. The area's activities are centered in northwest New Mexico and southwest Colorado. San Juan encompasses nearly 7,500 square miles, or approximately 4.8 million acres, with the major portion located in the New Mexico counties of Rio Arriba and San Juan. The Company is a significant holder of productive leasehold acreage in this area with over 840,000 net acres under its control. The Company operates over 6,800 well completions in San Juan and holds interests in an additional 3,900 non-operated well completions. The Company also owns and operates the Val Verde gathering and processing system, consisting of one of San Juan's largest treating plants and approximately 460 miles of gathering lines with 12 compressor stations. In 2001, the Company invested $146 million in oil and gas capital that included investments for over 275 new wells and approximately 630 mechanical workovers. Over 170 of the new wells and 360 of the workovers were Company operated. The Company's net production from San Juan averaged approximately 629 MMCF of gas per day, 28.8 MBbls of NGLs per day and 1.4 MBbls of oil per day during 2001. A majority of the Company's growth in San Juan during the 1990's came from production of coalbed methane gas from the Fruitland Coal formation. Beginning in 1997, as the Fruitland Coal play matured, the Company began placing greater emphasis on increasing production from conventional gas-producing formations such as the Mesaverde, the Pictured Cliffs and the Dakota. The Mesaverde formation, which consists of the Lewis Shale, Cliffhouse, Menefee and Point Lookout sands, is the largest producing conventional formation in San Juan. In 2001, the Company continued its aggressive infill drilling program in San Juan's Mesaverde formation developing an additional 76 BCFE of reserves. In the last four years, the Company has added over 400 BCFE of reserves in the Mesaverde formation and developed just over one half of these reserves. The Company drilled 11 increased density wells in two areas in the Dakota formation and obtained production and pressure data in 2001. Based on this data, the Company presented a request for basin wide Dakota well spacing of 80 acres to the New Mexico Oil Conservation Division on October 18, 2001. San Juan is planning 15 of the 80-acre Dakota wells for 2002. Although the Company's production from the Fruitland Coal formation peaked in 1998, the Company continues to optimize coal gas production through the application of technology. The Company has an ongoing optimization program that consists of recavitating existing wells, adding compression and installing artificial 2 lift, where appropriate, to mitigate production decline. In 2001, net production from the Fruitland Coal averaged 253 MMCF of gas per day from approximately 1,400 wells. Development of the conventional horizons and minimizing production decline in the Fruitland Coal continue to be a primary focus for the Company in San Juan. In 2002, the Company will continue to exploit the San Juan reserve base with low-risk, high return development projects while setting up future exploitation opportunities by testing new ideas such as increased density drilling in the Fruitland Coal and Pictured Cliffs formations. Wind River Basin The Madden Field, located in the Wind River Basin ("Wind River"), covers more than 70,000 acres in Fremont and Natrona Counties, Wyoming. Production in this basin occurs from multiple horizons ranging in depth from 5,000 feet to over 25,000 feet. During 2001, the Company delineated the deep Madison reservoir with the testing of the Big Horn #6-27 wildcat, accelerated infill development with the drilling of the Big Horn #7-34 and #8-35 wells and continued construction of the Lost Cabin Gas Plant Train III. All gas produced from the Madison formation is sour and is currently processed at Lost Cabin Gas Plant Trains I and II which have a combined inlet capacity of 130 MMCF of gas per day. Completion of Lost Cabin Gas Plant Train III is expected during the third quarter of 2002, adding 180 MMCF of gas per day of inlet capacity. Total Lost Cabin Gas Plant inlet capacity will then be 310 MMCF of gas per day with plant tail gate capacity of 200 MMCF of gas per day. The Company owns a 49 percent working interest in the plant and approximately 42 percent of the Madison reservoir. In Wind River, the Company invested $30 million on approximately 30 drilling and workover projects in the deep Madison and shallower formations. The Company also invested $65 million on plant construction in 2001. Net production for Wind River averaged 74 MMCF of gas per day in 2001. Williston Basin The Williston Basin ("Williston") encompasses approximately 225,000 square miles and has multiple producing horizons. The Company controls over 3.6 million acres in Williston through both mineral and leasehold interests. Net production for Williston averaged 7 MMCF of gas per day and 14.0 MBbls of oil per day in 2001. Activities in Williston have been focused on the Cedar Creek Anticline. Production from the Cedar Creek Anticline was 9.6 MBbls of oil per day during 2001. The Company successfully unitized the Cedar Hills South Unit and initiated waterflood development during 2001. The Company also initiated a down-spacing pilot in the East Lookout Butte Unit during 2001. This pilot will test the feasibility of 160-acre infill wells to improve waterflood efficiency. In 2001, the Company invested $51 million on drilling and workover projects in Williston. Certain non-core producing assets in Williston are scheduled for divestiture during 2002. Anadarko Basin The Anadarko Basin ("Anadarko") encompasses over 30,000 square miles and contains some of the deepest producing formations in the world. The Company produces from multiple horizons in the basin, ranging in depth from 11,000 feet to over 21,000 feet. The Company controls over 250,000 net acres principally located in western Oklahoma. Net production for Anadarko averaged 97 MMCF of gas per day and 1.4 MBbls of NGLs per day in 2001. In 2001, the Company invested $45 million in Anadarko. Permian Basin In 2001, Permian Basin ("Permian") operations were focused primarily on the Waddell Ranch and Sonora areas. These areas comprise 62 percent of the Company's net production from this basin. The remainder of Permian operations were outsourced under property management agreements and are scheduled for divestiture in 2002. Net production for the entire Permian averaged 54 MMCF of gas per day, 2.3 MBbls of NGLs per day and 8.0 MBbls of oil per day in 2001. The Company spent $33 million in Permian during 2001. 3 Onshore Gulf Coast The Onshore Gulf Coast covers plays in south Louisiana and south and east Texas, with a net acreage position of more than 870,000 acres including 660,000 acres of mineral fee lands in south Louisiana where the Company owns the mineral rights and surface lands. Net production from these plays in 2001 averaged 134 MMCF of gas per day, .5 MBbls of NGLs per day and 7 MBbls of oil per day. The focus for south Louisiana centers on exploiting lower risk opportunities in and around core assets while exploring select higher risk, higher reward opportunities. In south Louisiana, the Company spent $59 million of oil and gas capital to participate in a total of 44 projects in 2001. Exploitation activities included the drilling of a deeper well on the northwest flank in Bay St. Elaine. An offset well was drilled resulting in accelerated development of the shallower pay encountered in the initial well. Additional drilling successes also occurred at the Pass Wilson and Ramos fields. Activity in south and east Texas in 2001 focused primarily on the development of assets in order to maintain production volumes. The Company invested approximately $6 million of oil and gas capital on four projects. Net production was 22 MMCF of gas per day at Armstrong Ranch in Jim Hogg County where the Company has drilled 11 wells over the past three years. The Company plans to divest substantially all of its south and east Texas assets in 2002 and focus on opportunities in south Louisiana with its significant land position and large 3-D seismic database. Gulf of Mexico Shelf Trend The Gulf of Mexico Shelf Trend ("Shelf") encompasses plays in the shallow waters of the Gulf of Mexico at water depths of less than 1,000 feet. Over the last three years, the Company has de-emphasized activity in the Shelf in favor of investments in other areas which have longer-life assets with more favorable cost structures and investment economics. Accordingly, capital investments in this area have been reduced from annual levels of over $200 million in 1998 to levels below $50 million in each of the last three years. During 2001, the Company participated in a total of 42 Shelf projects and produced an average of 109 MMCF of gas per day, .9 MBbls of NGLs per day and 6.7 MBbls of oil per day. The Company plans to divest substantially all of its Shelf assets in 2002 and will focus its Gulf Coast activities on onshore south Louisiana. Deepwater Gulf of Mexico The Company owns 176,000 net acres in the deepwater provinces of the Gulf of Mexico ("Deepwater"). The Company's exploration strategy for Deepwater focuses on exploring opportunities identified on Company owned leases, supplemented by third party generated prospects. The Company invested $78 million in Deepwater in 2001. Net production during 2001 averaged 12 MMCF of gas per day and 2.1 MBbls of oil per day from the non-operated Pluto project that was completed in late 1999. The Company plans to divest Pluto in early 2002. Alaska The Company was successful in the May 2001 Alaska State lease sale, purchasing 184,320 net acres of land for $2 million. These lands are located in the gas prone foothills south of Prudhoe Bay. CANADA Western Canadian Sedimentary Basin In the Western Canadian Sedimentary Basin, the Company is active in exploration, exploitation and production of oil and gas. A portfolio of opportunities is maintained ranging from conventional exploration and exploitation in Alberta and British Columbia, to frontier exploration in the Mackenzie Delta. Exploitation and exploration efforts in 2001 were focused primarily within the Mesozoic and Mississippian sections of Central Alberta, in and around the existing producing assets of Whitecourt/Wolf and O'Chiese. The multi-zone potential of these areas, ranging in depth from 4,100 feet to 10,500 feet, makes 4 them an attractive part of the basin, and core assets to the Company. Eleven exploration and 124 exploitation successes were realized in these asset areas, and will create additional drilling locations for 2002. A single well Banff discovery in the O'Chiese area has a gross potential of 40 BCF of gas with high deliverability and will attract more drilling in 2002. The development and exploitation program in the Wolf area resulted in the Wolf plant being loaded to capacity. Net production from these two assets averaged 225 MMCF of gas per day, 7.5 MBbls of NGLs per day and 2.3 MBbls of oil per day for 2001 with an investment of $172 million. Exploitation and exploration activities in eastern Alberta and southeast Saskatchewan in the shallow gas sands also resulted in 78 successes. Net production averaged 65 MMCF of gas per day, 2.7 MBbls of NGLs per day and 8.6 MBbls of oil per day with an investment of $60 million for 2001. Higher impact exploration opportunities have been pursued within the deeper Devonian section of western and northern Alberta and northeastern British Columbia. Active areas range from the Gregg Lakes/Berland area to the Hamburg area in Alberta, and the foothills trend of Bullmoose/Sikunka in northeast British Columbia. A successful 2001 development re-entry was drilled in the Gregg Lakes area, targeting the Cooking Lake formation to a total vertical depth of 18,000 feet. This is the second successful well in this field and one of the deepest horizontal wells in western Canada at 21,670 feet measured depth. Both wells are expected to be on production in 2002. Foothills exploration and development drilling in British Columbia was reduced in 2001 with only two gross wells being drilled. The Company will be reducing its capital exposure on this risky play trend in the future by utilizing farm-outs to evaluate the future potential of its lands. Exploration and development drilling in the Hamburg/Lady Fern area, for Slave Point reef targets using 3-D seismic data, continues to confirm the Company's interpretation of the geophysical signature and is expected to result in a number of additional locations for 2002. Net production from the area averaged 114 MMCF of gas per day, .9 MBbls of NGLs per day and 1.0 MBbls of oil per day for 2001. The Company invested $114 million here. Beaufort Basin The Northwest Territories Mackenzie Delta exploration program continued an aggressive pace in 2001. The Company and its partners, BP/Canada and Chevron, completed 181 kilometers ("km") of 2-D and 139 square km of 3-D seismic on our 540,000 gross acre exploration licenses. Plans are in place to shoot 310 square km of 3-D seismic in 2002 and begin drilling exploration wells in 2003. Because its costs are currently being carried by its partners, the Company incurred no expenditures here during 2001. OTHER INTERNATIONAL Other International operations are a combination of exploration projects and large field development operations. Key focus areas of operations are in the Northwest European Shelf, North Africa, Latin America, the Far East and West Africa. In 2001, oil and gas capital expenditures for Other International operations totaled $217 million and consisted of $135 million for development projects, $52 million for exploration and $30 million related to proved reserve acquisitions. Other International production in 2001 represented nine percent of the Company's total or 170 MMCF of gas per day and 7.3 MBbls of oil per day. At December 31, 2001, Other International proved reserves totaled 1.3 TCFE and represented 11 percent of the Company's total. Northwest European Shelf Other International development and production operations are currently focused in Northwest Europe, which provides the majority of production outside of the U.S. and Canada and includes assets in the East Irish Sea and in the United Kingdom ("U.K.") and Dutch sectors of the North Sea. The East Irish Sea assets became part of the portfolio in 1997 with the acquisition of ten licenses covering 267,000 acres. The Company has a 100 percent working interest in seven operated gas fields. First production from the two sweet gas fields at Dalton and Millom commenced in the third quarter of 1999 and at year-end 2001, the last of six producing wells drilled at Millom was being completed. Development of the sour gas fields is now underway with first production planned in 2004. In addition to offshore production facilities and 5 pipelines, a new onshore processing terminal is expected to be built to receive and process the sour gas prior to final sale. Net production from the East Irish Sea asset averaged 100 MMCF of gas per day during 2001. The Company invested $81 million in the East Irish Sea in 2001. The Company's remaining Northwest European Shelf operations consist of non-operated production from the Brae and T-Block complexes in the U.K. sector of the North Sea and from the CLAM joint venture in the Dutch sector. North Africa The Company's North African operations are concentrated in Algeria and offshore Egypt. Development operations are now underway in Algeria, with first production expected in the first half of 2003. The Company invested $62 million in Algeria in 2001. In Menzel Lejmat Block 405a, in Algeria's Berkine Basin, the Company is the operator and holds a 65 percent working interest. A total of 31 wells have been drilled, including ten wildcat exploration wells. Development of the two MLN Fields is now underway under a parliamentary decree and the Exploitation Permit, issued by the Algerian government in late 2000. During 2001, the Company signed a new Petroleum Sharing Contract ("PSC") with Sonatrach, the Algerian national oil company, for an additional exploration license, Block 402d, in the Berkine Basin. During 2002, 3-D seismic operations are expected to commence under this new PSC. The Company also holds a small interest in the Ourhoud Field in the northeast portion of the block. Ourhoud is currently under development by Sonatrach with first production expected in 2003. Exploitation License Agreements are presently being processed by Sonatrach for additional satellite fields to the MLN Field. In the future, applications will be filed for the southern MLSE Fields. Engineering design preparations were advanced in 2001 for the development of the non-operated Offshore North Sinai gas fields in Egypt for which a gas sales agreement exists with the Egyptian General Petroleum Corporation. Latin America During 2001, the Company pursued opportunities in the sub-Andean plays in South America. Across Ecuador and Peru, the Company farmed-in to three new exploration blocks, shot 200 km of 2-D seismic, drilled one well and concluded negotiations to acquire interests in one producing and one exploitation property. Additionally, the Company made substantial progress toward moving one existing block out of force majeure to enable exploration activities. The exploration farm-ins include a 23.9 percent interest in Peru Block 35 and a 20 percent interest in Peru Block 34. Blocks 34 and 35 have 2.8 million and 2.6 million acres, respectively, in the Ucayali Basin, and are located approximately 100 km north of Camisea. Interest in both blocks was obtained from Repsol, the operator, and Perez Companc. The Mashansha prospect will be drilled on Block 35 in 2002. BR also farmed-in to a 50 percent interest in Ecuador Block 23. The Compania General de Combustibles S.A. operated block is adjacent to Block 24, which is owned 100 percent by BR. Efforts continue to focus on indigenous issues in these two blocks to enable exploration efforts. A field geological study and a 200 km, 2-D seismic acquisition program were completed in Peru Block 87, in an effort to better define multiple prospects. Processing of the data will be completed in time to drill during the dry season of 2002, if warranted. The Guineyacu prospect on Peru Block 32 was drilled mid-year but found sub-economic quantities of oil and the block was subsequently released to the government. In Ecuador, the acquisition of a 25 percent interest in Ecuador Block 7 and a 32.5 percent interest in Ecuador Block 21 from Sipetrol and Clapsa provides production, development and exploration opportunities. This acquisition closed on February 8, 2002. Gross production from Block 7 averaged approximately 14.5 MBbls of oil per day in 2001. Exploration and exploitation opportunities also exist on the block. Development of the Yuralpa Field is underway on Block 21, with first production anticipated during 2003. 6 BR has a 25.7 percent interest in the Sierra Chata concession in the Neuquen Basin in Argentina as a result of the Hunter acquisition. The asset has a gross sales capacity of 178 MMCF of gas per day through 42 producing wells. Net production from this asset averaged 21 MMCF of gas per day during December 2001. Gas marketing efforts have largely focused on Chilean and Argentine markets, facilitated through existing infrastructure, which enables substantial flexibility. BR holds a 13.7 percent interest in the Casanare concession area in Colombia, which has maintained production of 1.5 MBbls of oil per day net, due to a development drilling and workover program. The interest in Casanare is scheduled for divestiture during 2002. Far East In the Far East, the Company continues to focus on selected basins in China. The Company is targeting exploration and exploitation opportunities to add to its existing leasehold position. In 2001, approval was received and work for the Panyu development project began. The Panyu development involves two offshore oil fields, Bootes and Ursa, located in Block 15/34. The Company holds a 24.5 percent non-operated interest in Block 15/34, located in the Pearl River Mouth Basin offshore China. These fields contain net proved reserves of 14.7 MMBbls of oil. Devon is the operator and first production is expected in 2003. The Company obtained the Chuanzhong Block in the Sichuan Basin onshore China in 2000. This natural gas project is currently in the appraisal phase of development and the Company holds a 100 percent operated interest. This project offers an opportunity to apply the Company's expertise in exploitation of tight gas reservoirs in a concession with substantial reserve potential. The project is currently in a pilot phase of drilling new wells and stimulating existing wells. Additional work is contingent on successful negotiation of a long-term gas marketing agreement. The Company invested $15 million in China in 2001. West Africa In West Africa, the Company has been targeting acquisitions of low working interests in a variety of new and untested deepwater plays that have the promise of high upside potential. The three blocks in Gabon that the Company holds with operator, Agip, did not initiate drilling in 2001 due to rig equipment problems. The license period for these blocks has been extended for a year and drilling is expected to occur in the second quarter of 2002. In 2001, the Company added to its exploration acreage portfolio in the region by entering into an agreement with BP to acquire their entire 20 percent interest in Block 21, deepwater Angola. The Company's entry into this block is expected in 2002. Together with its large acreage position in deepwater Gabon, the Company has now established a foothold in a number of plays in the area. The Company's approach is to learn from the exploration activities expected to occur in the coming year. 7 RESERVES The following table sets forth estimates by the Company's petroleum engineers of proved oil, NGL and gas reserves at December 31, 2001. These reserves have been reduced for royalty interests owned by others. To reflect the change in the characteristics of its oil and gas properties, in 2001, the Company began reporting its production volumes and reserves in three streams: natural gas, crude oil and NGLs. Under this methodology, gas reserves are reported after extracting liquids and eliminating non-hydrocarbon gases from the natural gas stream. This change had no material impact on total equivalent reserves.
DECEMBER 31, 2001 ---------------------------------------- PROVED PROVED TOTAL PROVED DEVELOPED UNDEVELOPED RESERVES --------- ----------- ------------ NORTH AMERICA USA Gas (BCF)........................................... 3,771 1,121 4,892 NGLs (MMBbls)....................................... 175.5 52.2 227.7 Oil (MMBbls)........................................ 163.7 80.6 244.3 Total USA (BCFE)............................... 5,806 1,918 7,724 Canada Gas (BCF)........................................... 1,758 378 2,136 NGLs (MMBbls)....................................... 39.3 8.4 47.7 Oil (MMBbls)........................................ 38.4 18.2 56.6 Total Canada (BCFE)............................ 2,224 538 2,762 OTHER INTERNATIONAL Gas (BCF)........................................... 478 419 897 Oil (MMBbls)........................................ 9.3 61.7 71.0 Total Other International (BCFE)............... 534 789 1,323 WORLDWIDE Gas (BCF)........................................... 6,007 1,918 7,925 NGLs (MMBbls)....................................... 214.8 60.6 275.4 Oil (MMBbls)........................................ 211.4 160.5 371.9 Total Worldwide (BCFE)......................... 8,564 3,245 11,808
For further information on reserves, including information on future net cash flows and the standardized measure of discounted future net cash flows, see "Supplementary Financial Information -- Supplemental Oil and Gas Disclosures." PRODUCTIVE WELLS Working interests in productive wells at December 31, 2001 follow.
GROSS NET ------ ------ NORTH AMERICA USA Gas.................................................... 11,493 6,881 Oil.................................................... 4,969 2,894 Canada Gas.................................................... 5,327 3,677 Oil.................................................... 2,228 1,431 OTHER INTERNATIONAL Gas.................................................... 145 24 Oil.................................................... 147 27 WORLDWIDE Gas.................................................... 16,965 10,582 Oil.................................................... 7,344 4,352
8 NET WELLS DRILLED Drilling activity in 2001 was principally in the Western Canadian Sedimentary, San Juan, Gulf Coast, Permian, Anadarko, Wind River and Williston Basins. The following table sets forth the Company's net productive and dry wells.
YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 ----- ----- ----- NORTH AMERICA USA Productive Exploratory.......................................... 6.0 1.2 9.3 Development.......................................... 271.0 159.6 183.1 Dry Exploratory.......................................... 8.5 3.9 9.4 Development.......................................... 10.1 5.2 4.4 ----- ----- ----- Total Net Wells -- USA............................ 295.6 169.9 206.2 ----- ----- ----- Canada Productive Exploratory.......................................... 22.9 56.5 67.4 Development.......................................... 158.8 73.4 30.6 Dry Exploratory.......................................... 13.4 44.1 3.6 Development.......................................... 48.3 17.0 4.2 ----- ----- ----- Total Net Wells -- Canada......................... 243.4 191.0 105.8 ----- ----- ----- OTHER INTERNATIONAL Productive Exploratory.......................................... 2.1 3.2 2.1 Development.......................................... 5.8 2.4 3.2 Dry Exploratory.......................................... 3.1 2.1 2.0 Development.......................................... .1 .1 -- ----- ----- ----- Total Net Wells -- Other International............ 11.1 7.8 7.3 ----- ----- ----- WORLDWIDE Productive Exploratory.......................................... 31.0 60.9 78.8 Development.......................................... 435.6 235.4 216.9 Dry Exploratory.......................................... 25.0 50.1 15.0 Development.......................................... 58.5 22.3 8.6 ----- ----- ----- Total Net Wells -- Worldwide...................... 550.1 368.7 319.3 ===== ===== =====
As of December 31, 2001, 41 gross wells, representing approximately 31 net wells, were being drilled. 9 ACREAGE Working interests in developed and undeveloped acreage at December 31, 2001 follow.
GROSS NET ---------- ---------- NORTH AMERICA USA Developed Acres........................................ 5,430,943 2,927,290 Undeveloped Acres...................................... 10,348,570 8,500,473 Canada Developed Acres........................................ 3,012,054 1,939,946 Undeveloped Acres...................................... 6,180,240 4,467,704 OTHER INTERNATIONAL Developed Acres........................................ 368,263 82,470 Undeveloped Acres...................................... 28,655,846 12,117,035 WORLDWIDE Developed Acres........................................ 8,811,260 4,949,706 Undeveloped Acres...................................... 45,184,656 25,085,212
CAPITAL EXPENDITURES Following are the Company's capital expenditures.
YEAR ENDED DECEMBER 31, ------------------------ 2001 2000 1999 ------ ------ ---- ($ MILLIONS) NORTH AMERICA USA Oil and Gas Activities................................. $ 583 $ 412 $488 Plants & Pipelines..................................... 70 56 14 Administrative......................................... 20 19 38 ------ ------ ---- Total USA......................................... 673 487 540 ------ ------ ---- Canada Oil and Gas Activities................................. 2,282 316 291 Plants & Pipelines..................................... 276 20 4 Administrative......................................... 5 4 4 ------ ------ ---- Total Canada...................................... 2,563 340 299 ------ ------ ---- OTHER INTERNATIONAL Oil and Gas Activities................................. 217 179 148 Administrative......................................... 1 6 2 ------ ------ ---- Total Other International......................... 218 185 150 ------ ------ ---- WORLDWIDE Oil and Gas Activities................................. 3,082 907 927 Plants & Pipelines..................................... 346 76 18 Administrative......................................... 26 29 44 ------ ------ ---- Total Worldwide................................... $3,454 $1,012 $989 ====== ====== ====
Worldwide capital expenditures for oil and gas activities in 2001 of $3,082 million include 27 percent for development, 8 percent for exploration and 65 percent for proved property acquisitions. Proved property acquisitions are primarily related to the Hunter acquisition. Included in capital expenditures for oil and gas activities are exploration costs expensed under the successful efforts method of accounting. 10 OIL AND GAS PRODUCTION AND PRICES The Company's average daily production represents its net ownership and includes royalty interests and net profit interests owned by the Company. In 2001, the Company began reporting its production volumes and reserves in three streams: natural gas, crude oil and NGLs. Under this methodology, gas production is reported after extracting liquids and eliminating non-hydrocarbon gases from the natural gas stream. Amounts for prior years have been reclassified to conform to current presentation. Following are the Company's production and prices.
YEAR ENDED DECEMBER 31, -------------------------- 2001 2000 1999 ------ ------ ------ NORTH AMERICA USA Production Gas (MMCF per day)................................... 1,121 1,265 1,321 NGLs (MBbls per day)................................. 34.6 36.1 33.6 Oil (MBbls per day).................................. 44.0 51.6 57.3 Average Sales Price Gas (per MCF)........................................ $ 3.94 $ 3.28 $ 2.43 NGLs (per Bbl)....................................... 11.41 14.60 8.95 Oil (per Bbl)........................................ $22.63 $24.18 $16.70 Canada Production Gas (MMCF per day)................................... 433 341 376 NGLs (MBbls per day)................................. 12.5 11.1 12.2 Oil (MBbls per day).................................. 11.9 12.5 13.7 Average Sales Price Gas (per MCF)........................................ $ 4.53 $ 4.10 $ 2.32 NGLs (per Bbl)....................................... 22.50 25.38 15.87 Oil (per Bbl)........................................ $26.51 $29.06 $17.70 OTHER INTERNATIONAL Production Gas (MMCF per day)................................... 170 118 86 Oil (MBbls per day).................................. 7.3 9.6 13.2 Average Sales Price Gas (per MCF)........................................ $ 2.45 $ 2.23 $ 1.93 Oil (per Bbl)........................................ $23.42 $27.73 $17.00 WORLDWIDE Production Gas (MMCF per day)................................... 1,724 1,724 1,783 NGLs (MBbls per day)................................. 47.1 47.2 45.8 Oil (MBbls per day).................................. 63.2 73.7 84.2 Average Sales Price Gas (per MCF)........................................ $ 3.94 $ 3.37 $ 2.41 NGLs (per Bbl)....................................... 14.35 17.14 10.79 Oil (per Bbl)........................................ $23.45 $25.44 $16.93
11 PRODUCTION UNIT COSTS Following are the Company's production unit costs. Production costs consist of production taxes and well operating costs.
YEAR ENDED DECEMBER 31, ------------------------ 2001 2000 1999 ------ ----- ----- (PER MCFE) NORTH AMERICA USA Average Production Costs............................... $ .69 $.57 $.49 DD&A Rates............................................. .75 .74 .64 Canada Average Production Costs............................... .65 .69 .53 DD&A Rates............................................. .77 .67 .55 OTHER INTERNATIONAL Average Production Costs............................... .21 .31 .54 DD&A Rates............................................. 1.05 .83 .89 WORLDWIDE Average Production Costs............................... .64 .57 .50 DD&A Rates............................................. $ .78 $.73 $.64
For additional financial information about segments and geographic areas, see Note 13 of Notes to Consolidated Financial Statements. OTHER MATTERS Competition. The Company actively competes for reserve acquisitions, exploration leases and sales of oil and gas, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for the sale of oil, gas and NGLs. Competitive factors in the Company's business include price, contract terms, quality of service, pipeline access, transportation discounts and distribution efficiencies. Regulation of Oil and Gas Production, Sales and Transportation. The oil and gas industry is subject to regulation by numerous national, state and local governmental agencies and departments throughout the world. Compliance with these regulations is often difficult and costly and noncompliance could result in substantial penalties and risks. Most jurisdictions in which the Company operates also have statutes, rules, regulations or guidelines governing the conservation of natural resources, including the unitization or pooling of oil and gas properties and the establishment of maximum rates of production from oil and gas wells. Some jurisdictions also require the filing of drilling and operating permits, bonds and reports. The failure to comply with these statutes, rules and regulations could result in the imposition of fines and penalties and the suspension or cessation of operations in affected areas. The Company operates various gathering systems. The United States Department of Transportation and certain governmental agencies regulate the safety and operating aspects of the transportation and storage activities of these facilities by prescribing standards. The Federal Energy Regulation Commission ("FERC") has implemented policies allowing interstate pipeline companies to negotiate their rates with individual shippers. The Company will monitor the effects of these policies on its marketing efforts but does not expect that they will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. All of the Company's sales of its domestic gas are currently deregulated, although FERC may elect in the future to regulate certain sales. Environmental Regulation. Various federal, state and local laws and regulations relating to the protection of the environment, including the discharge of materials into the environment, may affect the Company's domestic exploration, development and production operations and the costs of those operations. In addition, certain of the Company's international operations are subject to environmental regulations adminis- 12 tered by foreign governments, including political subdivisions thereof, or by international organizations. These domestic and international laws and regulations, among other things, govern the amounts and types of substances that may be released into the environment, the issuance of permits to conduct exploration, drilling and production operations, the discharge and disposition of generated waste materials, the reclamation and abandonment of wells, sites and facilities and the remediation of contaminated sites. These laws and regulations may impose substantial liabilities for noncompliance and for any contamination resulting from the Company's operations and may require the suspension or cessation of operations in affected areas. Environmental requirements have a substantial impact on the oil and gas industry, and on the costs of doing business. The Company is committed to the protection of the environment throughout its operations and believes that it is in substantial compliance with applicable environmental laws and regulations. The Company believes that environmental stewardship is an important part of its daily business and will continue to make expenditures on a regular basis relating to environmental compliance. The Company also maintains insurance coverage for some environmental risks, although it is not fully insured against all such risks. The Company does not anticipate that it will be required under current environmental laws and regulations to expend amounts that will have a material adverse effect on the consolidated financial position or results of operations of the Company. However, because regulatory requirements frequently change and may become more stringent, there can be no assurance that future laws and regulations will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. Filings of Reserve Estimates With Other Agencies. During 2001, the Company filed estimates of oil and gas reserves for the year 2000 with the Department of Energy. These estimates differ by 5 percent or less from the reserve data presented. For information concerning proved oil, NGLs and gas reserves, see page 57. EMPLOYEES The Company had 2,167 and 1,783 employees at December 31, 2001 and 2000, respectively. At December 31, 2001, the Company had no union employees. ITEM THREE LEGAL PROCEEDINGS The Company and numerous other oil and gas companies have been named as defendants in various lawsuits alleging violations of the civil False Claims Act. These lawsuits have been consolidated by the United States Judicial Panel on Multidistrict Litigation for pre-trial proceedings in the matter of In re Natural Gas Royalties Qui Tam Litigation, MDL-1293, United States District Court for the District of Wyoming ("MDL-1293"). The plaintiffs contend that defendants underpaid royalties on natural gas and NGLs produced on federal and Indian lands through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs allege that the royalties paid by defendants were lower than the royalties required to be paid under federal regulations and that the forms filed by defendants with the Minerals Management Service ("MMS") of the United States Department of the Interior reporting these royalty payments were false, thereby violating the civil False Claims Act. The United States has intervened in certain of the MDL-1293 cases as to some of the defendants, including the Company. Various administrative proceedings are also pending before the MMS of the United States Department of the Interior with respect to the valuation of natural gas produced by the Company on federal and Indian lands. In general, these proceedings stem from regular MMS audits of the Company's royalty payments over various periods of time and involve the interpretation of the relevant federal regulations. Based on the Company's present understanding of the various governmental and False Claims Act proceedings described above, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. However, in the event that the Company is found to have violated the civil False Claims Act, the Company could be subject to monetary damages and a variety of sanctions, including double damages, substantial monetary fines, civil penalties and a temporary suspension from entering into 13 future federal mineral leases and other federal contracts for a defined period of time. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on the consolidated financial position of the Company, although results of operations and cash flow could be significantly impacted in the reporting periods in which such matters are resolved. The Company has also been named as a defendant in the lawsuit styled UNOCAL Netherlands B.V., et al v. Continental Netherlands Oil Company B.V., et al, No. 98-854, in the Court of Appeal in The Hague in the Netherlands. Plaintiffs, who are working interest owners in the Q1 Block in the North Sea, have alleged that the Company and other former working interest owners in the adjacent Logger Field in the L16a Block unlawfully trespassed or were otherwise unjustly enriched by producing part of the oil from the adjoining Q1 Block. The plaintiffs claim that the defendants infringed upon plaintiffs' right to produce the minerals present in its license area and acted in violation of generally accepted standards by failing to inform plaintiffs of the overlap of the Logger Field into the Q-1 Block. For all relevant periods, the Company owned a 37.5% working interest in the Logger Field. Following a trial, the District Court in The Hague rendered a Judgment in favor of the defendants, including the Company, dismissing all claims. Plaintiffs thereafter appealed. On October 19, 2000, the Court of Appeal in The Hague issued an interim Judgment in favor of the plaintiffs and ordered that additional evidence be presented to the court relating to issues of both liability and damages. The Company and the other defendants are continuing to vigorously assert defenses against these claims and have presented additional evidence to the Court of Appeal. The Company has also asserted claims of indemnity against two of the defendants from whom it had acquired a portion of its working interest share. The Company is unable at this time to reasonably predict the outcome, or, in the event of an unfavorable outcome, to reasonably estimate the possible loss or range of loss, if any, in this lawsuit. In addition to the foregoing, the Company and its subsidiaries are named defendants in numerous other lawsuits and named parties in governmental and other proceedings arising in the ordinary course of business. While the outcome of these other lawsuits and proceedings cannot be predicted with certainty, management believes these other matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. ITEM FOUR SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM FIVE MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock, par value $.01 per share ("Common Stock") is traded on the New York Stock Exchange under the symbol "BR." At December 31, 2001, the number of holders of Common Stock was 17,531. Information on Common Stock prices and quarterly dividends is shown on page 60. 14 ITEM SIX SELECTED FINANCIAL DATA The selected financial data for the Company set forth below for the five years ended December 31, 2001 should be read in conjunction with the consolidated financial statements.
2001 2000 1999 1998 1997 ------- ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA Revenues....................................... $ 3,326 $3,147 $2,313 $2,225 $2,575 Operating Income (Loss)........................ 1,085 1,191 200 (439) 605 Net Income (Loss).............................. 561 675 (10) (338) 352 Basic Earnings (Loss) per Common Share......... 2.71 3.13 (.05) (1.60) 1.69 Diluted Earnings (Loss) per Common Share....... 2.70 3.12 (.05) (1.60) 1.67 Cash Dividends Declared per Common Share....... $ .55 $ .55 $ .46 $ .46 $ .39 BALANCE SHEET DATA Total Assets................................... $10,582 $7,506 $7,165 $7,060 $7,164 Long-term Debt................................. 4,337 2,301 2,769 2,684 2,317 Stockholders' Equity........................... $ 3,525 $3,750 $3,229 $3,312 $3,561 Common Shares Outstanding...................... 201 216 216 216 209
ITEMS SEVEN AND SEVEN A MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FINANCIAL CONDITION AND LIQUIDITY The Company's long-term debt to total capital (total capital is defined as long-term debt and stockholders' equity) ratio at December 31, 2001 and December 31, 2000 was 55 percent and 38 percent, respectively. In February 2001, the Company, through its wholly-owned subsidiary, Burlington Resources Finance Company ("BRFC"), issued $400 million of 6.68% Notes due February 15, 2011. On July 18, 2001, the Company's Board of Directors authorized the Company to redeem or repurchase up to $1 billion principal amount of debt securities of the Company. In August 2001, the Company acquired notes with an aggregate principal amount of $710 million and a weighted average interest rate of 7.28% and issued $178 million of 6.4% Notes and $575 million of 7.2% Notes due August 15, 2011 and 2031, respectively. The transaction was accounted for as an exchange of debt instruments and reduced the Company's amount available under its shelf registration statement on file with the Securities and Exchange Commission ("SEC") from $1,500 million to $747 million. On October 8, 2001, the Company's Board of Directors authorized the Company to restore its shelf registration statement to $1,500 million. The Company expects to file such registration statement in the first half of 2002. In November 2001, the Company issued $500 million of 5.6% Notes due December 1, 2006, $500 million of 6.5% Notes due December 1, 2011 and $500 million of 7.4% Notes due December 1, 2031. These notes were issued through a private placement and the proceeds were used, along with cash on hand and the issuance of $400 million of commercial paper, to fund the Hunter acquisition. During 2001, the Company issued $348 million of net commercial paper. Commercial paper outstanding at December 31, 2001 was $675 million with a weighted average interest rate of approximately 3%. On October 1, 2001, the Company retired $150 million of 8 1/2% Notes. The Company also repaid $61 million of other debt during the year. On December 13, 2001, the Company's Board of Directors authorized the Company to redeem or repurchase an additional $700 million principal amount of debt securities. 15 Burlington Resources Capital Trust I, Burlington Resources Capital Trust II (collectively, the "Trusts"), BR and BRFC have a shelf registration statement on file with the SEC as mentioned above. Pursuant to such registration statement, BR may issue debt securities, shares of common stock or preferred stock. In addition, BRFC may issue debt securities and the Trusts may issue trust preferred securities. Net proceeds, terms and pricing of offerings of securities issued under the shelf registration statement will be determined at the time of the offerings. BRFC and the Trusts are wholly owned finance subsidiaries of BR and have no independent assets or operations other than transferring funds to BR's subsidiaries. Any debt issued by BRFC is fully and unconditionally guaranteed by BR. Any trust preferred securities issued by the Trusts are also fully and unconditionally guaranteed by BR. The Company had credit commitments in the form of revolving credit facilities ("revolvers") as of December 31, 2001. The revolvers which are comprised of agreements for $600 million, $400 million and $300 million are available to cover debt due within one year. Therefore, commercial paper, credit facility notes and fixed-rate debt due within one year are classified as long-term debt. Currently, there are no amounts outstanding under the revolvers, however, the Company's outstanding commercial paper reduces the amount of credit available under the revolvers. The $600 million revolver expires in December 2006 and the $400 million and $300 million revolvers expire in December 2002 unless renewed by mutual consent. At expiration of the agreements, the Company has the option to convert the outstanding balances on the $400 million and $300 million revolvers to one-year and five-year plus one day term notes, respectively. Under the covenants of the revolvers, Company debt cannot exceed 60 percent of capitalization (as defined in the agreements). Effective January 2, 2002, the Company entered into a $350 million bridge revolving credit facility in order to finance the acquisition of certain assets from ATCO Gas and Pipelines Ltd. Any advances under the facility are required to be used to finance this acquisition or to repay commercial paper issued in order to finance this acquisition. On January 2, 2002, the Company issued $346 million of commercial paper to fund the acquisition. The facility expires in July 2002. On December 13, 2001, the Company's Board of Directors authorized the Company to issue debt securities, either through a private placement or public offering, in order to refinance any outstanding amounts under the facility or commercial paper issued in connection with the acquisition. Net cash provided by operating activities in 2001 was $2,106 million compared to $1,598 million and $1,102 million in 2000 and 1999, respectively. The increase in 2001 was primarily due to higher operating income, excluding non-cash items, and lower working capital needs. Operating income was higher principally as a result of higher natural gas prices. The increase in 2000 compared to 1999 was primarily due to higher operating income resulting from higher commodity prices partially offset by working capital and other changes. The Company has various commitments primarily related to leases for office space, other property and equipment and demand charges on firm transportation agreements. The Company expects to fund these commitments with cash generated from operations. The following table summarizes the Company's contractual obligations at December 31, 2001.
PAYMENTS DUE BY PERIOD ---------------------------------------------------- LESS THAN AFTER 4 CONTRACTUAL OBLIGATION TOTAL 1 YEAR 1-2 YEARS 3-4 YEARS YEARS - ------------------------------------------------- ------ --------- --------- --------- ------- (IN MILLIONS) Long-term debt(1)................................ $3,707 $ 100 $ 63 $500 $3,044 Commercial paper(1).............................. 675 675 -- -- -- Non-cancellable operating leases................. 192 33 54 39 66 Drilling rig commitments......................... 188 63 125 -- -- Transportation demand charges.................... 917 133 244 203 337 ------ ------ ---- ---- ------ Total Contractual Obligations.......... $5,679 $1,004 $486 $742 $3,447 ====== ====== ==== ==== ======
16 - --------------- (1) See discussion of long-term debt commercial paper above and Note 6 of Notes to Consolidated Financial Statements. Certain of the Company's contracts require the posting of collateral upon request in the event that the Company's long-term debt is rated below investment grade or ceases to be rated. Those contracts primarily consist of hedging agreements, two Canadian transportation agreements and a natural gas purchase agreement. A few of the hedging agreements also require posting of collateral if the market value of the transactions thereunder exceed a specified dollar threshold that varies with the Company's credit rating. While the mark-to-market positions under the hedging agreements and the natural gas purchase agreement will fluctuate with commodity prices, as a producer, the Company's liquidity exposure due to its outstanding derivative instruments tends to increase when commodity prices increase. Consequently, the Company is most likely to have its largest unfavorable mark-to-market position in a high commodity price environment when it is least likely that a credit support requirement due to an adverse rating action would occur. At December 31, 2001, a rating change would have had no impact on the Company related to the hedging agreements, since the mark-to-market position under each of the respective agreements was favorable to the Company. In the case of the Canadian transportation agreements, the collateral required would be an amount equal to 12 months of estimated demand charges. That amount totaled approximately $9 million as of December 31, 2001. In the normal course of business, the Company has performance obligations which are supported by surety bonds or letters of credit. These obligations are primarily site restoration and dismantlement, royalty payments and exploration programs where governmental organizations require such support. Changes in credit rating also impact the cost of borrowing under the Company's revolvers, but have no impact on availability of credit under the agreements. The revolvers are filed as exhibits 10.18, 10.19 and 10.32 to this Form 10-K. The Company has investments in two entities that it accounts for under the equity method. The book values of the Company's interests in Lost Creek Gathering Company, L.L.C. ("Lost Creek") and CLAM Petroleum B.V. ("CLAM") are $8 million and $24 million, respectively. Lost Creek and CLAM have debt obligations in the amount of $53 million and $20 million, respectively, that are non-recourse to the Company. Management believes that even if the Company's share of the debt obligations of these entities were deemed obligations of the Company, the amounts would not have a material impact on the Company's liquidity. In December 2000, the Company's Board of Directors authorized the repurchase of up to $1 billion of the Company's Common Stock. During 2001, the Company repurchased 16.1 million shares of its Common Stock for approximately $684 million. Through December 31, 2001, the Company has repurchased approximately 16.3 million shares or $693 million of its Common Stock under this $1 billion authorization. The Company has certain other commitments and uncertainties related to its normal operations. Management believes that there are no other commitments or uncertainties that will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. CAPITAL EXPENDITURES AND RESOURCES Capital expenditures for 2001 totaled $3,454 million compared to $1,012 million and $989 million in 2000 and 1999, respectively. The Company invested $1,085 million on internal development and exploration of oil and gas properties during 2001 compared to $858 million and $792 million in 2000 and 1999, respectively. The Company invested $1,997 million for property acquisitions in 2001 compared to $49 million and $135 million in 2000 and 1999, respectively. The Company also invested $346 million on plants and pipelines in 2001 compared to $76 million and $18 million in 2000 and 1999, respectively. Property acquisitions and plants and pipelines in 2001 primarily include assets from the Hunter acquisition. See Note 2 of Notes to Consolidated Financial Statements for additional information. Capital expenditures for 2002, excluding proved property acquisitions, are projected to be approximately $1.3 billion. Capital expenditures are expected to be primarily 17 for internal development and exploration of oil and gas properties and plant and pipeline expenditures. Capital expenditures are expected to be funded from internal cash flows. In October 2001, the Company announced its intent to sell certain non-core, non-strategic properties in order to improve the overall quality of its portfolio. As a result, in December 2001, the Company recorded a pretax impairment charge of $184 million ($116 million after tax) primarily related to these properties resulting in net properties held for sale of $338 million and related restructuring liabilities of $10 million. The $10 million restructuring liability is related to severance and other exit costs and is included in Accounts Payable on the Consolidated Balance Sheet at December 31, 2001. The held for sale properties are expected to be sold in 2002. The Company expects to use the proceeds from property sales to repay debt. MARKETING North America (USA and Canada) The Company's marketing strategy is to maximize the value of its production by developing marketing flexibility from the wellhead to its ultimate sale. The Company's natural gas production is gathered, processed, exchanged and transported utilizing various firm and interruptible contracts and routes to access higher value market hubs. The Company's customers include local distribution companies, electric utilities, industrial users and marketers. The Company maintains the capacity to ensure its production can be marketed either at the wellhead or downstream at market sensitive prices. All of the Company's crude oil production is sold to third parties at the wellhead or transported to market hubs where it is sold or exchanged. NGLs are typically sold at field plants or transported to market hubs and sold to third parties. Downgrades or the inability of the Company's customers to maintain their credit rating or credit worthiness could result in an increase in the allowance for unrecoverable receivables from natural gas, NGLs or crude oil revenues or it could result in a change in the Company's assumption process of evaluating collectibility based on situations regarding specific customers and applicable economic conditions. Other International The Company's Other International production is marketed to third parties either directly by the Company or by the operators of the properties. Production is sold at the platforms or local sales points based on spot or contract prices. COMMODITY RISK Substantially all of the Company's crude oil, NGLs and natural gas production is sold on the spot market or under short-term contracts at market sensitive prices. Spot market prices for domestic crude oil and natural gas are subject to volatile trading patterns in the commodity futures market, including among others, the New York Mercantile Exchange ("NYMEX"). Quality differentials, worldwide political developments and the actions of the Organization of Petroleum Exporting Countries also affect crude oil prices. There is also a difference between the NYMEX futures contract price for a particular month and the actual cash price received for that month in a U.S. producing basin or at a U.S. market hub, which is referred to as the "basis differential." On January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires enterprises to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The requisite accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. In accordance with the transition provisions of SFAS No. 133, the Company recorded a net-of-tax cumulative-effect-type adjustment of $366 million loss in accumulated other comprehensive income to recognize at fair value all derivatives that are designated as cash flow hedging instruments. The Company 18 recorded cash flow hedge derivatives liabilities of $582 million ($361 million after tax) and $3 million after tax was recorded in current earnings as a cumulative effect of the change in accounting principle. The Company reclassified, as reductions to earnings during 2001, $322 million ($200 million after tax) from the transition adjustment that was recorded in accumulated other comprehensive income. The Company utilizes over-the-counter price and basis swaps as well as options to hedge its production in order to decrease its price risk exposure. The gains and losses realized as a result of these price and basis derivative transactions are substantially offset when the hedged commodity is delivered. In order to accommodate the needs of its customers, the Company also uses price swaps to convert natural gas sold under fixed price contracts to market sensitive prices. The Company uses a sensitivity analysis technique to evaluate the hypothetical effect that changes in the market value of crude oil and natural gas may have on the fair value of the Company's derivative instruments. For example, at December 31, 2001, the potential decrease in fair value of derivative instruments assuming a 10 percent adverse movement (an increase in the underlying commodities prices) would result in a $72 million decrease in the net unrealized gain. The derivative instruments in place at December 31, 2001 hedged approximately 22 percent of the Company's projected production volumes through 2002. For purposes of calculating the hypothetical change in fair value, the relevant variables include the type of commodity, the commodity futures prices, the volatility of commodity prices and the basis and quality differentials. The hypothetical change in fair value is calculated by multiplying the difference between the hypothetical price (adjusted for any basis or quality differentials) and the contractual price by the contractual volumes. As more fully described in Note 1 of Notes to Consolidated Financial Statements, the Company periodically assesses the effectiveness of its derivative instruments in achieving offsetting cash flows attributable to the risks being hedged. Changes in basis differentials or notional amounts of the hedged transactions could cause the derivative instruments to fail the effectiveness test and result in the mark-to- market accounting for the affected derivative transactions which would be reflected in the Company's current period earnings. Credit and Market Risks The Company manages and controls market and counterparty credit risk through established formal internal control procedures which are reviewed on an ongoing basis. The Company attempts to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures and, if necessary, through establishment of valuation reserves related to counterparty credit risk. In the normal course of business, collateral is not required for financial instruments with credit risk. Historically, the Company has suffered minimal losses from credit risk. OIL AND GAS RESERVES The process of estimating quantities of natural gas, NGLs and crude oil reserves is very complex, requiring significant decisions in the evaluation of all available geological, geophysical, engineering and economic data. The data for a given field may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, material revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various fields make these estimates generally less precise than other estimates included in the financial statement disclosures. As described in Note 1 of Notes to Consolidated Financial Statements, the Company uses the units-of-production method to amortize its oil and gas properties. Changes in reserve quantities as described above will cause corresponding changes in depletion expense in periods subsequent to the quantity revision. See the Supplementary Financial Information for reserve data. 19 CARRYING VALUE OF LONG-LIVE ASSETS As more fully described in Note 1 of Notes to Consolidated Financial Statements, the Company performs an impairment analysis whenever events or changes in circumstances indicate an asset's carrying amount may not be recoverable. Cash flows used in the impairment analysis are determined based upon management's estimates of proved oil, NGLs and gas reserves, future oil, NGLs and gas prices and costs to extract these reserves. Downward revisions in estimated reserve quantities, increases in future cost estimates or depressed oil, NGLs and gas prices could cause the Company to reduce the carrying amounts of its properties. As described in Note 12 of Notes to Consolidated Financial Statements, the Company recorded a pretax impairment charge of $184 million and $225 million for the years ended December 31, 2001, and 1999, respectively. NATURAL GAS MEASUREMENT The Company records estimated amounts for natural gas revenues and natural gas purchase costs based on volumetric calculations under its natural gas sales and purchase contracts. Variances or imbalances resulting from such calculations are inherent in natural gas sales, production, operations, measurement and administration. Management does not believe that differences between actual and estimated natural gas revenues or purchase costs attributable to the unresolved variances or imbalances are material. FOREIGN CURRENCY RISK The Company's reported cash flows related to Canadian operations is based on cash flows measured in Canadian dollars and converted to the U.S. dollar equivalent based on the average of the Canadian and U.S. dollar exchange rates for the period reported. The Company's Canadian subsidiaries have no financial obligations that are denominated in U.S. dollars. DIVIDENDS On January 9, 2002, the Board of Directors declared a common stock quarterly cash dividend of $.1375 per share, payable April 1, 2002 to shareholders of record on March 8, 2002. Dividend levels are determined by the Board of Directors based on profitability, capital expenditures, financing and other factors. The Company declared cash dividends on Common Stock totaling approximately $113 million during 2001. RESULTS OF OPERATIONS Year Ended December 31, 2001 Compared With Year Ended December 31, 2000 The Company reported net income of $561 million or $2.70 diluted earnings per common share in 2001 compared to net income of $675 million or $3.12 diluted earnings per common share in 2000. Net income in 2001 included a non-cash after tax charge of $116 million or $.56 per diluted share primarily related to the impairment of oil and gas properties held for sale. The Company evaluates the impairment of its oil and gas properties on a field-by-field basis whenever events or changes in circumstances indicate an asset's carrying amount may not be recoverable. In December 2001, primarily as a result of the Company's decision to exit the Gulf of Mexico Shelf and divest of certain other properties, the Company recognized a pretax charge of $184 million ($116 million after tax) related to those properties. The Company also recognized a $6 million after tax restructuring charge or $.03 per share related to severance and other exit costs. Net income in 2001 also included an after tax gain of $12 million or $.06 per diluted share consisting of ineffectiveness of cash-flow and fair-value hedges and gains on derivative instruments which do not qualify for hedge accounting under Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. The Company adopted SFAS No. 133 effective January 1, 2001. For more discussion of SFAS No. 133, see Note 1 of Notes to Consolidated Financial Statements. The results of operations for 2001 include one month of activities related to the Canadian Hunter Exploration Ltd. ("Hunter") acquisition. To reflect the change in the characteristics of its oil and gas properties, in 2001, the Company began reporting its production volumes and reserves in three streams: natural gas, crude oil and NGLs. Under this 20 methodology, gas production is reported after extracting liquids and eliminating non-hydrocarbon gases from the natural gas stream. This change had no financial impact and no material impact on total equivalent production volumes. Amounts for prior years have been reclassified to conform to current presentation. Revenues increased $179 million to $3,326 million in 2001 compared to $3,147 million in 2000. Revenues in 2001 increased $267 million compared to 2000 as a result of higher gas prices partially offset by lower oil and NGL prices. Including a $.48 realized loss per MCF related to hedging activities, average gas prices increased $.57 per MCF in 2001 to $3.94 per MCF from $3.37 per MCF in 2000 which increased revenues $362 million. The increase in revenues related to higher gas prices was partially offset by a reduction in revenues due to lower average oil and NGL prices. Including a $1.10 realized loss per barrel related to hedging activities, average oil prices decreased $1.99 per barrel in 2001 to $23.45 per barrel from $25.44 per barrel in 2000 resulting in reduced revenues of $47 million. Average NGL prices decreased $2.79 per barrel in 2001 to $14.35 per barrel from $17.14 per barrel in 2000 resulting in reduced revenues of $48 million. A decline in oil sales volumes resulted in a decrease in revenues of $107 million in 2001 compared to 2000. Oil sales volumes decreased 10.5 MBbls per day in 2001 to 63.2 MBbls per day from 73.7 MBbls per day in 2000 reducing revenues $100 million. Gas sales volumes were the same as the prior year at 1,724 MMCF per day, however, due to one less day in 2001 compared to 2000, gas revenues were down $6 million. NGL sales volumes decreased slightly to 47.1 MBbls per day in 2001 from 47.2 MBbls per day in 2000, resulting in a reduction in revenues of $1 million. Oil sales volumes decreased primarily due to natural production declines and reduced capital spending in the Gulf Coast and Mid-Continent areas and property sales in 2000. Although total gas sales volumes were the same as the prior year, sales volumes were higher in Canada and East Irish Sea. Gas sales volumes were higher in Canada due to a successful drilling program and the Hunter acquisition and East Irish Sea was higher due to an additional interest acquired in the area. These increases were offset primarily due to lower sales volumes in the San Juan, Gulf of Mexico and south Louisiana areas. Gas sales volumes were lower in these areas due to lower capital spending in the Gulf of Mexico and natural declines in the other areas. Revenues in 2001 also included a $19 million gain related to ineffectiveness of cash-flow and fair-value hedges and gains on derivative instruments which do not qualify for hedge accounting. Costs and Expenses were $2,241 million in 2001 compared to $1,956 million in 2000. Costs and Expenses for 2001 included a $184 million charge primarily related to the impairment of oil and gas properties held for sale and a restructuring charge of $10 million for severance and other exit costs. Excluding the $194 million charges in 2001, costs and expenses increased $91 million. The increase was primarily due to a $35 million increase in production and processing expenses, a $26 million increase in depreciation, depletion and amortization ("DD&A"), a $21 million increase in exploration costs, a $9 million increase in transportation expense and an $8 million increase in taxes other than income taxes. Production and processing expenses increased primarily due to higher workover expense, higher service, electrical and lease fuel costs. DD&A increased due to a higher unit-of-production rates related to changes in production mix and higher finding costs. Exploration costs increased primarily due to higher drilling rig expenses of $29 million and higher exploratory dry hole costs of $28 million partially offset by lower geological and geophysical ("G&G") expenses of $23 million and lower lease impairment charges of $16 million. Transportation expense increased primarily due to higher tariffs and taxes other than income taxes increased primarily due to higher oil and gas revenues. Interest Expense was $190 million in 2001 compared to $197 million in 2000. The decrease was primarily due to higher capitalized interest during 2001. Other Expense (Income) -- Net was income of $12 million in 2001 compared to expense of $27 million in 2000. This increase was primarily due to higher interest income in 2001 as a result of excess cash on hand during the year, higher gains on sale of non-oil and gas assets and lower interest expense related to tax matters. Income tax expense was $349 million in 2001 compared to $292 million in 2000. The increase in tax expense was primarily due to lower tax benefits related to Section 29 credits and tax-accrual adjustments partially offset by lower tax on 2001 pretax income. The Section 29 tax credits were $24 million in 2001 compared to $52 million in 2000. Favorable tax-accrual adjustments were $21 million in 2001 compared to $56 million in 2000 primarily related to prior period activity. 21 Year Ended December 31, 2000 Compared With Year Ended December 31, 1999 The Company reported net income of $675 million or $3.12 diluted earnings per common share in 2000 compared to a net loss of $10 million or $.05 diluted loss per common share in 1999. The 1999 results included a non-cash after tax charge of $140 million or $.65 per share related to the impairment of oil and gas properties. In the fourth quarter of 1999, the Company determined that there would be performance related downward reserve adjustments associated with certain properties located on the Gulf of Mexico Shelf and in the Permian Basin. As a result, the Company recognized a pretax impairment charge of $225 million ($140 million after tax) related to those properties. The Company also recognized a $26 million after tax charge or $.12 per share related to severance and transaction costs associated with the acquisition of Poco Petroleums Ltd. ("Acquisition"). Revenues increased $834 million to $3,147 million in 2000 compared to $2,313 million in 1999. Revenues in 2000 increased $950 million compared to 2000 as a result of higher commodity prices. Including a $.45 realized loss per MCF related to hedging activities, average gas prices increased $.96 per MCF in 2000 to $3.37 per MCF from $2.41 per MCF in 1999, which increased revenues $611 million. Including a $2.62 realized loss per barrel related to hedging activities, average oil prices increased $8.51 per barrel in 2000 to $25.44 per barrel from $16.93 per barrel in 1999, which increased revenues $230 million. Average NGL prices increased $6.35 per barrel in 2000 to $17.14 per barrel from $10.79 per barrel in 1999, increasing revenues $109 million. A decline in oil and gas sales volumes partially offset by an increase in NGL sales volumes resulted in a decrease in revenues of $105 million in 2000 compared to 1999. Oil sales volumes decreased 10.5 MBbls per day in 2000 to 73.7 MBbls per day from 84.2 MBbls per day in 1999, reducing revenues $63 million. Gas sales volumes decreased 59 MMCF in 2000 to 1,724 per MMCF per day from 1,783 per MMCF per day compared to the prior year, reducing revenues $48 million. The decrease in revenues as a result of lower oil and gas sales volumes were partially offset by an increase in NGL sales volumes of 1.4 MBbls per day in 2000 to 47.2 MBbls per day from 45.8 MBbls per day in 1999, resulting in increased revenues of $6 million. Oil sales volumes decreased primarily due to natural production declines in the Gulf Coast area. Costs and Expenses were $1,956 million in 2000 compared to $2,113 million in 1999. Costs and expenses in 1999 included a $225 million charge related to the impairment of oil and gas properties and also a charge of $37 million related to severance and transaction costs associated with the Acquisition. Excluding the $262 million of charges in 1999, costs and expenses in 2000 increased $105 million compared to 1999. The increase was primarily due to a $73 million increase in DD&A, a $27 million increase in taxes other than income taxes and an $11 million increase in exploration costs partially offset by an $8 million decrease in transportation expenses. DD&A increased primarily due to a higher unit rate resulting from a change in production mix. Taxes other than income taxes increased primarily due to higher oil and gas revenues. Exploration costs increased primarily due to higher lease impairment expense of $19 million and higher exploratory dry hole costs of $7 million, partially offset by lower G&G expense of $15 million. Transportation expenses decreased due to lower Canadian production. Interest Expense was $197 million in 2000 compared to $211 million in 1999. The decrease was primarily due to lower outstanding fixed-rate debt partially offset by higher commercial paper borrowings during 2000. Other Expense (Income) -- Net was an expense of $27 million in 2000 compared to expense of $2 million in 1999. This increase is primarily due to foreign currency transaction losses and other miscellaneous expenses partially offset by interest income related to the settlement of a windfall profits tax matter. Income taxes were an expense of $292 million in 2000 compared to a benefit of $3 million in 1999. The increase in tax expense was primarily due to higher pretax income resulting in higher income taxes of $342 million, higher state taxes of $21 million and higher foreign taxes in excess of the U.S. statutory rate of $35 million partially offset by tax benefits resulting from Section 29 tax credits and tax-accrual adjustments. The Section 29 tax credits were $52 million in 2000 compared to $2 million in 1999. Tax-accrual adjustments were also $52 million in 2000 primarily related to prior period activity. 22 Acquisitions On October 8, 2001, BR and Hunter entered into an agreement pursuant to which BR agreed to make an offer to purchase all of the outstanding shares of Hunter for cash consideration of C$53 per share representing an aggregate value of approximately U.S. $2.1 billion resulting in an excess purchase price of approximately $793 million which has been reflected as goodwill. On December 5, 2001, the transaction was consummated. This acquisition was funded with cash on hand and proceeds from the issuances of $1.5 billion of fixed-rate notes and $400 million of commercial paper. The transaction was accounted for under the purchase method in accordance with SFAS No. 141. See Note 2 of Notes to Consolidated Financial Statements for more information related to this transaction. During the first quarter of 2001, the Company purchased from DIFCO Limited an additional 10 percent interest in 7 fields in the East Irish Sea for $25 million. The Company is the operator of the properties and now owns 100 percent of the assets. In January 2001, the Company's Canadian subsidiary, Burlington Resources Canada Energy Ltd., now known as Burlington Resources Canada Ltd. ("BRCL"), acquired approximately 37 billion cubic feet of gas equivalent ("BCFE") of proved reserves from Petrobank Energy and Resources Ltd. for $57 million. In December 2001, the Alberta Energy and Utility Board approved the application by ATCO Gas Pipelines Ltd., a regulated gas utility, to sell properties in the Viking-Kinsella area of Alberta, Canada to BRCL for approximately $346 million. The properties have net proved reserves of approximately 251 BCFE. The transaction was consummated on January 3, 2002. Legal Proceedings The Company and numerous other oil and gas companies have been named as defendants in various lawsuits alleging violations of the civil False Claims Act. These lawsuits have been consolidated by the United States Judicial Panel on Multidistrict Litigation for pre-trial proceedings in the matter of In re Natural Gas Royalties Qui Tam Litigation, MDL-1293, United States District Court for the District of Wyoming ("MDL-1293"). The plaintiffs contend that defendants underpaid royalties on natural gas and NGLs produced on federal and Indian lands through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs allege that the royalties paid by defendants were lower than the royalties required to be paid under federal regulations and that the forms filed by defendants with the Minerals Management Service ("MMS") reporting these royalty payments were false, thereby violating the civil False Claims Act. The United States has intervened in certain of the MDL-1293 cases as to some of the defendants, including the Company. Various administrative proceedings are also pending before the MMS of the United States Department of the Interior with respect to the valuation of natural gas produced by the Company on federal and Indian lands. In general, these proceedings stem from regular MMS audits of the Company's royalty payments over various periods of time and involve the interpretation of the relevant federal regulations. Based on the Company's present understanding of the various governmental and False Claims Act proceedings described above, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. However, in the event that the Company is found to have violated the civil False Claims Act, the Company could be subject to monetary damages and a variety of sanctions, including double damages, substantial monetary fines, civil penalties and a temporary suspension from entering into future federal mineral leases and other federal contracts for a defined period of time. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on the consolidated financial position of the Company, although results of operations and cash flow could be significantly impacted in the reporting periods in which such matters are resolved. The Company has also been named as a defendant in the lawsuit styled UNOCAL Netherlands B.V., et al. v. Continental Netherlands Oil Company B.V., et al, No. 98-854, in the Court of Appeal in The Hague in the Netherlands. Plaintiffs, who are working interest owners in the Q-1 Block in the North Sea, have alleged that 23 the Company and other former working interest owners in the adjacent Logger Field in the L16a Block unlawfully trespassed or were otherwise unjustly enriched by producing part of the oil from the adjoining Q-1 Block. The plaintiffs claim that the defendants infringed upon plaintiffs' right to produce the minerals present in its license area and acted in violation of generally accepted standards by failing to inform plaintiffs of the overlap of the Logger Field into the Q-1 Block. For all relevant periods, the Company owned a 37.5% working interest in the Logger Field. Following a trial, the District Court in The Hague rendered a Judgment in favor of the defendants, including the Company, dismissing all claims. Plaintiffs thereafter appealed. On October 19, 2000, the Court of Appeal in The Hague issued an interim Judgment in favor of the plaintiffs and ordered that additional evidence be presented to the court relating to issues of both liability and damages. The Company and the other defendants are continuing to vigorously assert defenses against these claims. The Company has also asserted claims of indemnity against two of the defendants from whom it had acquired a portion of its working interest share. The Company is unable at this time to reasonably predict the outcome, or, in the event of an unfavorable outcome, to reasonably estimate the possible loss or range of loss, if any, in this lawsuit. In addition to the foregoing, the Company and its subsidiaries are named defendants in numerous other lawsuits and named parties in numerous governmental and other proceedings arising in the ordinary course of business. While the outcome of these other lawsuits and proceedings cannot be predicted with certainty, management believes these other matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. OTHER MATTERS Recent Accounting Pronouncements The following SFAS's were issued in June 2001: SFAS No. 141, Business Combinations, SFAS No. 142, Goodwill and Other Intangible Assets, and SFAS No. 143, Accounting for Asset Retirement Obligations. In August 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets was also issued. SFAS No. 141, requires the use of the purchase method of accounting for all business combinations, applies to all business combinations initiated after June 30, 2001 and to all business combinations accounted for by the purchase method that are completed after June 30, 2001. SFAS No. 142 requires that goodwill as well as other intangible assets with indefinite lives not be amortized but be tested annually for impairment and is effective for fiscal years beginning after December 15, 2001. SFAS No. 141 and No. 142 apply to the Company's accounting for the acquisition of Hunter. The Company is in the process of evaluating the impairment methodology for goodwill. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost should be allocated to expense using a systematic and rational method. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets and long-lived assets to be disposed of. It supersedes, with exceptions, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and is effective for fiscal years beginning after December 15, 2001. The Company is currently assessing the impact of SFAS No. 143 and No. 144 and therefore, at this time cannot reasonably estimate the effect of these statements on its consolidated financial position, results of operations or cash flows. FORWARD-LOOKING STATEMENTS The Company, in discussions of its future plans, expectations, objectives and anticipated performance in periodic reports filed by the Company with the Securities and Exchange Commission (or documents incorporated by reference therein) may include projections or other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, as amended. Such projections and forward-looking statements are based on assumptions which the Company believes are reasonable, but are by their nature inherently uncertain. In all cases, there can be no assurance 24 that such assumptions will prove correct or that projected events will occur, and actual results could differ materially from those projected. Some of the important factors that could cause actual results to differ from any such projections or other forward-looking statements follow. Changes in crude oil, NGL and natural gas prices (including basis differentials) from those assumed in preparing projections and forward-looking statements could cause the Company's actual financial results to differ materially from projected financial results and can also impact the Company's determination of proved reserves and the standardized measure of discounted future net cash flows relative to crude oil, NGL and natural gas reserves. In addition, periods of sharply lower commodity prices could affect the Company's production levels and/or cause it to curtail capital spending projects and delay or defer exploration, exploitation or development projects. Projections relating to the price received by the Company for natural gas and NGLs also rely on assumptions regarding the availability and pricing of transportation to the Company's key markets. In particular, the Company has contractual arrangements for the transportation of natural gas from the San Juan Basin eastward to Eastern and Midwestern markets or to market hubs in Texas, Oklahoma and Louisiana. The natural gas price received by the Company could be adversely affected by any constraints in pipeline capacity to serve these markets. Exploration and Production Risks. The Company's business is subject to all of the risks and uncertainties normally associated with the exploration for and development and production of crude oil, NGLs and natural gas. Reserves which require the use of improved recovery techniques for production are included in proved reserves if supported by a successful pilot project or the operation of an installed program. The process of estimating quantities of proved reserves is inherently uncertain and involves subjective engineering and economic determinations. In this regard, changes in the economic conditions (including commodity prices) or operating conditions (including, without limitation, exploration, development and production costs and expenses and drilling results from exploration and development activity) could cause the Company's estimated proved reserves or production to differ from those included in any such forward-looking statements or projections. Projecting future crude oil, NGL and natural gas production is imprecise. Producing oil and gas reservoirs eventually have declining production rates. Projections of production rates rely on certain assumptions regarding historical production patterns in the area or formation tests for a particular producing horizon. Actual production rates could differ materially from such projections. Production rates depend on a number of additional factors, including commodity prices, market demand and the political, economic and regulatory climate. Another major factor affecting the Company's production is its ability to replace depleting reservoirs with new reserves through acquisition, exploration or development programs. Exploration success is extremely difficult to predict with certainty, particularly over the short term where the timing and extent of successful results vary widely. Over the long term, the ability to replace reserves depends not only on the Company's ability to locate crude oil, NGL and natural gas reserves, but on the cost of finding and developing such reserves. Moreover, development of any particular exploration or development project may not be justified because of the commodity price environment at the time or because of the Company's finding and development costs for such project. No assurances can be given as to the level or timing of success that the Company will be able to achieve in acquiring or finding and developing additional reserves. Projections relating to the Company's production and financial results rely on certain assumptions about the Company's continued success in its acquisition and asset rationalization programs and in its cost management efforts. The Company's drilling operations are subject to various hazards common to the oil and gas industry, including explosions, fires, and blowouts, which could result in damage to or destruction of oil and gas wells or formations, production facilities and other property and injury to people. They are also subject to the 25 additional hazards of marine operations, such as capsizing, collision and damage or loss from severe weather conditions. Development Risk. A significant portion of the Company's development plans involve large projects in Algeria, the East Irish Sea, China, Wyoming, North Dakota, the Gulf of Mexico and other areas. A variety of factors affect the timing and outcome of such projects including, without limitation, approval by the other parties owning working interests in the project, receipt of necessary permits and approvals by applicable governmental agencies, the availability of the necessary drilling equipment, delivery schedules for critical equipment and arrangements for the gathering and transportation of the produced hydrocarbons. Foreign Operations Risk. The Company's operations outside of the U.S. are subject to risks inherent in foreign operations, including, without limitation, the loss of revenue, property and equipment from hazards such as expropriation, nationalization, war, insurrection and other political risks, increases in taxes and governmental royalties, renegotiation of contracts with governmental entities, changes in laws and policies governing operations of foreign-based companies, currency restrictions and exchange rate fluctuations and other uncertainties arising out of foreign government sovereignty over the Company's international operations. Laws and policies of the U.S. affecting foreign trade and taxation may also adversely affect the Company's international operations. The Company's ability to market crude oil, NGL's and natural gas discovered or produced in its foreign operations, and the price the Company could obtain for such production, depends on many factors beyond the Company's control, including ready markets for crude oil, NGL's and natural gas, the proximity and capacity of pipelines and other transportation facilities, fluctuating demand for crude oil and natural gas, the availability and cost of competing fuels, and the effects of foreign governmental regulation of oil and gas production and sales. Pipeline and processing facilities do not exist in certain areas of exploration and, therefore, any actual sales of the Company's production could be delayed for extended periods of time until such facilities are constructed. Competition. The Company actively competes for property acquisitions, exploration leases and sales of crude oil, NGL's and natural gas, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for gas purchasing and processing contracts and for natural gas and NGLs at several steps in the distribution chain. Competitive factors in the Company's business include price, contract terms, quality of service, pipeline access, transportation discounts and distribution efficiencies. Political and Regulatory Risk. The Company's operations are affected by foreign, national, state and local laws and regulations such as restrictions on production, changes in taxes, royalties and other amounts payable to governments or governmental agencies, price or gathering rate controls and environmental protection regulations. Changes in such laws and regulations, or interpretations thereof, could have a significant effect on the Company's operations or financial results. Potential Environmental Liabilities. The Company's operations are subject to various foreign, national, state and local laws and regulations covering the discharge of material into, and protection of, the environment. Such regulations affect the costs of planning, designing, operating and abandoning facilities. The Company expends considerable resources, both financial and managerial, to comply with environmental regulations and permitting requirements. Although the Company believes that its operations and facilities are in substantial compliance with applicable environmental laws and regulations, risks of substantial costs and liabilities are inherent in crude oil and natural gas operations. Moreover, it is possible that other developments, such as increasingly strict environmental laws, regulations and enforcement, and claims for damage to property or persons resulting from the Company's current or discontinued operations, could result in substantial costs and liabilities in the future. 26 ITEM EIGHT FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF INCOME (LOSS)
YEAR ENDED DECEMBER 31, --------------------------- 2001 2000 1999 ------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) REVENUES.................................................... $3,326 $3,147 $2,313 ------ ------ ------ COSTS AND EXPENSES Taxes Other than Income Taxes............................. 166 158 131 Transportation Expense.................................... 249 240 248 Production and Processing................................. 505 470 465 Depreciation, Depletion and Amortization.................. 730 704 631 Exploration Costs......................................... 258 237 226 Impairment of Oil and Gas Properties...................... 184 -- 225 Merger Costs.............................................. -- -- 37 Administrative............................................ 149 147 150 ------ ------ ------ Total Costs and Expenses.................................... 2,241 1,956 2,113 ------ ------ ------ Operating Income............................................ 1,085 1,191 200 Interest Expense............................................ 190 197 211 Other Expense (Income) -- Net............................... (12) 27 2 ------ ------ ------ Income (Loss) Before Income Taxes and Cumulative Effect of Change in Accounting Principle............................ 907 967 (13) Income Tax Expense (Benefit)................................ 349 292 (3) ------ ------ ------ Income (Loss) Before Cumulative Effect of Change in Accounting Principle...................................... 558 675 (10) Cumulative Effect of Change in Accounting Principle -- Net.......................................... 3 -- -- ------ ------ ------ NET INCOME (LOSS)........................................... $ 561 $ 675 $ (10) ====== ====== ====== EARNINGS (LOSS) PER COMMON SHARE Basic Before Cumulative Effect of Change in Accounting Principle............................................. $ 2.70 $ 3.13 $ (.05) Cumulative Effect of Change in Accounting Principle -- Net...................................... .01 -- -- ------ ------ ------ NET INCOME (LOSS)...................................... $ 2.71 $ 3.13 $ (.05) ====== ====== ====== Diluted Before Cumulative Effect of Change in Accounting Principle............................................. $ 2.69 $ 3.12 $ (.05) Cumulative Effect of Change in Accounting Principle -- Net...................................... .01 -- -- ------ ------ ------ NET INCOME (LOSS)...................................... $ 2.70 $ 3.12 $ (.05) ====== ====== ======
See accompanying Notes to Consolidated Financial Statements. 27 BURLINGTON RESOURCES INC. CONSOLIDATED BALANCE SHEET
DECEMBER 31, ------------------ 2001 2000 ------- ------- (IN MILLIONS, EXCEPT SHARE DATA) ASSETS Current Assets Cash and Cash Equivalents................................. $ 116 $ 132 Accounts Receivable....................................... 398 809 Commodity Hedging Contracts and Other Derivatives......... 118 -- Inventories............................................... 50 45 Other Current Assets...................................... 33 25 ------- ------- 715 1,011 ------- ------- Oil and Gas Properties (Successful Efforts Method).......... 16,038 13,118 Other Properties............................................ 1,416 1,019 ------- ------- 17,454 14,137 Accumulated Depreciation, Depletion and Amortization........ 8,623 7,830 ------- ------- Properties -- Net......................................... 8,831 6,307 ------- ------- Commodity Hedging Contracts and Other Derivatives........... 5 -- ------- ------- Goodwill.................................................... 782 -- ------- ------- Other Assets................................................ 249 188 ------- ------- Total Assets....................................... $10,582 $ 7,506 ======= ======= Current Liabilities Accounts Payable.......................................... $ 599 $ 619 Commodity Hedging Contracts and Other Derivatives......... 3 -- Taxes Payable............................................. 6 55 Accrued Interest.......................................... 61 33 Dividends Payable......................................... 28 30 Other Current Liabilities................................. 14 21 ------- ------- 711 758 ------- ------- Long-term Debt.............................................. 4,337 2,301 ------- ------- Deferred Income Taxes....................................... 1,403 266 ------- ------- Commodity Hedging Contracts and Other Derivatives........... 15 -- ------- ------- Other Liabilities and Deferred Credits...................... 591 431 ------- ------- Commitments and Contingent Liabilities Preferred Stock, Par Value $.01 per Share (Authorized 75,000,000 Shares; One Share Issued)...................... -- -- Common Stock, Par Value $.01 per Share (Authorized 325,000,000 Shares; Issued 241,188,688 and 241,188,698 Shares for 2001 and 2000, respectively)................... 2 2 Paid-in Capital............................................. 3,944 3,944 Retained Earnings........................................... 1,332 884 Deferred Compensation -- Restricted Stock................... (9) (5) Accumulated Other Comprehensive Loss........................ (106) (70) Cost of Treasury Stock (40,395,695 and 25,619,893 Shares for 2001 and 2000, respectively).............................. (1,638) (1,005) ------- ------- Stockholders' Equity........................................ 3,525 3,750 ------- ------- Total Liabilities and Stockholders' Equity......... $10,582 $ 7,506 ======= =======
See accompanying Notes to Consolidated Financial Statements. 28 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, -------------------------------- 2001 2000 1999 ------- ------------- ------ (IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss)......................................... $ 561 $ 675 $ (10) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities Depreciation, Depletion and Amortization............... 730 704 631 Deferred Income Taxes.................................. 219 219 (12) Exploration Costs...................................... 258 237 226 Impairment of Oil and Gas Properties................... 184 -- 225 Changes in Derivative Fair Values...................... (25) -- -- Working Capital Changes, Net of Acquisition Accounts Receivable.................................... 467 (341) (31) Inventories............................................ 6 8 -- Other Current Assets................................... (3) 1 (4) Accounts Payable....................................... (187) 109 (13) Taxes Payable.......................................... (46) (33) 40 Accrued Interest....................................... 23 (3) 6 Other Current Liabilities.............................. (2) 4 (22) Changes in Other Assets and Liabilities................... (79) 18 66 ------- ------ ------ Net Cash Provided By Operating Activities......... 2,106 1,598 1,102 ------- ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES Additions to Properties................................... (1,293) (941) (989) Acquisition of Hunter, net of cash acquired............... (2,087) -- -- Proceeds from Sales and Other............................. 1 19 (4) ------- ------ ------ Net Cash Used In Investing Activities............. (3,379) (922) (993) ------- ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Long-term Debt.............................. 2,247 70 632 Reduction in Long-term Debt............................... (211) (564) (528) Dividends Paid............................................ (116) (89) (127) Common Stock Purchases.................................... (684) (121) (9) Common Stock Issuances.................................... 41 92 21 Debt Issuance Costs and Other............................. (20) (21) (9) ------- ------ ------ Net Cash Provided By (Used In) Financing Activities...................................... 1,257 (633) (20) ------- ------ ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (16) 43 89 CASH AND CASH EQUIVALENTS Beginning of Year......................................... 132 89 -- ------- ------ ------ End of Year............................................... $ 116 $ 132 $ 89 ======= ====== ======
See accompanying Notes to Consolidated Financial Statements. 29 BURLINGTON RESOURCES INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
ACCUMULATED OTHER DEFERRED COMPREHENSIVE COST OF COMMON PAID-IN RETAINED COMPENSATION -- INCOME TREASURY STOCKHOLDERS' STOCK CAPITAL EARNINGS RESTRICTED STOCK (LOSS) STOCK EQUITY ------ ------- ------------- ---------------- ------------- -------- -------------- (IN MILLIONS, EXCEPT SHARE DATA) Balance, December 31, 1998...................... $2 $3,953 $ 440 $(2) $ (74) $(1,007) $3,312 -- ------ ------ --- ----- ------- ------ Comprehensive Income (Loss) Net Loss.................. (10) (10) Foreign Currency Translation............. 20 20 ------ ----- ------ Comprehensive Income (Loss)................ (10) 20 10 ------ ----- ------ Cash Dividends ($.46 per Share).................... (103) (103) Common Stock Purchases (250,000 Shares).......... (9) (9) Common Stock Issuances...... 7 7 Stock Option Activity and Other..................... 6 1 (1) 6 12 -- ------ ------ --- ----- ------- ------ Balance, December 31, 1999...................... 2 3,966 328 (3) (54) (1,010) 3,229 -- ------ ------ --- ----- ------- ------ Comprehensive Income (Loss) Net Income................ 675 675 Foreign Currency Translation............. (16) (16) ------ ----- ------ Comprehensive Income (Loss)................ 675 (16) 659 ------ ----- ------ Cash Dividends ($.55 per Share).................... (119) (119) Common Stock Purchases (3,505,000 Shares)........ (125) (125) Stock Option Activity and Other..................... (22) (2) 130 106 -- ------ ------ --- ----- ------- ------ Balance, December 31, 2000...................... 2 3,944 884 (5) (70) (1,005) 3,750 -- ------ ------ --- ----- ------- ------ Comprehensive Income (Loss) Net Income................ 561 561 Foreign Currency Translation............. (90) (90) Cumulative Effect of Change in Accounting Principle - Hedging..... (366) (366) Hedging Activities........ 420 420 ------ ----- ------ Comprehensive Income (Loss)................ 561 (36) 525 ------ ----- ------ Cash Dividends ($.55 per Share).................... (113) (113) Common Stock Purchases (16,092,000 Shares)....... (684) (684) Stock Option Activity....... 41 41 Issuance of Restricted Stock..................... (10) 10 -- Amortization of Restricted Stock..................... 6 6 -- ------ ------ --- ----- ------- ------ Balance, December 31, 2001...................... $2 $3,944 $1,332 $(9) $(106) $(1,638) $3,525 == ====== ====== === ===== ======= ======
See accompanying Notes to Consolidated Financial Statements. 30 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES Principles of Consolidation and Reporting The consolidated financial statements include the accounts of Burlington Resources Inc. ("BR") and its majority-owned subsidiaries (the "Company"). All significant intercompany transactions have been eliminated in consolidation. Investments in entities in which the Company has a significant ownership interest, generally 20 to 50 percent, or otherwise does not exercise control, are accounted for using the equity method. Under the equity method, the investments are stated at cost plus the Company's equity in undistributed earnings and losses. The consolidated financial statements for previous periods include certain reclassifications that were made to conform to current presentation. Such reclassifications have no impact on previously reported net income or stockholders' equity. Cash and Cash Equivalents All short-term investments purchased with a maturity of three months or less are considered cash equivalents. Cash equivalents are stated at cost, which approximates market value. Inventories Inventories of materials, supplies and products are valued at the lower of average cost or market. Properties Oil and gas properties are accounted for using the successful efforts method. Under this method, all development costs and acquisition costs of proved properties are capitalized and amortized on a units-of-production basis over the remaining life of proved developed reserves and proved reserves, respectively. Costs of drilling exploratory wells are initially capitalized, but charged to expense if and when a well is determined to be unsuccessful. Costs of unproved properties are capitalized and amortized on a composite basis, based on past success experience and average property lives. The Company evaluates the impairment of its oil and gas properties on a field-by-field basis whenever events or changes in circumstances indicate an asset's carrying amount may not be recoverable. Unamortized capital costs are reduced to fair value if the sum of the expected undiscounted future cash flows is less than the asset's net book value. Cash flows are determined based upon proved reserves using prices and costs consistent with those used for internal decision making. Costs of retired, sold or abandoned properties that constitute a part of an amortization base are charged or credited, net of proceeds, to accumulated depreciation, depletion and amortization. Gains or losses from the disposal of other properties are recognized currently. Expenditures for maintenance, repairs and minor renewals necessary to maintain properties in operating condition are expensed as incurred. Major replacements and renewals are capitalized. Estimated dismantlement and abandonment costs for oil and gas properties are capitalized at their estimated net present value and amortized net of salvage value. The Company's abandonment liability, included in Other Liabilities and Deferred Credits in the Consolidated Balance Sheet, was $201 million and $147 million at December 31, 2001 and 2000, respectively. Other properties include gas plants, pipelines, buildings, data processing and telecommunications equipment, office furniture and equipment and other fixed assets. These items are recorded at cost and are depreciated on the straight-line method based on expected lives of the individual assets or group of assets. Revenue Recognition Gas revenues are recorded on the entitlement method. Under the entitlement method, revenue is recorded when title passes based on the Company's net interest. Gas imbalances occur when the Company sells more or less than its entitled ownership percentage of total gas production. Any amount received in excess 31 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of the Company's share is treated as a liability. If the Company receives less than it is entitled, the underproduction is recorded as a receivable. At December 31, 2001 and 2000, the Company had gas imbalance receivables of $39 million and $19 million, respectively. Functional Currency The assets, liabilities and operations of BR's Canadian subsidiaries are measured using the Canadian dollar as the functional currency. These assets and liabilities are translated into United States ("U.S.") dollars at end-of-period exchanges rates and are recorded in other comprehensive income. Revenue and expenses are translated into U.S. dollars at the average exchange rates in effect during the period. The assets, liabilities and results of operations of foreign entities other than BR's Canadian subsidiaries are measured using the U.S. dollar as the functional currency. For subsidiaries where the U.S. dollar is the functional currency, all foreign currency denominated assets and liabilities are remeasured into U.S. dollars at end-of-period exchange rates. Inventories, prepaid expenses and properties are exceptions to this policy and are remeasured at historical rates. Foreign currency revenues and expenses are remeasured at average exchange rates in effect during the year. Exceptions to this policy include all expenses related to balance sheet amounts that are remeasured at historical exchange rates. Exchange gains and losses arising from remeasured foreign currency denominated monetary assets and liabilities are included in Other Expense (Income) -- Net in the Consolidated Statement of Income (Loss). Included in net income for the years ended December 31, 2001, 2000 and 1999 are losses of $7 million, $4 million and a gain of $9 million, respectively. Derivative Instruments and Hedging Activities The Company enters into derivative contracts, primarily options and swaps, to hedge future crude oil and natural gas production in order to mitigate the risk of market price fluctuations. The Company also enters into derivative contracts to mitigate the risk of foreign currency exchange rate fluctuations. On January 1, 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. Effective with the adoption of SFAS No. 133, all derivatives are recognized on the balance sheet and measured at fair value. If the derivative does not qualify as a hedge or is not designated as a hedge, the gain or loss on the derivative is recognized currently in earnings. If the derivative qualifies for hedge accounting, the gain or loss on the derivative is either recognized in income along with an offsetting adjustment to the basis of the item being hedged for fair value hedges or deferred in other comprehensive income to the extent the hedge is effective for cash flow hedges. To qualify for hedge accounting, the derivative must qualify as either a fair-value, cash-flow or foreign-currency hedge. The hedging relationship between the hedging instruments and hedged items must be highly effective in achieving the offset of changes in fair values or cash flows attributable to the hedged risk both at the inception of the hedge and on an ongoing basis. The Company measures hedge effectiveness on a quarterly basis. Hedge accounting is discontinued prospectively when a hedging instrument becomes ineffective. The Company assesses hedge effectiveness based on total changes in the fair value of options used in cash flow hedges rather than changes of intrinsic value only. As a result, changes in the entire fair value of option contracts are deferred in accumulated other comprehensive income until the hedged transaction affects earnings to the extent such contracts are effective. Gains and losses deferred in accumulated other comprehensive income related to cash flow hedge derivatives that become ineffective remain unchanged until the related production is delivered. Adjustment to the carrying amounts of hedged production is discontinued in instances where the related fair-value hedging instrument becomes ineffective. The balance in the fair-value hedge adjustment account is recorded in income when the related production is delivered. If the Company determines that it is probable that a hedged forecasted transaction will not occur, deferred gains or losses on the hedging instrument are recognized in earnings immediately. 32 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Gains and losses on hedging instruments and adjustments of the carrying amounts of hedged production are included in crude oil and natural gas revenues and are included in realized prices in the period that the related production is delivered. Gains and losses on hedging instruments which represent hedge ineffectiveness and gains and losses on derivative instruments which do not qualify for hedge accounting are included in other revenues in the period in which they occur. The resulting cash flows are reported as cash flows from operating activities. Credit and Market Risks The Company manages and controls market and counterparty credit risk through established formal internal control procedures which are reviewed on an ongoing basis. The Company attempts to minimize credit risk exposure to counterparties through formal credit policies, monitoring procedures and, if necessary, through establishment of valuation reserves related to counterparty credit risk. In the normal course of business, collateral is not required for financial instruments with credit risk. Income Taxes Income taxes are provided based on earnings reported for tax return purposes in addition to a provision for deferred income taxes. Deferred income taxes are provided to reflect the tax consequences in future years of differences between the financial statement and tax basis of assets and liabilities. Tax credits are accounted for under the flow-through method, which reduces the provision for income taxes in the year the tax credits are earned. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized. Stock-based Compensation The Company uses the intrinsic value based method of accounting for stock-based compensation, as prescribed by Accounting Principles Board Opinion No. 25 and related interpretations. Under this method, the Company records no compensation expense for stock options granted when the exercise price for options granted is equal to the fair market value of the Company's stock on the date of the grant. Environmental Costs Environmental expenditures are expensed or capitalized, as appropriate, depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations, and that do not have future economic benefit, are expensed. Liabilities related to future costs are recorded on an undiscounted basis when environmental assessments and/or remediation activities are probable and the costs can be reasonably estimated. Reclassifications The Company's 2001 taxes other than income taxes include severance, ad valorem, payroll and miscellaneous taxes. To conform to current presentation, the Company reclassified $11 million of payroll and miscellaneous taxes from production and processing expenses and administrative expenses to taxes other than income taxes for each of the years ended December 31, 2000 and 1999. The Company also reclassified $15 million and $12 million of certain other non-corporate expenses from administrative expenses to production and processing expenses for years ended December 31, 2000 and 1999, respectively. These reclassifications had no effect on operating income. 33 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Earnings Per Common Share Basic earnings per common share ("EPS") is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. The weighted average number of common shares outstanding for computing basic EPS was 207 million, 216 million and 216 million for the years ended December 31, 2001, 2000 and 1999, respectively. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The weighted average number of common shares outstanding for computing diluted EPS, including dilutive stock options, was 208 million, 216 million and 217 million for the years ended December 31, 2001, 2000 and 1999, respectively. For the years ended December 31, 2001, 2000 and 1999, approximately 4 million shares attributable to the exercise of outstanding options were excluded from the calculation of diluted EPS because the effect was antidilutive. No adjustments were made to reported net income in the computation of EPS. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates pertain to proved oil, NGL and gas reserve volumes and the future development, dismantlement and abandonment costs as well as estimates relating to certain gas, NGL and oil revenues and expenses. Actual results could differ from those estimates. 34 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2. BUSINESS COMBINATIONS AND OTHER PROPERTY ACQUISITIONS Acquisition of Canadian Hunter Exploration Ltd. ("Hunter") On December 5, 2001, BR acquired all of the outstanding shares of Hunter for cash consideration of C$53 per share representing an aggregate value of approximately U.S. $2.1 billion resulting in an excess purchase price of approximately $793 million which has been reflected as goodwill. Through the acquisition, BR gains Hunter's significant interest in Canada's Deep Basin, North America's third-largest natural gas field, increasing its critical mass and enhancing its position as a leading North American natural gas producer. BR also obtains the exploration expertise of Hunter's workforce, gains additional cost optimization by eliminating duplicate efforts and increasing purchasing power and gains greater marketing flexibility in optimizing sales and accessing key market information. This acquisition was funded with cash on hand and proceeds from the issuances of $1.5 billion of fixed-rate notes and $400 million of commercial paper. The transaction was accounted for under the purchase method in accordance with SFAS No. 141. The results of operations of Hunter were included in the Company's financial statements effective December 5, 2001. The Company is in the process of evaluating the impairment methodology for goodwill. The purchase price was calculated as follows.
(IN MILLIONS) ------------- Calculation of Purchase Price for Assets Acquired: Cash paid for stock purchased.......................... $2,014 Cash settlement of employee stock options.............. 66 Other purchase price costs (e.g. fees, etc.)........... 17 Cash acquired.......................................... (10) ------ Total purchase price for common equity............ 2,087 ------ Plus fair market value of liabilities assumed: Current and other liabilities.......................... 308 Deferred tax........................................... 902 ------ Total liabilities................................. 1,210 ------ Total purchase price for assets acquired.................. $3,297 ======
The following is the allocation of the purchase price to specific assets and liabilities based on estimates of fair values and costs. All of the goodwill was assigned to the Company's Canadian reporting unit.
(IN MILLIONS) ------------- Current assets.............................................. $ 74 Other assets................................................ 45 Properties, plant and equipment............................. 2,385 Goodwill.................................................... 793 ------ 3,297 Current liabilities......................................... (105) Other liabilities........................................... (194) Long-term debt.............................................. (9) Deferred tax................................................ (902) ------ $2,087 ======
The purchase price allocation is preliminary in nature and is subject to changes as additional information becomes available. Management does not expect the final purchase price allocation to differ materially. Other purchase price costs relate primarily to professional fees of approximately $16 million and other direct transaction costs of approximately $1 million. 35 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table presents the unaudited pro forma results of the Company as though the acquisition had occurred on January 1, 2000. Pro forma results are not necessarily indicative of actual results.
2001 2000 ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues.................................................... $3,902 $3,648 Net income.................................................. 696 757 Basic earnings per common share............................. 3.36 3.51 Diluted earnings per common share........................... $ 3.34 $ 3.50
Other Acquisitions During the first quarter of 2001, the Company purchased from DIFCO Limited an additional 10 percent interest in 7 fields in the East Irish Sea for $25 million. The Company is the operator of the properties and now owns 100 percent of the assets. In January 2001, the Company's Canadian subsidiary, Burlington Resources Canada Energy Ltd., now known as Burlington Resources Canada Ltd. ("BRCL"), acquired approximately 37 billion cubic feet of gas equivalent ("BCFE") of proved reserves from Petrobank Energy and Resources Ltd. for $57 million. On August 16, 1999, the Company entered into a definitive agreement to acquire Poco Petroleums Ltd. ("Poco") (the "Acquisition"). The Acquisition was consummated on November 18, 1999 and accounted for under the pooling of interests method. Under the terms of the Acquisition, Poco shareholders received .25 BR common equivalent shares ("exchangeable shares"), totaling 38,393,135 shares, for each Poco share held. The exchangeable shares were Canadian securities, which began trading on the Toronto Stock Exchange on November 23, 1999 under the symbol BRX. These shares had the same voting rights, dividend entitlements and other attributes as shares of BR Common Stock and were exchangeable, at each shareholder's option, for BR Common Stock on a one for one basis. See Note 8 of Notes to Consolidated Financial Statements for disposition of remaining exchangeable shares. During the fourth quarter of 1999, the Company recorded a pretax charge of $37 million ($26 million after tax) for direct costs associated with the Acquisition. These costs consist of $10 million for severance related to certain executives and $27 million for direct transaction costs. At December 31, 2000, all costs had been paid. 3. OIL AND GAS AND OTHER PROPERTIES Oil and gas properties consisted of the following.
DECEMBER 31, ------------------ 2001 2000 ------- ------- (IN MILLIONS) Proved properties........................................... $15,638 $12,694 Unproved properties......................................... 400 424 ------- ------- 16,038 13,118 Accumulated depreciation, depletion and amortization........ 8,060 7,342 ------- ------- Net oil and gas properties........................ $ 7,978 $ 5,776 ======= =======
36 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Other properties consisted of the following.
DECEMBER 31, DEPRECIABLE --------------- LIFE-YEARS 2001 2000 ----------- ------ ------ (IN MILLIONS) Plants and pipeline systems................................. 10-20 $ 979 $ 630 Land, building, improvements and furniture and fixtures..... 0-40 145 143 Data processing & telecommunications equipment.............. 3-7 229 189 Other....................................................... 3-15 63 57 ------ ------ 1,416 1,019 Accumulated Depreciation.................................... 563 488 ------ ------ Net other properties.............................. $ 853 $ 531 ====== ======
4. INCOME TAXES The jurisdictional components of income (loss) before income taxes follow.
YEAR ENDED DECEMBER 31, ------------------------- 2001 2000 1999 ------ ------ ------- (IN MILLIONS) Domestic.................................................... $470 $673 $ (66) Foreign..................................................... 437 294 53 ---- ---- ----- Total............................................. $907 $967 $ (13) ==== ==== =====
The provision for income taxes follows.
YEAR ENDED DECEMBER 31, ------------------------- 2001 2000 1999 ------ ------ ------- (IN MILLIONS) Current Federal................................................... $ 25 $ 37 $ 4 State..................................................... 19 10 -- Foreign................................................... 86 26 5 ---- ---- ----- 130 73 9 ---- ---- ----- Deferred Federal................................................... 76 84 (44) State..................................................... 14 15 4 Foreign................................................... 129 120 28 ---- ---- ----- 219 219 (12) ---- ---- ----- Total............................................. $349 $292 $ (3) ==== ==== =====
Reconciliation of the federal statutory income tax rate to the effective income tax rate follows.
2001 2000 1999 ---- ----- ----- YEAR ENDED DECEMBER 31, ---------------------- U.S. statutory rate......................................... 35.0% 35.0% 35.0% State income taxes.......................................... 2.3 2.4 (16.7) Taxes on foreign income in excess of U.S. statutory rate.... 6.0 4.5 (66.5) Tax credits................................................. (2.7) (5.4) 15.9 Adjustments of prior year accruals.......................... (1.5) (5.8) 89.5 Merger costs................................................ -- -- (31.9) Other....................................................... (.7) (.5) (3.7) ---- ----- ----- Effective rate......................................... 38.4% 30.2% 21.6% ==== ===== =====
37 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred income tax liabilities (assets) follow.
DECEMBER 31, -------------- 2001 2000 ------ ----- (IN MILLIONS) Deferred income tax liabilities Property, plant and equipment............................. $1,763 $ 740 Commodity hedging contracts and other derivatives......... 33 -- Other..................................................... 49 72 ------ ----- 1,845 812 ------ ----- Deferred income tax assets AMT credit carryforward................................... (347) (345) Deferred foreign tax credits.............................. (55) (66) Net operating loss carryforward........................... (2) -- Foreign tax credit carryforward........................... -- (2) Financial accruals and other.............................. (70) (166) ------ ----- (474) (579) ------ ----- Less valuation allowance.................................... 32 33 ------ ----- $1,403 $ 266 ====== =====
The net deferred income tax liabilities, as of December 31, 2001 and 2000, include deferred state income tax liabilities of approximately $49 million and $35 million, respectively. The net deferred income tax liabilities also include foreign tax liabilities of approximately $1,102 million and $124 million as of December 31, 2001 and 2000, respectively. No deferred U.S. income tax liability has been recognized on the undistributed earnings of controlled foreign corporations that have been retained for reinvestment. A valuation allowance is provided for uncertainties surrounding the realization of various tax credit carryforwards. The Alternative Minimum Tax ("AMT") credit carryforward, related primarily to nonconventional fuel tax credits, is available to offset future federal income tax liabilities. The AMT credit carryforward has no expiration date. The benefit of these tax credits is recognized in net income for accounting purposes and is reflected in the current tax provision to the extent the Company is able to utilize the credits for tax return purposes. The net operating loss carryforward primarily relates to foreign jurisdictions and will expire between 2003 and 2006 if not used. 5. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company enters into fixed-price gas swap agreements to fix the prices of anticipated future natural gas production and enters into variable-price gas swap agreements that convert fixed price physical sales contracts back to market sensitive prices. The Company enters into natural gas basis swap agreements to fix the sales price differential between the Company's marketing locations and NYMEX Henry Hub. The Company enters into natural gas option agreements to establish floor and ceiling prices on anticipated future natural gas production. The Company also enters into natural gas option agreements to establish floor and ceiling prices on anticipated future natural gas production while allowing the Company to participate in upward price movements above a specified non-participation range. Generally, the Company does not receive net premiums on its option hedging strategies. The Company enters into crude oil swap agreements to fix the price of anticipated future crude oil production and purchases call options agreements that allow the Company to participate in market price increases that exceed hedge prices established when the Company enters into a swap. The Company also enters into crude oil option agreements to establish floor and ceiling prices on anticipated future crude oil production while allowing the Company to participate in upward price movements above a specified non-participation range. Generally, the Company does not receive net premiums on its option hedging strategies. 38 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 2001, the Company had the following natural gas volumes hedged. Natural Gas Fixed-Price Swaps
AVERAGE FAIR VALUE VOLUMES FIXED ASSET PRODUCTION PERIOD (MMBTU) PRICE (LIABILITY) - ----------------- ---------- ------- ------------- (IN MILLIONS) 2002................................................ 20,489,913 $3.15 $ 9 2003................................................ 15,570,630 3.13 (1) 2004................................................ 15,613,289 3.24 (1) 2005................................................ 10,513,930 3.21 (2) 2006 to 2007................................................ 1,672,500 $3.21 $--
Natural Gas Basis Swaps
AVERAGE VOLUMES BASIS FAIR VALUE PRODUCTION PERIOD (MMBTU) DIFFERENTIAL ASSET - ----------------- ---------- ------------ ------------- (IN MILLIONS) 2002............................................. 17,959,913 $(.13) $ 4 2003............................................. 15,570,630 (.28) 1 2004............................................. 15,613,289 (.27) -- 2005............................................. 10,513,930 (.29) -- 2006 to 2007............................................. 1,672,500 $(.15) $ --
Natural Gas Options
AVERAGE FAIR VALUE VOLUMES STRIKE ASSET PRODUCTION PERIOD OPTION TYPE (MMBTU) PRICE (LIABILITY) - ----------------- --------------- ----------- ------- ------------- (IN MILLIONS) 2002...................................... Puts purchased 141,780,000 $ 3.07 $114 2002...................................... Puts sold 81,255,000 2.01 (11) 2002...................................... Calls sold 141,780,000 5.49 (6) 2002...................................... Calls purchased 30,250,000 $10.80 $ --
As of December 31, 2001, the fair value of the swap agreements the Company had entered into in order to convert the Company's fixed-price gas sales contracts to market sensitive positions was a $1 million liability offset by a $1 million asset basis adjustment to the carrying value of the fixed-price gas sales contracts. As of December 31, 2001, the Company had the following crude oil volumes hedged. The total notional amount of the crude oil call options is matched with a corresponding notional amount of fixed-price swaps. Crude Oil Swaps
AVERAGE VOLUMES FIXED PRODUCTION PERIOD (BARRELS) PRICE FAIR VALUE - ----------------- ---------- ------- ------------- (IN MILLIONS) 2002........................................................ 180,000 $21.91 $ --
39 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Crude Oil Options
AVERAGE VOLUMES STRIKE FAIR VALUE PRODUCTION PERIOD OPTION TYPE (BARRELS) PRICE ASSET (LIABILITY) ----------------- --------------- --------- ------- ----------------- (IN MILLIONS) 2002..................................... Puts Purchased 1,810,000 $25.00 $ 10 2002..................................... Puts Sold 1,810,000 20.00 (4) 2002..................................... Calls Sold 1,810,000 32.17 -- 2002..................................... Calls Purchased 1,990,000 $36.36 $ --
The derivative assets and liabilities represent the difference between hedged values and market values on hedged volumes of the commodities as of December 31, 2001. Hedging activities reduced natural gas and crude oil revenues by $297 million and $25 million, respectively, during 2001. In addition, during 2001, gains of $19 million were recorded in revenues associated with ineffectiveness of cash-flow and fair-value hedges and gains on derivative instruments which do not qualify for hedge accounting. In addition to hedges of commodity prices, the Company also has foreign currency swaps to hedge its exposure to exchange rate fluctuations related to its Canadian subsidiaries. As of December 31, 2001, the Company had $8 million of liabilities related to foreign currency exchange rate hedges. In accordance with the transition provisions of SFAS No. 133, on January 1, 2001, the Company recorded a net-of-tax cumulative-effect-type loss adjustment of $366 million in accumulated other comprehensive income to recognize at fair value all derivatives that are designated as cash-flow hedging instruments. The Company recorded cash-flow hedge derivatives liabilities of $582 million ($361 million after tax), fair value hedge derivative assets of $16 million ($10 million after tax), related liability adjustments to book value of fair-value hedged items of $16 million ($10 million after tax) and a $3 million after tax non-cash gain was recorded in current earnings as a cumulative effect of accounting change. Changes in other comprehensive income for the year ended December 31, 2001 follow.
(IN MILLIONS) ------------- Cumulative effect of change in accounting principle -- January 1, 2001.......................... $(366) Reclassification adjustments for settled contracts... 200 Current period changes in fair value of settled contracts........................................... 153 Changes in fair value of outstanding hedging positions........................................... 67 ----- Accumulated other comprehensive income hedging activities -- December 31, 2001....................... $ 54 =====
Based on commodity prices and foreign exchange rates as of December 31, 2001, the Company expects to reclassify gains of $86 million ($54 million after tax) to earnings from the balance in accumulated other comprehensive income during the next twelve months. As of December 31, 2001, the Company had cash-flow hedge derivative assets of $109 million and liabilities of $10 million. The Company had liabilities and assets related to fair-value hedges of $4 million and $4 million, respectively. The Company also had assets totaling $10 million related to commodity derivative instruments that do not qualify for hedge accounting. 40 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. LONG-TERM DEBT Long-term debt follows.
DECEMBER 31, ---------------- 2001 2000 ------ ------ (IN MILLIONS) Commercial Paper............................................ $ 675 $ 327 Notes, 8 1/2%, due 2001..................................... -- 150 Notes, 8.54%, due 2001...................................... -- 15 Notes, 6.20%, due 2001...................................... -- 32 Notes, 8 1/4%, due 2002..................................... 100 100 Notes, 6.40%, due 2003...................................... 63 66 Notes, 7.12%, due 2005...................................... -- 39 Notes, 5.60%, due 2006...................................... 500 -- Notes, 6.60%, due 2007...................................... 94 100 Notes, 6.91%, due 2008...................................... -- 50 Debentures, 9 7/8%, due 2010................................ 150 150 Notes, 6.50%, due 2011...................................... 500 -- Notes, 6.68%, due 2011...................................... 400 -- Notes, 6.40%, due 2011...................................... 178 -- Notes, 7.00%, due 2011...................................... -- 75 Debentures, 7 5/8%, due 2013................................ 100 100 Debentures, 9 1/8%, due 2021................................ 150 150 Debentures, 7.65%, due 2023................................. 88 200 Debentures, 8.20%, due 2025................................. 150 150 Debentures, 6 7/8%, due 2026................................ 67 150 Debentures, 7 3/8%, due 2029................................ 92 450 Notes, 7.20%, due 2031...................................... 575 -- Notes, 7.40%, due 2031...................................... 500 -- Other, including discounts.................................. (45) (3) ------ ------ Total long-term debt.............................. $4,337 $2,301 ====== ======
Excluding commercial paper, the Company has debt maturities of $100 million due in 2002, $63 million due in 2003, $0 million due in 2004 and 2005, and $3,544 million due in 2006 and thereafter. The Company's commercial paper borrowings at December 31, 2001 and 2000 had weighted average interest rates of approximately 3 percent and 6 percent, respectively. The fair value of debt outstanding as of December 31, 2001 and 2000 approximates the carrying amount. Burlington Resources Capital Trust I, Burlington Resources Capital Trust II (collectively, the "Trusts"), BR and Burlington Resources Finance Company ("BRFC") have a shelf registration on file with the Securities and Exchange Commission ("SEC"). Pursuant to such registration statement, BR may issue debt securities, shares of common stock or preferred stock. In addition, BRFC may issue debt securities and the Trusts may issue trust preferred securities. Net proceeds, terms and pricing of offerings of securities issued under the shelf registration statement will be determined at the time of the offerings. BRFC and the Trusts are wholly owned finance subsidiaries of BR and have no independent assets or operations other than transferring funds to BR's subsidiaries. Any debt issued by BRFC is fully and unconditionally guaranteed by BR. Any trust preferred securities issued by the Trusts are also fully and unconditionally guaranteed by BR. In February 2001, BRFC issued $400 million of 6.68% Notes due February 15, 2011. In August 2001, BRFC acquired notes with an aggregate principal amount of $710 million and a weighted average interest rate 41 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of 7.28% and issued $178 million of 6.4% Notes and $575 million of 7.2% Notes due August 15, 2011 and 2031, respectively. The transaction was accounted for as an exchange of debt instruments and reduced the Company's amount available under its shelf registration statement on file with the SEC from $1,500 million to $747 million. The Company had credit commitments in the form of revolving credit facilities ("revolvers") as of December 31, 2001. These revolvers are available to cover debt due within one year, therefore, commercial paper, credit facility notes and fixed-rate debt due within one year are classified as long-term debt. Currently, there are no amounts outstanding under the revolvers, however, the Company's outstanding commercial paper reduces the amount of credit available under the revolvers. The revolvers are comprised of agreements for $600 million, $400 million and $300 million. The $600 million revolver expires in December 2006 and the $400 million and $300 million revolvers expire in December 2002 unless renewed by mutual consent. At expiration of the agreements, the Company has the option to convert the outstanding balances on the $400 million and $300 million revolvers to one year and five-year plus one day term notes, respectively. At the Company's option, interest on borrowings under the $600 million and $400 million revolvers is based on the prime rate or Eurodollar rates. The other revolver bears interest at rates based on prime or Eurodollar rates also at the Company's option, however, the lenders have the option to provide bankers' acceptances in lieu of Eurodollar rate loans. Under the covenants of the revolvers, Company debt cannot exceed 60 percent of capitalization (as defined in the agreements). Outstanding borrowings of $127 million and $114 million as of December 31, 2001 and 2000, respectively, on Company-owned life insurance policies were reported as a reduction to the cash surrender value and are included as a component of Other Assets in the Company's consolidated balance sheet. 7. TRANSPORTATION ARRANGEMENTS WITH EL PASO NATURAL GAS COMPANY In 2001, 2000 and 1999, approximately 29 percent, 32 percent and 30 percent, respectively, of the Company's gas production was transported to direct sale customers through El Paso Natural Gas Company's ("EPNG") pipeline systems. These transportation arrangements are pursuant to EPNG's approved Federal Energy Regulatory Commission tariffs applicable to all shippers. The Company expects to continue to transport a substantial portion of its future gas production through EPNG's pipeline system. See Note 10 of Notes to Consolidated Financial Statements for demand charges paid to EPNG which provide the Company with firm and interruptible transportation capacity rights on interstate and intrastate pipeline systems. 42 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 8. CAPITAL STOCK Common Stock Activity
NUMBER OF SHARES -------------------------------------- ISSUED TREASURY OUTSTANDING ----------- ---------- ----------- BALANCE AT DECEMBER 31, 1998.......................... 241,083,924 25,420,562 215,663,362 Unexchanged Poco shares............................. 104,846 104,846 Treasury shares purchased........................... 250,000 (250,000) Shares issued under compensation plans, net of forfeitures...................................... (27,448) 27,448 Option exercises.................................... (424,089) 424,089 ----------- ---------- ----------- BALANCE AT DECEMBER 31, 1999.......................... 241,188,770 25,219,025 215,969,745 Unexchanged Poco shares............................. (72) (72) Treasury shares purchased........................... 3,505,000 (3,505,000) Shares issued under compensation plans, net of forfeitures...................................... (190,547) 190,547 Option exercises.................................... (2,913,585) 2,913,585 ----------- ---------- ----------- BALANCE AT DECEMBER 31, 2000.......................... 241,188,698 25,619,893 215,568,805 Unexchanged Poco shares............................. (10) (10) Treasury shares purchased........................... 16,092,000 (16,092,000) Shares issued under compensation plans, net of forfeitures...................................... (264,011) 264,011 Option exercises.................................... (1,052,187) 1,052,187 ----------- ---------- ----------- BALANCE AT DECEMBER 31, 2001.......................... 241,188,688 40,395,695 200,792,993 =========== ========== ===========
In December 2000, the Company's Board of Directors authorized the repurchase of up to $1 billion of the Company's Common Stock. During 2001, the Company repurchased 16.1 million shares of its Common Stock for approximately $684 million. Through December 31, 2001, the Company has repurchased approximately 16.3 million shares or $693 million of its Common Stock under this $1 billion authorization. Stock Compensation Plans The Company's 1993 Stock Incentive Plan (the "1993 Plan") succeeds its 1988 Stock Option Plan which expired by its terms in May 1993 but remains in effect for options granted prior to May 1993. The 1993 Plan provides for the grant of stock options, restricted stock, stock purchase rights and stock appreciation rights or limited stock appreciation rights. Under the 1993 Plan, options may be granted to officers and key employees at fair market value on the date of grant, are exercisable in whole or part by the optionee after completion of at least one year of continuous employment from the grant date and have a term of ten years. At December 31, 2001, 4,169,973 shares were available for grant under the 1993 Plan. In 1997, the Company adopted the 1997 Employee Stock Incentive Plan (the "1997 Plan") from which stock options and restricted stock ("Awards") may be granted to employees who are not eligible to participate in the 1993 Plan. The options are granted at fair market value on the grant date, become exercisable in whole or part by the optionee after completion of at least one year of continuous employment and have a term of ten years. The 1997 Plan limits Awards, in aggregate, to a maximum of 1.5 million shares annually, of which up to 150,000 shares annually may be restricted stock. The Company issued 256,700, 211,350 and 110,250 shares of restricted stock in 2001, 2000 and 1999, respectively, from the 1993 and 1997 Plans. The restrictions on this stock generally lapse on the third anniversary of the date of grant. The weighted average grant-date fair value of restricted stock granted in the years ended December 31, 2001, 2000, and 1999 was approximately $50.30, $34.62 and $36.47, respectively. 43 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Related compensation expense of $7 million, $4 million and $2 million was recognized for the years ended December 31, 2001, 2000 and 1999, respectively. The Company's 2000 Stock Option Plan for Non-Employee Directors provides for the annual grant of a nonqualified option for 2,000 shares of Common Stock immediately following the Annual Meeting of Stockholders to Directors who are not salaried officers of the Company. In addition, an option for 5,000 shares is granted upon a Director's initial election or appointment to the Board of Directors. The exercise price per share with respect to each option is the fair market value, as defined in the plan, of the Common Stock on the date the option is granted. The total number of shares of the Company's Common Stock for which options may be granted under the plan is 250,000. The Company's stock option activity follows.
WEIGHTED AVERAGE OPTIONS EXERCISE PRICE ---------- ---------------- Balance, December 31, 1998.................................. 9,145,082 $37.84 Granted................................................... 822,880 33.35 Exercised................................................. (424,089) 30.50 Cancelled................................................. (645,075) 38.32 ---------- Balance, December 31, 1999.................................. 8,898,798 37.80 Granted................................................... 1,432,925 34.55 Exercised................................................. (2,913,585) 31.73 Cancelled................................................. (837,044) 35.38 ---------- Balance, December 31, 2000.................................. 6,581,094 40.08 Granted................................................... 1,638,675 50.53 Exercised................................................. (1,052,187) 35.81 Cancelled................................................. (303,324) 47.00 ---------- Balance, December 31, 2001.................................. 6,864,258 $42.93 ==========
The following table summarizes information related to stock options outstanding and exercisable at December 31, 2001.
WEIGHTED AVERAGE OPTIONS RANGE OF WEIGHTED AVERAGE REMAINING OPTIONS WEIGHTED AVERAGE OUTSTANDING EXERCISE PRICES EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE - ----------- --------------- ---------------- ---------------- ----------- ---------------- 381,768 .............. $19.51-27.38 $24.10 2.8 381,768 $24.10 3,134,212 .............. 29.10-43.56 37.24 6.1 2,610,953 37.76 3,348,278 .............. 43.88-52.03 50.40 6.7 1,845,353 50.20 --------- --------- 6,864,258 .............. $19.51-52.03 $42.93 6.2 4,838,074 $41.41 ========= =========
Exercisable stock options and weighted average exercise prices at December 31, 2000 and 1999 follow.
OPTIONS WEIGHTED AVERAGE EXERCISABLE EXERCISE PRICE ----------- ---------------- December 31, 2000........................................... 5,348,994 $41.36 December 31, 1999........................................... 7,638,364 $36.98
44 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The weighted average fair values of options granted during the years 2001, 2000 and 1999 were $11.33, $10.33 and $11.13, respectively. The fair values of employee stock options were calculated using a variation of the Black-Scholes stock option valuation model with the following weighted average assumptions for grants in 2001, 2000 and 1999: stock price volatility of 35 percent, 35 percent and 27 percent, respectively; risk free rate of return ranging from 4 percent to 5 percent; dividend yield of 1.32 percent, 1.46 percent and .88 percent, respectively; and an expected term of 3 years. If the fair value based method of accounting, as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, had been applied, the Company's pro forma net income (loss) and pro forma EPS are shown below. The fair value of stock options included in the pro forma amounts is not necessarily indicative of future effects on net income (loss) and EPS.
YEAR ENDED DECEMBER 31, ------------------------ 2001 2000 1999 ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Net income (loss) -- as reported............................ $ 561 $ 675 $ (10) Net income (loss) -- pro forma.............................. 549 663 (41) Basic EPS -- as reported.................................... 2.71 3.13 (.05) Basic EPS -- pro forma...................................... 2.65 3.08 (.19) Diluted EPS -- as reported.................................. 2.70 3.12 (.05) Diluted EPS -- pro forma.................................... $2.64 $3.06 $(.19)
Preferred Stock and Preferred Stock Purchase Rights The Company is authorized to issue 75,000,000 shares of preferred stock, par value $.01 per share. As of December 31, 2001, one share of preferred stock was issued and designated as Special Voting Stock in connection with the Poco acquisition. On December 9, 1998, the Company's Board of Directors designated 3,250,000 of the authorized preferred shares as Series A Junior Participating Preferred Stock. Upon issuance, each one-hundredth of a share of Series A Junior Participating Preferred Stock will have dividend and voting rights approximately equal to those of one share of Common Stock of the Company. In addition, on December 9, 1998, the Board of Directors declared a dividend distribution of one Right for each outstanding share of Common Stock of the Company to shareholders of record on December 16, 1998. The Rights become exercisable if, without the Company's prior consent, a person or group acquires securities having 15 percent or more of the voting power of all of the Company's voting securities (an "Acquiring Person") or ten days following the announcement of a tender offer which would result in such ownership. Each Right, when exercisable, entitles the registered holder to purchase from the Company one-hundredth of a share of Series A Junior Participating Preferred Stock at a price of $200 per one hundredth of a share, subject to adjustment. If, after the Rights become exercisable, the Company were to be involved in a merger or other business combination in which its Common Stock was exchanged or changed or 50 percent or more of the Company's assets or earning power were sold, each Right would permit the holder to purchase, for the exercise price, stock of the acquiring company having a value of twice the exercise price. In addition, except for certain permitted offers, if any person or group becomes an Acquiring Person, each Right would permit the purchase, for the exercise price, of Common Stock of the Company having a value of twice the exercise price. Rights owned by an Acquiring Person are void. The Rights may be redeemed by the Company under certain circumstances until their expiration date for $.01 per Right. On November 8, 1999 (effective November 18, 1999), the Company's Board of Directors designated one of the authorized preferred shares as Special Voting Stock. The Special Voting Stock is entitled to a number of votes equal to the number of outstanding Exchangeable Shares of Burlington Resources Canada Inc. (other than Exchangeable Shares held by the Company), on all matters presented to the stockholders of the Company. Upon the liquidation, dissolution or winding up of the Company, the holder of the Special Voting Stock shall be entitled, prior and in preference to any distribution to the holders of Common Stock and after 45 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) the distribution to the holders of any class or series of Preferred Stock ranking senior to the Special Voting Stock of all amounts to which such holders are entitled, to receive the sum of $.01. Except as aforesaid, no dividends or distributions shall be payable to the holder of the Special Voting Stock. The Special Voting Stock is not convertible into any other class or series of the capital stock or to cash, property or other rights, and may not be redeemed. If the Special Voting Stock shall be purchased or otherwise acquired by the Company, it shall be deemed retired and shall be cancelled and may not thereafter be reissued or otherwise disposed of by the Company. As long as any Exchangeable Shares of Burlington Resources Canada Inc. are outstanding, the number of shares comprising the Special Voting Stock shall not be increased or decreased and no other term of the Special Voting Stock shall be amended, except upon the unanimous approval of all shares of Common Stock. On November 18, 1999, the one share of Special Voting Stock was issued to CIBC Mellon Trust Company, as trustee pursuant to the Voting and Exchange Trust Agreement among the Company, Burlington Resources Canada Inc. and CIBC Mellon Trust Company, for the benefit of the holders of the Exchangeable Shares of Burlington Resources Canada Inc. On September 14, 2001, all of the remaining outstanding exchangeable shares issued by the Company's subsidiary, Burlington Resources Canada Inc., in connection with the November 1999 acquisition of Poco Petroleums Ltd., were exchanged for BR Common Stock. The exchangeable shares had been trading on the Toronto Stock Exchange in Canada under the symbol "BRX". On September 17, 2001, as part of a reorganization of the Company's Canadian subsidiaries, Burlington Resources Canada Inc., Burlington Resources Canada Energy Ltd. (formerly Poco Petroleums Ltd.) and another wholly-owned Canadian subsidiary of the Company were amalgamated and are now known as Burlington Resources Canada Ltd. 9. RETIREMENT BENEFITS The Company's U.S. pension plans are non-contributory defined benefit plans covering all U.S. employees. The benefits are based on years of credited service and final average compensation. Contributions to the tax qualified plans are limited to amounts that are currently deductible for tax purposes. Contributions are intended to provide not only for benefits attributed to service-to-date but also for those expected to be earned in the future. Hunter also provides a pension plan and postretirement benefits to a closed group of employees and retirees. The Company provides postretirement medical, dental and life insurance benefits for a closed group of retirees and their dependents. The Company also provides limited retiree life insurance benefits to employees who retire under the pension plan. The postretirement benefit plans are unfunded, therefore, the Company funds claims on a cash basis. The Company has a discretionary defined contribution plan ("401K" plan). Under the 401K plan, an employee may elect to contribute from 1 to 13 percent of his/her eligible compensation subject to an Internal Revenue Service limit of $10,500 per year. The Company matches, with cash, from 6 to 8 percent of the employee's eligible contributions. The Company contributed $8 million to the 401K plan for each of the years ended December 31, 2001, 2000 and 1999 to match eligible contributions by employees. 46 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following tables set forth the amounts recognized in the Consolidated Balance Sheet and Statement of Income.
PENSION POSTRETIREMENT BENEFITS BENEFITS ----------- --------------- YEAR ENDED DECEMBER 31, ----------------------------- 2001 2000 2001 2000 ---- ---- ------ ------ (IN MILLIONS) Change in benefit obligation Benefit obligation at beginning of year................... $160 $161 $ 32 $ 24 Service cost.............................................. 9 9 -- -- Interest cost............................................. 11 11 3 3 Amendments................................................ -- -- -- -- Actuarial loss............................................ 1 1 9 8 Participant contributions................................. -- -- 2 -- Acquisition............................................... 12 -- -- -- Benefits paid............................................. (12) (22) (5) (3) ---- ---- ---- ---- Benefit obligation at end of year......................... 181 160 41 32 ---- ---- ---- ---- Change in plan assets Fair value of plan assets at beginning of year............ 156 171 -- -- Actual return on plan assets.............................. (4) 2 -- -- Employer contribution..................................... -- 5 3 3 Participant contributions................................. -- -- 2 -- Acquisition............................................... 15 -- -- -- Benefits paid............................................. (12) (22) (5) (3) ---- ---- ---- ---- Fair value of plan assets at end of year.................. 155 156 -- -- ---- ---- ---- ---- Funded status............................................... (26) (4) (41) (32) Unrecognized net actuarial gain............................. 21 2 16 7 Unrecognized net transition obligation...................... -- 1 -- -- Unrecognized prior service cost............................. 1 1 (6) (7) ---- ---- ---- ---- Net prepaid (accrued) benefit cost.......................... $ (4) $ -- $(31) $(32) ==== ==== ==== ====
PENSION BENEFITS POSTRETIREMENT BENEFITS -------------------- ------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------ 2001 2000 1999 2001 2000 1999 ---- ---- ---- ----- ----- ------ (IN MILLIONS) Benefit cost for the plans includes the following components Service cost.................................. $ 9 $ 9 $ 10 $-- $-- $-- Interest cost................................. 11 11 12 3 3 2 Expected return on plan assets................ (14) (13) (14) -- -- -- Recognized net actuarial loss................. -- -- 1 -- -- -- ---- ---- ---- --- --- -- Net benefit cost...................... $ 6 $ 7 $ 9 $ 3 $ 3 $2 ==== ==== ==== === === ==
47 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PENSION BENEFITS POSTRETIREMENT BENEFITS ----------------------- ----------------------- YEAR ENDED DECEMBER 31, -------------------------------------------------- 2001 2000 1999 2001 2000 1999 ----- ----- ----- ----- ----- ----- Weighted average assumptions Discount rate......................... 7.25% 7.50% 7.75% 7.25% 7.50% 7.75% Expected return on plan assets........ 9.00% 9.00% 9.00% -- -- -- Rate of compensation increase......... 5.00% 5.00% 5.00% -- -- --
A 10 percent annual rate of increase in the per capita cost of pre-age 65 covered health care benefits was assumed for 2002. The rate is assumed to decrease gradually to 5 percent for 2007 and remain at that level thereafter. A 12 percent annual rate of increase in the per capita cost of post-age 65 covered health care benefits was assumed to decrease gradually to 5 percent for 2009 and remain at that level thereafter. Assumed health care cost trends have a significant effect on the amounts reported for the postretirement medical and dental care plans. A one-percentage point change in assumed health care cost trend rates would have the following effects.
1-PERCENTAGE 1-PERCENTAGE POINT INCREASE POINT DECREASE -------------- -------------- (IN THOUSANDS) Effect on total service and interest cost................... $ 214 $ (183) Effect on postretirement benefit obligation................. $3,823 $(3,296)
10. COMMITMENTS AND CONTINGENT LIABILITIES Demand Charges The Company has entered into contracts which provide firm transportation capacity rights on interstate and intrastate pipeline systems. The remaining terms on these contracts range from 1 to 23 years and require the Company to pay transportation demand charges regardless of the amount of pipeline capacity utilized by the Company. The Company paid $128 million, $123 million and $122 million of demand charges of which $24 million, $27 million and $36 million were paid to EPNG for the years ended December 31, 2001, 2000 and 1999, respectively. All transportation costs including demand charges are included in transportation expense in the income statement. Future transportation demand charge commitments at December 31, 2001 follow.
YEAR ENDED DECEMBER 31, ----------------------- (IN MILLIONS) 2002........................................................ $133 2003........................................................ 126 2004........................................................ 118 2005........................................................ 108 2006........................................................ 95 Thereafter.................................................. 337 ---- Total............................................. $917 ====
Lease Obligations The Company has operating leases for office space and other property and equipment. The Company incurred lease rental expense of $23 million, $24 million and $24 million for the years ended December 31, 2001, 2000 and 1999, respectively. 48 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Future minimum annual rental commitments at December 31, 2001 follow.
YEAR ENDED DECEMBER 31, ----------------------- (IN MILLIONS) 2002........................................................ $ 33 2003........................................................ 29 2004........................................................ 25 2005........................................................ 21 2006........................................................ 18 Thereafter.................................................. 66 ---- Total............................................. $192 ====
Drilling Rig Commitments During 1998, the Company entered into agreements to lease two deep water drilling rigs through 2004 with remaining commitments of $188 million. This commitment will be utilized by drilling exploration wells, partner participation or subletting to extent possible. Legal Proceedings The Company and numerous other oil and gas companies have been named as defendants in various lawsuits alleging violations of the civil False Claims Act. These lawsuits have been consolidated by the United States Judicial Panel on Multidistrict Litigation for pre-trial proceedings in the matter of In re Natural Gas Royalties Qui Tam Litigation, MDL-1293, United States District Court for the District of Wyoming ("MDL-1293"). The plaintiffs contend that defendants underpaid royalties on natural gas and NGLs produced on federal and Indian lands through the use of below-market prices, improper deductions, improper measurement techniques and transactions with affiliated companies. Plaintiffs allege that the royalties paid by defendants were lower than the royalties required to be paid under federal regulations and that the forms filed by defendants with the Minerals Management Service ("MMS") reporting these royalty payments were false, thereby violating the civil False Claims Act. The United States has intervened in certain of the MDL-1293 cases as to some of the defendants, including the Company. Various administrative proceedings are also pending before the MMS of the United States Department of the Interior with respect to the valuation of natural gas produced by the Company on federal and Indian lands. In general, these proceedings stem from regular MMS audits of the Company's royalty payments over various periods of time and involve the interpretation of the relevant federal regulations. Based on the Company's present understanding of the various governmental and False Claims Act proceedings described above, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. However, in the event that the Company is found to have violated the civil False Claims Act, the Company could be subject to monetary damages and a variety of sanctions, including double damages, substantial monetary fines, civil penalties and a temporary suspension from entering into future federal mineral leases and other federal contracts for a defined period of time. While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on the consolidated financial position of the Company, although results of operations and cash flow could be significantly impacted in the reporting periods in which such matters are resolved. The Company has also been named as a defendant in the lawsuit styled UNOCAL Netherlands B.V., et al. v. Continental Netherlands Oil Company B.V., et al, No. 98-854, in the Court of Appeal in The Hague in the Netherlands. Plaintiffs, who are working interest owners in the Q-1 Block in the North Sea, have alleged that the Company and other former working interest owners in the adjacent Logger Field in the L16a Block 49 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) unlawfully trespassed or were otherwise unjustly enriched by producing part of the oil from the adjoining Q-1 Block. The plaintiffs claim that the defendants infringed upon plaintiffs' right to produce the minerals present in its license area and acted in violation of generally accepted standards by failing to inform plaintiffs of the overlap of the Logger Field into the Q-1 Block. For all relevant periods, the Company owned a 37.5% working interest in the Logger Field. Following a trial, the District Court in The Hague rendered a Judgment in favor of the defendants, including the Company, dismissing all claims. Plaintiffs thereafter appealed. On October 19, 2000, the Court of Appeal in The Hague issued an interim Judgment in favor of the plaintiffs and ordered that additional evidence be presented to the court relating to issues of both liability and damages. The Company and the other defendants are continuing to vigorously assert defenses against these claims. The Company has also asserted claims of indemnity against two of the defendants from whom it had acquired a portion of its working interest share. The Company is unable at this time to reasonably predict the outcome, or, in the event of an unfavorable outcome, to reasonably estimate the possible loss or range of loss, if any, in this lawsuit. In addition to the foregoing, the Company and its subsidiaries are named defendants in numerous other lawsuits and named parties in numerous governmental and other proceedings arising in the ordinary course of business. While the outcome of these other lawsuits and proceedings cannot be predicted with certainty, management believes these other matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. 11. SUPPLEMENTAL CASH FLOW INFORMATION The following is additional information concerning supplemental disclosures of cash payments.
YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 ----- ----- ----- (IN MILLIONS) Interest paid............................................... $164 $195 $206 Income taxes paid -- net.................................... $136 $ 88 $ 13
The Company purchased all of the outstanding shares of Hunter for $2,087 million, net of cash acquired. In conjunction with the acquisition, liabilities were assumed as follows. Fair value of assets acquired............................... $3,297 Cash paid for the capital stock, net of cash acquired....... 2,087 ------ Liabilities assumed....................................... $1,210 ======
At December 31, 2001, 2000 and 1999, the Accounts Payable balance on the Consolidated Balance Sheet included payables for capital expenditures of $298 million, $232 million and $161 million, respectively. 12. IMPAIRMENT OF OIL AND GAS PROPERTIES In December 2001, primarily as a result of the Company's decision to exit the Gulf of Mexico Shelf and divest of certain other properties, the Company recognized a pretax impairment charge of $184 million primarily related to the impairment of oil and gas properties held for sale. The net book value of these properties at December 31, 2001 totaled approximately $338 million. In the fourth quarter of 1999, the Company determined there would be performance related downward reserve adjustments associated with certain properties located on the Gulf of Mexico shelf and in the Permian Basin. As a result, the Company recognized a pretax impairment charge of $225 million related to those properties. 50 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. SEGMENT AND GEOGRAPHIC INFORMATION The Company's reportable segments are USA, Canada and Other International. These segments are engaged principally in the exploration, development, production and marketing of oil, gas and NGLs. The accounting policies for the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements. Intersegment sales were $157 million and $85 million in 2001 and 2000, respectively. There were no intersegment sales in 1999. The following tables present information about reported segment operations.
YEAR ENDED DECEMBER 31, 2001 ---------------------------------------- NORTH AMERICA --------------- OTHER USA CANADA INTERNATIONAL TOTAL ------ ------ ------------- ------ (IN MILLIONS) Revenues............................................... $2,199 $ 938 $189 $3,326 Depreciation, depletion and amortization............... 453 170 86 709 Impairment of oil and gas properties................... 184 -- -- 184 Operating income....................................... 772 458 25 1,255 Additions to properties................................ $ 653 $2,558 $217 $3,428
YEAR ENDED DECEMBER 31, 2000 ---------------------------------------- NORTH AMERICA --------------- OTHER USA CANADA INTERNATIONAL TOTAL ------ ------ ------------- ------ (IN MILLIONS) Revenues............................................... $2,224 $ 752 $171 $3,147 Depreciation, depletion and amortization............... 504 123 58 685 Operating income....................................... 1,026 313 36 1,375 Additions to properties................................ $ 468 $ 336 $179 $ 983
YEAR ENDED DECEMBER 31, 1999 ---------------------------------------- NORTH AMERICA --------------- OTHER USA CANADA INTERNATIONAL TOTAL ------ ------ ------------- ------ (IN MILLIONS) Revenues............................................... $1,775 $ 407 $131 $2,313 Depreciation, depletion and amortization............... 450 110 57 617 Impairment of oil and gas properties................... 225 -- -- 225 Operating income (loss)................................ 307 131 (21) 417 Additions to properties................................ $ 502 $ 295 $148 $ 945
The following is a reconciliation of segment operating income to consolidated income (loss) before income taxes.
YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 ------ ------ ----- (IN MILLIONS) Total operating income for reportable segments.............. $1,255 $1,375 $ 417 Merger costs................................................ -- -- 37 Corporate expenses.......................................... 170 184 180 Interest expense............................................ 190 197 211 Other expense (income)-- net................................ (12) 27 2 ------ ------ ----- Consolidated income (loss) before income taxes.............. $ 907 $ 967 $ (13) ====== ====== =====
51 BURLINGTON RESOURCES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following is a reconciliation of segment additions to properties to consolidated amounts.
YEAR ENDED DECEMBER 31, ------------------------- 2001 2000 1999 ------- ------- ----- (IN MILLIONS) Total additions to properties for reportable segments....... $3,428 $ 983 $945 Administrative additions.................................... 26 29 44 ------ ------ ---- Consolidated additions to properties........................ $3,454 $1,012 $989 ====== ====== ====
14. OTHER MATTERS Recent Accounting Pronouncements The following SFAS's were issued in June 2001: SFAS No. 141, Business Combinations, SFAS No. 142, Goodwill and Other Intangible Assets, and SFAS No. 143, Accounting for Asset Retirement Obligations. In August 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets was also issued. SFAS No. 141, requires the use of the purchase method of accounting for all business combinations, applies to all business combinations initiated after June 30, 2001 and to all business combinations accounted for by the purchase method that are completed after June 30, 2001. SFAS No. 142 requires that goodwill as well as other intangible assets with indefinite lives not be amortized but be tested annually for impairment and is effective for fiscal years beginning after December 15, 2001. SFAS No. 141 and No. 142 apply to the Company's accounting for the Hunter acquisition. The Company is in the process of evaluating the impairment methodology for goodwill. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Subsequently, the asset retirement cost should be allocated to expense using a systematic and rational method. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets to be disposed of. It supersedes, with exceptions, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to Be Disposed Of and is effective for fiscal years beginning after December 15, 2001. The Company is currently assessing the impact of SFAS No. 143 and No. 144 and therefore, at this time cannot reasonably estimate the effect of these statements on its consolidated financial position, results of operations or cash flows. 15. SUBSEQUENT EVENTS On January 3, 2002, the Company consummated a property acquisition from ATCO Gas and Pipelines Ltd., a Canadian regulated gas utility, for approximately $346 million. 52 REPORT OF MANAGEMENT The management of BR is responsible for the preparation and integrity of all information contained in this Annual Report. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The financial statements include amounts that are management's best estimates and judgments. BR maintains a system of internal control and a program of internal auditing that provides management with reasonable assurance that BR's assets are protected and that published financial statements are reliable and free of material misstatement. Management is responsible for the effectiveness of internal controls. This is accomplished through established codes of conduct, accounting and other control systems, policies and procedures, employee selection and training, appropriate delegation of authority and segregation of responsibilities. The Audit Committee of the Board of Directors, composed solely of directors who are not officers or employees, meets regularly with the independent accountants, financial management, counsel and internal audit. To ensure complete independence, the independent accountants and internal audit have full and free access to the Audit Committee to discuss the results of their audits, the adequacy of internal controls and the quality of financial reporting. Our independent accountants provide an objective independent review by their audit of the Company's financial statements. Their audit is conducted in accordance with auditing standards generally accepted in the United States of America and includes a review of internal accounting controls to the extent deemed necessary for the purposes of their audit. /s/ STEVEN J. SHAPIRO /s/ JOSEPH P. MCCOY - -------------------------------------------- -------------------------------------------- Steven J. Shapiro Joseph P. McCoy Senior Vice President and Vice President, Controller and Chief Financial Officer Chief Accounting Officer
53 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Burlington Resources Inc. In our opinion, based on our audits and the report of other auditors, the accompanying consolidated balance sheet and the related consolidated statements of income, cash flows and stockholders' equity, present fairly, in all material respects, the financial position of Burlington Resources Inc. and its subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. The consolidated financial statements give retroactive effect to the merger of Poco Petroleums Ltd. on November 18, 1999 in a transaction accounted for as a pooling of interests, as described in Note 2 to the consolidated financial statements. We did not audit the financial statements of Poco Petroleums Ltd., which statements reflect total revenues of $407 million for the year ended December 31, 1999. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Poco Petroleums Ltd., is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. As discussed in Note 4 to the consolidated financial statements, the Company changed its method of accounting for its derivative instruments and hedging activities in connection with its adoption of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended. /s/ PRICEWATERHOUSECOOPERS LLP February 13, 2002 Houston, Texas 54 BURLINGTON RESOURCES INC. SUPPLEMENTARY FINANCIAL INFORMATION SUPPLEMENTAL OIL AND GAS DISCLOSURES -- UNAUDITED The supplemental data presented herein reflects information for all of the Company's oil and gas producing activities. Costs incurred for oil and gas property acquisition, exploration and development activities follow.
YEAR ENDED DECEMBER 31, 2001 ----------------------------------------------- NORTH AMERICA ----------------- OTHER USA CANADA(1) INTERNATIONAL WORLDWIDE ---- --------- ------------- --------- (IN MILLIONS) Property acquisition Unproved........................................ $ 14 $ 18 $ 4 $ 36 Proved.......................................... 67 1,900 30 1,997 Exploration....................................... 99 76 48 223 Development....................................... 403 288 135 826 ---- ------ ---- ------ Total costs incurred.................... $583 $2,282 $217 $3,082 ==== ====== ==== ======
- --------------- (1) The amounts exclude deferred taxes of $902 million related to the Hunter acquisition.
YEAR ENDED DECEMBER 31, 2000 -------------------------------------------- NORTH AMERICA -------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ---- ------ ------------- --------- (IN MILLIONS) Property acquisition Unproved.......................................... $ 12 $ 21 $ 9 $ 42 Proved............................................ 6 14 29 49 Exploration......................................... 106 129 61 296 Development......................................... 288 152 80 520 ---- ---- ---- ---- Total costs incurred...................... $412 $316 $179 $907 ==== ==== ==== ====
YEAR ENDED DECEMBER 31, 1999 -------------------------------------------- NORTH AMERICA -------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ---- ------ ------------- --------- (IN MILLIONS) Property acquisition Unproved.......................................... $ 12 $ 18 $ 2 $ 32 Proved............................................ 69 66 -- 135 Exploration......................................... 88 67 66 221 Development......................................... 319 140 80 539 ---- ---- ---- ---- Total costs incurred...................... $488 $291 $148 $927 ==== ==== ==== ====
55 BURLINGTON RESOURCES INC. SUPPLEMENTARY FINANCIAL INFORMATION Results of operations for oil, NGL and gas producing activities, which exclude pipeline and processing activities, corporate general and administrative expenses, fixed-rate depreciation expense, and payroll and miscellaneous taxes, were as follow. Prior years have been restated to conform to current year presentation. Intersegment sales were $157 million and $85 million in 2001 and 2000, respectively. There were no intersegment sales in 1999.
YEAR ENDED DECEMBER 31, 2001 ------------------------------------------- NORTH AMERICA --------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ------ ------ ------------- --------- (IN MILLIONS) Revenues............................................. $2,122 $ 936 $189 $3,247 ------ ------ ---- ------ Production costs..................................... 401 137 17 555 Exploration costs.................................... 167 52 39 258 Operating expenses................................... 205 113 22 340 Depreciation, depletion and amortization............. 438 162 82 682 Impairment of oil and gas properties................. 184 -- -- 184 ------ ------ ---- ------ 1,395 464 160 2,019 ------ ------ ---- ------ Operating income..................................... 727 472 29 1,228 Income tax provision (benefit)....................... 264 234 (1) 497 ------ ------ ---- ------ Results of operations for oil and gas producing activities......................................... $ 463 $ 238 $ 30 $ 731 ====== ====== ==== ======
YEAR ENDED DECEMBER 31, 2000 ------------------------------------------- NORTH AMERICA --------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ------ ------ ------------- --------- (IN MILLIONS) Revenues............................................. $2,171 $ 748 $171 $3,090 ------ ------ ---- ------ Production costs..................................... 372 122 20 514 Exploration costs.................................... 104 92 42 238 Operating expenses................................... 225 89 15 329 Depreciation, depletion and amortization............. 487 118 54 659 ------ ------ ---- ------ 1,188 421 131 1,740 ------ ------ ---- ------ Operating income..................................... 983 327 40 1,350 Income tax provision................................. 256 157 23 436 ------ ------ ---- ------ Results of operations for oil and gas producing activities......................................... $ 727 $ 170 $ 17 $ 914 ====== ====== ==== ======
YEAR ENDED DECEMBER 31, 1999 ------------------------------------------- NORTH AMERICA --------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ------ ------ ------------- --------- (IN MILLIONS) Revenues............................................. $1,646 $ 481 $124 $2,251 ------ ------ ---- ------ Production costs..................................... 347 102 33 482 Exploration costs.................................... 141 39 46 226 Operating expenses................................... 208 100 23 331 Depreciation, depletion and amortization............. 435 107 54 596 Impairment of oil and gas properties................. 225 -- -- 225 ------ ------ ---- ------ 1,356 348 156 1,860 ------ ------ ---- ------ Operating income (loss).............................. 290 133 (32) 391 Income tax provision (benefit)....................... 94 63 (10) 147 ------ ------ ---- ------ Results of operations for oil and gas producing activities......................................... $ 196 $ 70 $(22) $ 244 ====== ====== ==== ======
56 BURLINGTON RESOURCES INC. SUPPLEMENTARY FINANCIAL INFORMATION The following table reflects estimated quantities of proved oil, NGL and gas reserves. These reserves have been estimated by the Company's petroleum engineers. The Company considers such estimates to be reasonable, however, due to inherent uncertainties, estimates of underground reserves are imprecise and subject to change over time as additional information becomes available. To reflect the change in the characteristics of its oil and gas properties, in 2001, the Company began reporting its production volumes and reserves in three streams: natural gas, crude oil and NGLs. Under this methodology, gas production and reserves are reported after extracting liquids and eliminating non-hydrocarbon gases from the natural gas stream. This change had no material impact on total equivalent reserves or production volumes. Amounts for prior years have been reclassified to conform to current presentation.
OIL (MMBBLS) ------------------------------------------ NORTH AMERICA -------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ----- ------ ------------- --------- PROVED DEVELOPED AND UNDEVELOPED RESERVES December 31, 1998...................................... 226.6 53.7 46.6 326.9 Revisions of previous estimates...................... (9.0) .6 .3 (8.1) Extensions, discoveries and other additions.......... 19.0 2.4 2.0 23.4 Production........................................... (20.9) (5.0) (4.8) (30.7) Purchase of reserves in place........................ .5 .2 -- .7 Sales of reserves in place........................... -- -- -- -- ----- ---- ---- ----- December 31, 1999...................................... 216.2 51.9 44.1 312.2 Revisions of previous estimates...................... .2 8.3 .9 9.4 Extensions, discoveries and other additions.......... 7.5 1.9 15.3 24.7 Production........................................... (18.8) (4.6) (3.5) (26.9) Purchases of reserves in place....................... .6 -- 14.7 15.3 Sales of reserves in place........................... (1.5) -- (1.5) (3.0) ----- ---- ---- ----- December 31, 2000...................................... 204.2 57.5 70.0 331.7 Revisions of previous estimates...................... (10.7) (.6) .4 (10.9) Extensions, discoveries and other additions.......... 66.7 2.9 2.5 72.1 Production........................................... (16.1) (4.3) (2.7) (23.1) Purchases of reserves in place....................... .4 1.2 .8 2.4 Sales of reserves in place........................... (.2) (.1) -- (.3) ----- ---- ---- ----- December 31, 2001...................................... 244.3 56.6 71.0 371.9 ===== ==== ==== ===== PROVED DEVELOPED RESERVES December 31, 1998.................................... 199.2 45.4 14.5 259.1 December 31, 1999.................................... 168.3 43.2 13.5 225.0 December 31, 2000.................................... 169.7 43.0 10.4 223.1 December 31, 2001.................................... 163.7 38.4 9.3 211.4
57
NGLS (MMBBLS) GAS (BCF) -------------------------- ------------------------------------------ NORTH AMERICA NORTH AMERICA TOTAL -------------- -------------- OTHER EQUIVALENT USA CANADA WORLDWIDE USA CANADA INTERNATIONAL WORLDWIDE (BCFE) ----- ------ --------- ----- ------ ------------- --------- ---------- 184.4 40.7 225.1 4,923 1,215 491 6,629 9,941 7.6 9.7 17.3 (76) (44) (1) (121) (66) 27.9 4.1 32.0 450 140 344 934 1,266 (12.3) (4.5) (16.8) (483) (137) (31) (651) (936) 5.0 1.2 6.2 121 45 -- 166 207 -- -- -- -- (8) -- (8) (8) ----- ----- ----- ----- ----- --- ----- ------ 212.6 51.2 263.8 4,935 1,211 803 6,949 10,404 (1.5) (8.8) (10.3) (72) (104) (9) (185) (190) 24.1 5.7 29.8 489 192 8 689 1,016 (13.2) (4.1) (17.3) (462) (124) (43) (629) (894) .2 .1 .3 5 18 -- 23 117 -- (.1) (.1) (11) (4) (30) (45) (64) ----- ----- ----- ----- ----- --- ----- ------ 222.2 44.0 266.2 4,884 1,189 729 6,802 10,389 5.8 (12.9) (7.1) 107 (66) (35) 6 (102) 9.6 4.8 14.4 253 165 58 476 995 (12.6) (4.6) (17.2) (409) (158) (62) (629) (871) 2.7 16.4 19.1 59 1,007 207 1,273 1,402 -- -- -- (2) (1) -- (3) (5) ----- ----- ----- ----- ----- --- ----- ------ 227.7 47.7 275.4 4,892 2,136 897 7,925 11,808 ===== ===== ===== ===== ===== === ===== ====== 143.6 32.5 176.1 3,835 970 243 5,048 7,659 168.3 41.6 209.9 3,907 983 289 5,179 7,788 177.6 35.5 213.1 3,903 960 251 5,114 7,731 175.5 39.3 214.8 3,771 1,758 478 6,007 8,564
58 BURLINGTON RESOURCES, INC. SUPPLEMENTARY FINANCIAL INFORMATION A summary of the standardized measure of discounted future net cash flows relating to proved oil, NGL and gas reserves is shown below. Future net cash flows are computed using year end commodity prices, costs and statutory tax rates (adjusted for tax credits and other items) that relate to the Company's existing proved oil, NGL and gas reserves.
2001 -------------------------------------------- NORTH AMERICA ---------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ------- ------ ------------- --------- (IN MILLIONS) Future cash inflows................................. $15,544 $6,206 $3,948 $25,698 Less related future Production costs............................... 4,612 1,606 1,042 7,260 Development costs.............................. 752 654 741 2,147 Income taxes................................... 2,701 1,433 621 4,755 ------- ------ ------ ------- Future net cash flows............................... 7,479 2,513 1,544 11,536 10% annual discount for estimated timing of cash flows............................................. 3,971 920 645 5,536 ------- ------ ------ ------- Standardized measure of discounted future net cash flows............................................. $ 3,508 $1,593 $ 899 $ 6,000 ======= ====== ====== =======
2000 --------------------------------------------- NORTH AMERICA ----------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ------- ------- ------------- --------- (IN MILLIONS) Future cash inflows................................ $52,400 $13,722 $3,895 $70,017 Less related future Production costs............. 7,732 1,394 926 10,052 Development costs............................. 670 656 632 1,958 Income taxes.................................. 14,959 4,655 773 20,387 ------- ------- ------ ------- Future net cash flows.............................. 29,039 7,017 1,564 37,620 10% annual discount for estimated timing of cash flows............................................ 15,173 2,879 764 18,816 ------- ------- ------ ------- Standardized measure of discounted future net cash flows............................................ $13,866 $ 4,138 $ 800 $18,804 ======= ======= ====== =======
1999 -------------------------------------------- NORTH AMERICA ---------------- OTHER USA CANADA INTERNATIONAL WORLDWIDE ------- ------ ------------- --------- (IN MILLIONS) Future cash inflows................................. $17,568 $4,184 $2,840 $24,592 Less related future Production costs.............. 4,778 1,140 778 6,696 Development costs.............................. 661 279 604 1,544 Income taxes................................... 3,281 685 423 4,389 ------- ------ ------ ------- Future net cash flows............................... 8,848 2,080 1,035 11,963 10% annual discount for estimated timing of cash flows............................................. 4,374 788 508 5,670 ------- ------ ------ ------- Standardized measure of discounted future net cash flows............................................. $ 4,474 $1,292 $ 527 $ 6,293 ======= ====== ====== =======
59 BURLINGTON RESOURCES INC. SUPPLEMENTARY FINANCIAL INFORMATION A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved oil, NGL and gas reserves follows.
2001 2000 1999 -------- ------- ------- (IN MILLIONS) January 1................................................... $ 18,804 $ 6,293 $ 5,144 -------- ------- ------- Revisions of previous estimates Changes in prices and costs............................... (22,694) 18,756 1,844 Changes in quantities..................................... 60 (157) (83) Additions to proved reserves resulting from extensions, discoveries and improved recovery, less related costs..... 483 2,613 723 Purchases of reserves in place.............................. 1,147 191 168 Sales of reserves in place.................................. (15) (46) (6) Accretion of discount....................................... 2,879 825 628 Sales of oil and gas, net of production costs............... (2,692) (2,575) (1,769) Net change in income taxes.................................. 7,836 (8,023) (815) Changes in rate of production and other..................... 192 927 459 -------- ------- ------- Net change.................................................. (12,804) 12,511 1,149 -------- ------- ------- December 31................................................. $ 6,000 $18,804 $ 6,293 ======== ======= =======
QUARTERLY FINANCIAL DATA -- UNAUDITED
2001 2000 --------------------------------- --------------------------------- 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST ------ ------ ------ ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Revenues........................... $ 611 $ 655 $ 917 $1,143 $ 999 $ 760 $ 680 $ 708 Operating Income (Loss)(a)......... (94) 143 425 611 485 318 201 187 Income Before Cumulative Effect of Change in Accounting Principle... (79) 73 231 333 -- -- -- -- Net Income (Loss)(a)............... (79) 73 231 336 304 200 94 77 Basic Earnings (Loss) per Common Share............................ (.39) .36 1.10 1.57 1.41 .93 .43 .36 Diluted Earnings (Loss) per Common Share............................ (.39) .36 1.10 1.56 1.41 .93 .43 .35 Cash Dividends Declared per Common Share............................ .14 .13 .14 .14 .14 .13 .14 .14 Common Stock Price Range High............................. 39.75 44.19 51.95 53.63 52.88 40.75 46.25 39.50 Low.............................. $32.75 $31.69 $37.55 $40.98 $34.31 $29.25 $34.50 $25.75
- --------------- (a) During the fourth quarter of 2001, the Company recognized a non-cash, pretax charge of $184 million primarily related to the impairment of oil and gas properties held for sale. ITEM NINE CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None 60 PART III ITEMS TEN AND ELEVEN DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND EXECUTIVE COMPENSATION Executive officers of the Registrant Bobby S. Shackouls, 51 -- Chairman of the Board, President and Chief Executive Officer, Burlington Resources Inc., July 1997 to present. President and Chief Executive Officer, Burlington Resources Inc., December 1995 to July 1997; President and Chief Executive Officer, Burlington Resources Oil & Gas Company, October 1994 to June 1998. Randy L. Limbacher, 43 -- Senior Vice President, Production, Burlington Resources Inc., April 2001 to present. President and Chief Executive Officer, BROG GP Inc., general partner of Burlington Resources Oil & Gas Company LP, December 2000 to present. President and Chief Executive Officer, Burlington Resources Oil & Gas Company, July 1998 to December 2000. Vice President, Gulf Coast Division, Burlington Resources Oil & Gas Company, February 1997 to June 1998; Vice President, Farmington Region, Burlington Resources Oil & Gas Company, June 1993 to January 1997. L. David Hanower, 42 -- Senior Vice President, Law and Administration, Burlington Resources Inc., July 1998 to present. Senior Vice President, Law, Burlington Resources Inc., April 1996 to June 1998, Vice President, Law, Burlington Resources Inc., April 1991 to April 1996; Senior Vice President, Law, Burlington Resources Oil & Gas Company, July 1993 to June 1998. Steven J. Shapiro, 49 -- Senior Vice President and Chief Financial Officer, Burlington Resources Inc., October 2000 to present. Senior Vice President, Chief Financial Officer and Director, Vastar Resources, Inc., 1993 to September 2000. John A. Williams, 57 -- Senior Vice President, Exploration, Burlington Resources Inc., April 2001 to present. Senior Vice President, Exploration, BROG GP Inc., general partner of Burlington Resources Oil & Gas Company LP, December 2000 to present. Senior Vice President, Exploration, Burlington Resources Oil & Gas Company, July 1998 to December 2000. Senior Vice President, Exploration, Burlington Resources Inc., October 1997 to June 1998; Senior Vice President, Exploration and Production, The Louisiana Land and Exploration Company, September 1995 to October 1997. A definitive proxy statement for the 2002 Annual Meeting of Stockholders (the "Proxy Statement") of the Company will be filed no later than 120 days after the end of the fiscal year with the Securities and Exchange Commission. The information set forth therein under "Election of Directors" and "Executive Compensation" is incorporated herein by reference. ITEM TWELVE SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required is set forth under the caption "Stock Ownership of Management and Certain Other Holders" in the Proxy Statement and is incorporated herein by reference. ITEM THIRTEEN CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Any information required is set forth under the caption "Election of Directors" in the Proxy Statement and is incorporated herein by reference. 61 PART IV ITEM FOURTEEN EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
PAGE ---- FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION Consolidated Statement of Income.......................... 27 Consolidated Balance Sheet................................ 28 Consolidated Statement of Cash Flows...................... 29 Consolidated Statement of Stockholders' Equity............ 30 Notes to Consolidated Financial Statements................ 31 Report of Independent Accountants......................... 54 Supplemental Oil and Gas Disclosures -- Unaudited......... 55 Quarterly Financial Data -- Unaudited..................... 60 AMENDED EXHIBIT INDEX....................................... A-1
REPORTS ON FORM 8-K The Company filed a Form 8-K dated December 4, 2001, which included as an exhibit a Press Release also dated December 4, 2001 announcing the acceptance of its C$53 per share cash tender offer to acquire all the common shares of Canadian Hunter Exploration Ltd. by Canadian Hunter's shareholders. The financial statements and pro forma financial information for Canadian Hunter required to be filed pursuant to Item 7 of such Form 8-K are filed as exhibits 99.3, 99.4 and 99.5 in this Form 10-K. The Company filed a Form 8-K dated October 9, 2001, which included as an exhibit a Press Release also dated October 9, 2001 announcing the Company and Canadian Hunter Exploration Ltd. have entered into an agreement pursuant to which the Company will make an offer to holders of the outstanding shares of Canadian Hunter to acquire all such shares for cash consideration of C$53 per share, representing an aggregate value of approximately U.S. $2.1 billion in cash. 62 SIGNATURES REQUIRED FOR FORM 10-K Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Burlington Resources Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BURLINGTON RESOURCES INC. By /s/ BOBBY S. SHACKOULS ------------------------------------ Bobby S. Shackouls Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Burlington Resources Inc. and in the capacities and on the dates indicated. By /s/ BOBBY S. SHACKOULS Chairman of the Board, February 13, 2002 ----------------------------------------------------- President and Chief Bobby S. Shackouls Executive Officer /s/ STEVEN J. SHAPIRO Senior Vice President and February 13, 2002 - -------------------------------------------------------- Chief Financial Officer Steven J. Shapiro /s/ JOSEPH P. MCCOY Vice President, February 13, 2002 - -------------------------------------------------------- Controller and Chief Joseph P. McCoy Accounting Officer /s/ REUBEN V. ANDERSON Director February 13, 2002 - -------------------------------------------------------- Reuben V. Anderson /s/ LAIRD I. GRANT Director February 13, 2002 - -------------------------------------------------------- Laird I. Grant /s/ JOHN T. LAMACCHIA Director February 13, 2002 - -------------------------------------------------------- John T. Lamacchia /s/ JAMES F. MCDONALD Director February 13, 2002 - -------------------------------------------------------- James F. McDonald /s/ KENNETH W. ORCE Director February 13, 2002 - -------------------------------------------------------- Kenneth W. Orce /s/ DONALD M. ROBERTS Director February 13, 2002 - -------------------------------------------------------- Donald M. Roberts /s/ JOHN F. SCHWARZ Director February 13, 2002 - -------------------------------------------------------- John F. Schwarz /s/ WALTER SCOTT, JR. Director February 13, 2002 - -------------------------------------------------------- Walter Scott, Jr. /s/ WILLIAM E. WADE Director February 13, 2002 - -------------------------------------------------------- William E. Wade
BURLINGTON RESOURCES INC. AMENDED EXHIBIT INDEX The following exhibits are filed as part of this report.
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ 3.1 Certificate of Incorporation of Burlington Resources Inc. as amended November 18, 1999 (Exhibit 3.1 to Form 10-K, filed March 17, 2000)............................................. * 3.2 By-Laws of Burlington Resources Inc. amended as of December 6, 2000..................................................... * 4.1 Form of Shareholder Rights Agreement dated as of December 16, 1998, between Burlington Resources Inc. and Bank Boston, N.A. which includes, as Exhibit A thereto, the form of Certificate of Designation specifying terms of the Series A Junior Participating Preferred Stock and, as Exhibit B thereto, the form of Rights Certificate (Exhibit 1 to Form 8-A, filed December 1998)................................... * 4.2 Indenture, dated as of June 15, 1990, between Burlington Resources Inc. and Citibank, N.A. (as Trustee), including Form of Debt Securities (Exhibit 4.2 to Form 8, filed February 1992).............................................. * 4.3 Indenture, dated as of October 1, 1991, between Burlington Resources Inc. and Citibank, N.A. (as Trustee), including Form of Debt Securities (Exhibit 4.3 to Form 8, filed February 1992).............................................. * 4.4 Indenture, dated as of April 1, 1992, between Burlington Resources Inc. and Citibank, N.A. (as Trustee), including Form of Debt Securities (Exhibit 4.4 to Form 8, filed March 1993)....................................................... * 4.5 Indenture, dated as of June 15, 1992, between The Louisiana Land and Exploration Company ("LL&E") and Texas Commerce Bank National Association (as Trustee) (Exhibit 4.1 to LL&E's Form S-3, as amended, filed November 1993)........... * 4.6 Indenture, dated as of February 12, 2001, between Burlington Resources Finance Company and Citibank, N.A. (as Trustee), including form of Debt Securities (Exhibit 4.1 to Form 8-K, filed February 2001)........................................ * +10.1 The 1988 Burlington Resources Inc. Stock Option Incentive Plan as amended (Exhibit 10.4 to Form 8, filed March 1993)....................................................... * +10.2 Burlington Resources Inc. Incentive Compensation Plan as amended and restated (Exhibit 10.29 to Form 10-Q, filed November 2000).............................................. * Amendment to Burlington Resources Inc. Incentive Compensation Plan dated December 2000 (Exhibit 10.2 to Form 10-K, filed February 2001).................................. * +10.3 Burlington Resources Inc. Senior Executive Survivor Benefit Plan dated as of January 1, 1989 (Exhibit 10.11 to Form 8, filed February 1989)........................................ * +10.4 Burlington Resources Inc. Deferred Compensation Plan as amended and restated (Exhibit 10.4 to Form 10-K, filed February 1997).............................................. * +10.5 Burlington Resources Inc. Supplemental Benefits Plan as amended and restated (Exhibit 10.5 to Form 10-K, filed February 1997).............................................. * +10.6 Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls (Exhibit 10.7 to Form 10-K, filed February 1996).............................................. * Amendment to Employment Contract between Burlington Resources Inc. and Bobby S. Shackouls, dated July 9, 1997 (Exhibit 10.6 to Form 10-K, filed February 1998)............ * Amendment to Employment Contract between the Company and Bobby S. Shackouls (Exhibit 10.29 to Form 10-Q, filed August 1999)....................................................... * +10.7 Burlington Resources Inc. Compensation Plan for Non-Employee Directors as amended and restated (Exhibit 10.8 to Form 10-K, filed February 1997).................................. * +10.8 Amended and Restated Burlington Resources Inc. Executive Change in Control Severance Plan, formerly known as the Key Executive Severance Protection Plan (Exhibit 10.8 to Form 10-K, filed February 2001).................................. * +10.9 Burlington Resources Inc. Retirement Income Plan for Directors (Exhibit 10.21 to Form 8, filed February 1991).... * +10.10 Burlington Resources Inc. 1991 Director Charitable Award Plan, dated as of January 16, 1991 (Exhibit 10.22 to Form 8, filed February 1991)........................................ * 10.11 Master Separation Agreement and documents related thereto dated January 15, 1992 by and among Burlington Resources Inc., El Paso Natural Gas Company and Meridian Oil Holding Inc., including exhibits (Exhibit 10.24 to Form 8, filed February 1992).............................................. *
A-1
EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ +10.12 Burlington Resources Inc. 1992 Stock Option Plan for Non-employee Directors (Exhibit 28.1 of Form S-8, No. 33-46518, filed March 1992)................................. * +10.13 Burlington Resources Inc. Key Executive Retention Plan and Amendments No. 1 and 2 (Exhibit 10.20 to Form 8, filed March 1993)....................................................... * Amendments No. 3 and 4 to the Burlington Resources Inc. Key Executive Retention Plan (Exhibit 10.17 to Form 10-K, filed February 1994).............................................. * +10.14 Burlington Resources Inc. 1992 Performance Share Unit Plan as amended and restated (Exhibit 10.17 to Form 10-K, filed February 1997).............................................. * +10.15 Burlington Resources Inc. 1993 Stock Incentive Plan (Exhibit 10.22 to Form 10-K, filed February 1994).................... * Amendment to Burlington Resources Inc. 1993 Stock Incentive Plan dated April 2000 (Exhibit 10.15 to Form 10-K, filed February 2001).............................................. * Amendment to Burlington Resources 1993 Stock Incentive Plan dated December 2000 (Exhibit 10.2 to Form 10-K, filed February 2001).............................................. * +10.16 Burlington Resources Inc. 1994 Restricted Stock Exchange Plan (Exhibit 10.23 to Form 10-K, filed February 1995)...... * Amendment to Burlington Resources Inc. 1994 Restricted Stock Exchange Plan dated December 2000 (Exhibit 10.2 to Form 10-K, filed February 2001).................................. * +10.17 Burlington Resources Inc. 1997 Performance Share Unit Plan, (Exhibit 10.21 to Form 10-K, filed February 1997)........... * 10.18 $400 million Short-term Revolving Credit Agreement, dated as of February 25, 1998, as Amended and Restated December 7, 2001, between Burlington Resources Inc. and JPMorgan Chase Bank, as agent.............................................. 10.19 $600 million Long-term Revolving Credit Agreement, dated as of February 25, 1998, as Amended and Restated December 7, 2001, between Burlington Resources Inc. and JPMorgan Chase Bank, as agent.............................................. +10.20 Form of Termination Agreement with Certain Senior Management Personnel as amended (Exhibit 10(a)(i) to LL&E's Form 10-K, filed March 1996)........................................... * +10.21 Form of The Louisiana Land and Exploration Company Deferred Compensation Arrangement for Selected Key Employees (Exhibit 10(g) to LL&E's Form 10-K, filed March 1991)................ * Amendment to the LL&E Deferred Compensation Arrangement for Selected Key Employees dated December 21, 1998 (Exhibit 10.26 to Form 10-K, filed February 1999).................... * +10.22 The LL&E Supplemental Excess Plan (Exhibit 10(j) to LL&E's Form 10-K, filed March 1993)................................................. * +10.23 Severance benefit agreement between Burlington Resources Inc. and John A. Williams, dated March 25, 1999 (Exhibit 10.28 to Form 10-Q, filed May 1999)......................... * +10.24 Form of agreement on pension related benefits with certain former Seattle holding company office employees (Exhibit 10.26 to Form 10-K, filed March 17, 2000)................... * +10.25 Poco Petroleums Ltd. Incentive Stock Option Plan (Form S-8 No. 333-91247, filed November 18, 1999)..................... * +10.26 Employee Savings Plan for Eligible Employees of Poco Petroleums Ltd. (Exhibit 4.4 to Form S-8 No. 333-95071, filed January 20, 2000)..................................... * +10.27 Burlington Resources Inc. Phantom Stock Plan for Non-Employee Directors (Exhibit 10.12 to Form 10-K, filed February 1996).............................................. * First Amendment to the Burlington Resources Inc. Phantom Stock Plan for Non-Employee Directors (Exhibit 10.29 to Form 10-Q, filed May 2000)....................................... * +10.28 Burlington Resources Inc. 2000 Stock Option Plan for Non-Employee Directors (Exhibit 10.30 to Form 10-Q, filed August 2000)................................................ * +10.29 Letter agreement regarding Steven J. Shapiro dated October 18, 2000 (Exhibit 10.29 to Form 10-K, filed February 2001)....................................................... * +10.30 Burlington Resources Inc. 2001 Performance Share Unit Plan (Exhibit 10.30 to Form 10-K, filed February 2001)........... * 10.31 Pre-Acquisition Agreement between Burlington Resources Inc. and Canadian Hunter Exploration Ltd. dated October 8, 2001 (Exhibit 99.2 to Form 8-K, filed October 2001).............. *
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EXHIBIT PAGE NUMBER DESCRIPTION NUMBER - ------- ----------- ------ 10.32 Canadian Credit Agreement, dated as of March 31, 2000, as Amended and Restated December 7, 2001, among Burlington Resources Canada Ltd., Burlington Resources Inc. and J.P. Morgan Bank Canada, as agent................................ 10.33 $350 million Bridge Revolving Credit Agreement, dated as of January 2, 2002, between Burlington Resources Inc. and JPMorgan Chase Bank, as agent............................... 21.1 Subsidiaries of the Registrant.............................. 23.1 Consent of Independent Accountants -- PricewaterhouseCoopers LLP......................................................... 23.2 Consent of Independent Accountants -- KPMG.................. 23.3 Consent of Independent Accountants -- Ernst & Young LLP..... 99.1 Audit Opinion of KPMG....................................... 99.2 Audit Opinion of Ernst & Young LLP.......................... 99.3 Audited Consolidated Financial Statements of Canadian Hunter Exploration Ltd. for the year ended December 31, 2000....... 99.4 Unaudited Consolidated Financial Statements of Canadian Hunter Exploration Ltd. for the nine month period ended September 30, 2001.......................................... 99.5 Burlington Resources Inc. Pro Forma Income Statements for the nine months ended September 30, 2001 and the year ended December 31, 2000...........................................
*Exhibit incorporated herein by reference as indicated. +Exhibit constitutes a management contract or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K. A-3 EX-10.18 3 h92808ex10-18.txt $400 MILLION SHORT-TERM REVOLVING CREDIT AGMT. EXHIBIT 10.18 - -------------------------------------------------------------------------------- BURLINGTON RESOURCES INC. ---------- $400,000,000 SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 As Amended and Restated as of December 7, 2001 ---------- JPMORGAN CHASE BANK, as Administrative Agent and Auction Administrative Agent CITIBANK, N.A. FLEET NATIONAL BANK, as Co-Syndication Agents BANK OF AMERICA, N.A. TORONTO DOMINION (TEXAS), INC., as Co-Documentation Agents TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms.........................................1 SECTION 1.02. Computation of Time Periods..................................14 SECTION 1.03. Accounting and Other Terms...................................14 SECTION 1.04. References...................................................14 ARTICLE 2 Amounts and Terms of the Advances SECTION 2.01. (a) Revolving A Advances.....................................14 SECTION 2.02. Making the A Advances........................................15 SECTION 2.03. Fees.........................................................16 SECTION 2.04. Reduction of the Commitments.................................17 SECTION 2.05. Repayment of A Advances......................................17 SECTION 2.06. Interest on A Advances.......................................17 SECTION 2.07. Additional Interest on Eurodollar Rate Advances..............18 SECTION 2.08. Interest Rate Determination..................................19 SECTION 2.09. Voluntary Conversion of A Advances...........................20 SECTION 2.10. Prepayments..................................................20 SECTION 2.11. Increased Costs..............................................21 SECTION 2.12. Increased Capital............................................22 SECTION 2.13. Illegality...................................................22 SECTION 2.14. Payments and Computations....................................23 SECTION 2.15. Taxes........................................................24 SECTION 2.16. Sharing of Payments, Etc.....................................26 SECTION 2.17. Evidence of Debt.............................................27 SECTION 2.18. Use of Proceeds..............................................27 SECTION 2.19. The B Advances...............................................27 SECTION 2.20. Increase of Commitments......................................30 SECTION 2.21. Extension of Stated Termination Date.........................32 SECTION 2.22. Replacement of Lenders.......................................33 ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of the Amendment and Restatement of this Agreement................................34 SECTION 3.02. Conditions Precedent to Each A Borrowing.....................35 SECTION 3.03. Conditions Precedent to Each B Borrowing.....................36 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower...............36
-i- TABLE OF CONTENTS (continued)
PAGE ---- ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants........................................38 SECTION 5.02. Negative Covenants...........................................40 SECTION 5.03. Reporting Requirements.......................................43 ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. Events of Default............................................45 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action.....................................48 SECTION 7.02. Administrative Agent's Reliance, Etc.........................48 SECTION 7.03. JPMorgan and Affiliates......................................49 SECTION 7.04. Lender Credit Decision.......................................49 SECTION 7.05. Indemnification..............................................49 SECTION 7.06. Successor Administrative Agent...............................50 SECTION 7.07. Auction Administrative Agent.................................51 ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc..............................................51 SECTION 8.02. Notices, Etc.................................................51 SECTION 8.03. No Waiver; Remedies..........................................52 SECTION 8.04. Costs and Expenses; Indemnity................................52 SECTION 8.05. Right of Set-off.............................................53 SECTION 8.06. Binding Effect...............................................53 SECTION 8.07. Assignments and Participations...............................54 SECTION 8.08. Confidentiality..............................................57 SECTION 8.09. Consent to Jurisdiction......................................58 SECTION 8.10. Governing Law................................................58 SECTION 8.11. Execution in Counterparts....................................58 SECTION 8.12. Waiver of Jury Trial.........................................59 Schedule I -- Material Subsidiaries Schedule II -- Pricing Grid Schedule III -- Initial Commitments Exhibit A Form of Note Exhibit B Form of Notice of A Borrowing Exhibit C Form of Notice of B Borrowing Exhibit D Form of Assignment and Acceptance Exhibit E Form of New Lender Agreement
-ii- TABLE OF CONTENTS (continued) Exhibit F Form of Commitment Increase Agreement Exhibit G Form of Extension Request Exhibit H Form of Opinion of Vice President and General Counsel for Borrower Exhibit I Form of Opinion of Jones, Day, Reavis & Pogue, New York Counsel for Borrower Exhibit J Form of Designation Agreement -iii- SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 as amended and restated as of December 7, 2001 BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Initial Lenders") listed on the signature pages hereof, JPMORGAN CHASE BANK, as administrative agent and auction administrative agent for the Lenders hereunder (in such capacities, the "Administrative Agent" and "Auction Administrative Agent", respectively), CITIBANK, N.A. and FLEET NATIONAL BANK, as co-syndication agents, and BANK OF AMERICA, N.A. and TORONTO DOMINION (TEXAS), INC., as co-documentation agents, agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Lender to the Borrower as part of an A Borrowing, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "TYPE" of A Advance). "A BORROWING" means a borrowing consisting of A Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, it being understood that there may be more than one A Borrowing on a particular day. "ADMINISTRATIVE AGENT" has the meaning specified in the introduction hereto. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender. "ADVANCE" means an A Advance or a B Advance. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "CONTROL" (including the terms "CONTROLS", "CONTROLLED BY" or "UNDER COMMON CONTROL WITH") means, with respect to any Person, the possession, direct or indirect, of the power to vote 10% or more (or in the case of an "AFFILIATE" of any Lender, 5% or more) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. Neither a director nor an officer of the Borrower, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. 1 "AGREEMENT" means this Short-Term Revolving Credit Agreement, together with all exhibits and schedules hereto, as amended or otherwise modified from time to time pursuant to the terms hereof. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) in the case of an A Advance, such Lender's Domestic Lending Office in respect of Base Rate Advances and such Lender's Eurodollar Lending Office in respect of Eurodollar Rate Advances and (ii) in the case of a B Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such B Advance. "ARRANGER" means J.P. Morgan Securities Inc. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender (other than a Designated Bidder) and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "AUCTION ADMINISTRATIVE AGENT" has the meaning specified in the introduction hereto. "AVERAGE AGGREGATE FACILITY ADVANCES" means, for any Utilization Fee Period, the average daily outstanding amount of (i) all Advances hereunder and (ii) all "Advances" under, and as defined in, the Long-Term Revolving Credit Agreement and the Canadian Credit Agreement. "AVERAGE AGGREGATE FACILITY COMMITMENTS" means, for any Utilization Fee Period, the average daily amount of (i) all Commitments hereunder and (ii) all "Commitments" under, and as defined in, the Long-Term Revolving Credit Agreement and the Canadian Credit Agreement. "B ADVANCE" means an advance by a Lender to the Borrower as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.19. "B BORROWING" means a borrowing consisting of simultaneous B Advances to the Borrower from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Borrower under the auction bidding procedure described in Section 2.19, it being understood that there may be more than one B Borrowing on a particular day. "B REDUCTION" has the meaning specified in Section 2.01(a). "BASE RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) The rate of interest announced publicly by the Administrative Agent in the United States with respect to loans made in the United States, from time to time, as the Administrative Agent's base or prime rate as in effect for such day; and (ii) 0.50% per annum above the Effective Federal Funds Rate for such day. 2 "BASE RATE ADVANCE" means an A Advance which bears interest as provided in Section 2.06(a)(i). "BORROWER" has the meaning specified in the introduction hereto. "BORROWING" means an A Borrowing or a B Borrowing. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "BUSINESS ENTITY" means a partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. "CANADIAN CREDIT AGREEMENT" means the Credit Agreement dated as of March 31, 2000, as amended and restated as of December 7, 2001, among Burlington Resources Canada Ltd., as the borrower, Burlington Resources Inc., as parent, the financial institutions party thereto, JPMorgan, as administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "CAPITALIZATION" means the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries, plus (ii) the aggregate amount of Guaranties by the Borrower or its consolidated Subsidiaries, plus (iii) the sum of the preferred stock and common stockholders' equity of the Borrower, plus (iv) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997 (but excluding any such amount with respect to assets of Project Finance Subsidiaries), minus (v) to the extent otherwise included in determining the amounts computed under clause (iii) above, the aggregate investment (net of any Project Financing) of the Borrower and its consolidated Subsidiaries in Project Finance Subsidiaries. "CLAM" means CLAM Petroleum B.V., a Netherlands company, and CLAM's successors. "CLAM CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of July 25, 1985, among MaraLou Netherlands Partnership, CLAM, the banks parties thereto and Morgan, as agent for such banks, as amended and restated as of August 15, 1997, or any successor credit agreement entered into for the purpose of refinancing such Amended and Restated Credit Agreement, in each case, as amended, restated, extended or otherwise modified from time to time. "COMMITMENT" has the meaning specified in Section 2.01(a). "COMMITMENT EXPIRATION DATE" has the meaning specified in Section 2.21(a). "COMMITMENT INCREASE NOTICE" has the meaning specified in Section 2.20(a). 3 "COMMITMENT INCREASE AGREEMENT" has the meaning specified in Section 2.20(c). "COMMITMENT PERCENTAGE" means as to any Lender at any time, the percentage that such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "CONSOLIDATED TANGIBLE NET WORTH" means, on a consolidated basis, the excess of (i) the sum of (x) the preferred stock and common stockholders' equity of the Borrower and (y) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997, over (ii) the intangible assets of the Borrower and its consolidated Subsidiaries. "CONTINGENT GUARANTY" has the meaning specified in the definition of the term "Guaranty" contained in this Section 1.01. "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of A Advances of one Type into A Advances of another Type pursuant to Section 2.08, 2.09 or 2.13. "DEBT" of any Person means, without duplication (i) indebtedness of such Person for borrowed money or in respect of bankers' acceptances, (ii) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion) to pay the deferred purchase price of property or services, (iii) obligations of such Person as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (iv) Overdue Reimbursement Obligations; provided, however, that where any such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties, which are not the Borrower or any of its consolidated Subsidiaries, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof, and provided, further, that the following shall not at any time constitute Debt: (1) obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not Overdue Reimbursement Obligations, (2) Project Financing, (3) the Morgan Gold Loans unless, at such time, for any reason whatsoever, (A) no royalty income shall have accrued under the Royalty Agreement dated as of December 5, 1984 between Copper Range Company, a Michigan corporation, and LL&E during the three consecutive fiscal quarters of LL&E most recently ended prior to such time or (B) any payment required to have been made to LL&E under such agreement prior to such time shall not have been paid on, or within 30 days after, the date such payment is due and (4) amounts borrowed by the Borrower and its Subsidiaries under life insurance policies issued to one or more of the foregoing and covering employees or former employees of one or more of the foregoing not in excess of the cash surrender value of such policies. 4 "DESIGNATED BIDDER" means (i) an Affiliate of a Lender or (ii) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" by Moody's or "A-1" by S&P or a comparable rating from the successor of either of them, that, in the case of either clause (i) or (ii) above, (1) is organized under the laws of the United States or any state thereof, (2) shall have become a party hereto pursuant to subsections (e), (f) and (g) of Section 8.07, and (3) is not otherwise a Lender. Notwithstanding the foregoing, each Designated Bidder shall be subject to the written consent of the Borrower and the Administrative Agent, such consent not to be unreasonably withheld. "DESIGNATION AGREEMENT" means a designation agreement entered into by the Borrower, a Lender (other than a Designated Bidder) and a Designated Bidder, and accepted by the Administrative Agent, in substantially the form of Exhibit J hereto. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" in its Administrative Questionnaire, or in the Assignment and Acceptance or New Lender Agreement pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EFFECTIVE DATE" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied (or compliance therewith shall have been waived by the Lenders), which date the Administrative Agent will promptly confirm to the Borrower and the Lenders in writing, and which date shall be no earlier than December 7, 2001. "EFFECTIVE FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 8.07, any bank or other entity approved in writing by the Borrower expressly with respect to such assignment and, except as to such an assignment by JPMorgan so long as JPMorgan is the Administrative Agent hereunder, the Administrative Agent shall be an Eligible Assignee for purposes of this Agreement, provided that neither the Administrative Agent's nor the Borrower's approval shall be unreasonably withheld, and provided further that no such approval shall be necessary if (i) the assignee is a Lender Affiliate, (ii) the assignee was a Lender immediately prior to such assignment, or (iii) if an Event of Default shall then be continuing. "EQUITY INTERESTS" means any capital stock, partnership, joint venture, member or limited liability or unlimited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. 5 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. "ERISA AFFILIATE" means any Person who is a member of the Borrower's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" in its Administrative Questionnaire or in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such A Borrowing and for a period equal to such Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "EURODOLLAR RATE ADVANCE" means an A Advance which bears interest determined by reference to the Eurodollar Rate, as provided in Section 2.06(a)(ii). "EURODOLLAR RATE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labeled "LIBOR Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "EURODOLLAR RESERVE PERCENTAGE" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. 6 "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXTENSION REQUEST" means each request by the Borrower made pursuant to Section 2.21 for the Lenders to extend the Stated Termination Date, which shall contain the information in respect of such extension specified in Exhibit G and shall be delivered to the Administrative Agent in writing. "FACILITY FEE PERCENTAGE" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Facility Fee Percentage" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "FINAL MATURITY DATE" means the first anniversary of the Stated Termination Date or, if such day is not a Business Day, the next preceding Business Day. "GUARANTY", "GUARANTEED" and "GUARANTEEING" each means any act by which a Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Borrower or any of its consolidated Subsidiaries (excluding (i) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) any liability in connection with obligations of the Borrower or any of its consolidated Subsidiaries, including obligations under any conditional sales agreement, equipment trust financing or equipment lease, (iii) any liability or other act of the Borrower or any of its Subsidiaries under arrangements entered into in connection with the CLAM Credit Agreement, and (iv) any such act in connection with a Project Financing that either (A) guarantees to the provider of such Project Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is a direct guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (B) below) or (B) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence or existence of any event or condition other than or in addition to (1) the passage of time, (2) any Project Financing becoming due, (3) the commencement of bankruptcy, insolvency or similar proceedings by the obligor on any Project Financing or (4) the failure of the obligor on any Project Financing to satisfy a financial ratio, covenant or other similar financial measurement test, but only during such period as such act is not by its terms presently enforceable, or if so enforceable, there is not a reasonable probability that the guarantor will be called upon to perform thereunder (or to make capital contributions in lieu of performance thereunder) (any such act referred to in this clause (iv) being a "CONTINGENT GUARANTY")); provided, however, that for the purposes of this definition the liability of the Borrower or any of its Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. 7 "INDEMNIFIED PARTY" means any or all of the Lenders, the Arranger and the Administrative Agent. "INITIAL LENDERS" has the meaning specified in the introduction hereto. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same A Borrowing, the period beginning on the date of such Advance or the date of the Conversion of any Advance into such Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period for a Eurodollar Rate Advance shall be (i) one, two, three or six months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period, or (ii) subject to availability to each Lender, nine or twelve months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the fourth Business Day prior to the first day of such Interest Period, in each case as the Borrower may select; provided, however, that: (A) the duration of any Interest Period which commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date and the duration of any Interest Period which would otherwise end after the Final Maturity Date shall end on the Final Maturity Date; (B) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; (C) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and (D) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (A) above, end on the last Business Day of a calendar month. "JPMORGAN" means JPMorgan Chase Bank, and its successors. "LENDER AFFILIATE" means, with respect to any Lender, (a) an Affiliate of such Lender or (b) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender (with such Lender or Affiliate having the sole right and responsibility with respect to the approval of amendments and waivers to this Agreement, the Notes and all related agreements and instruments entered into from time to time). 8 "LENDERS" means the Initial Lenders, each bank or other financial institution that shall become a party hereto pursuant to Section 2.20, each Eligible Assignee that shall become a party hereto pursuant to Section 8.07(a), (b) and (d) and, except when used in reference to an A Advance, an A Borrowing, a Commitment or a term related to any of the foregoing, each Designated Bidder. "LIEN" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Debt or any Guaranty of any Person; provided that (i) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest", farmouts, joint operating or unitization agreements, or other similar transactions in the ordinary course of business and (ii) borrowings under life insurance policies as described in clause (4) of the proviso to the definition of "Debt" shall not be deemed to create a Lien. "LL&E" means The Louisiana Land and Exploration Company, a Maryland corporation and a wholly-owned Subsidiary of the Borrower. "LONG-TERM REVOLVING CREDIT AGREEMENT" means the Long-Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 among the Borrower, the financial institutions party thereto, JPMorgan, as administrative agent and auction administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "MAJORITY LENDERS" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the Advances held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "MARGIN STOCK" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition or operations of the Borrower and its consolidated Subsidiaries on a consolidated basis. "MATERIAL PLAN" means any Plan the assets of which exceed $50,000,000 or the liabilities of which for unfunded vested benefits determined on a plan termination basis (in accordance with Title IV of ERISA) exceed $10,000,000. "MATERIAL SUBSIDIARY" means, from time to time, any Subsidiary of the Borrower (other than a Project Financing Subsidiary) then owning assets (determined on a consolidated basis) that equal or exceed 10% of the book value of the consolidated assets of the Borrower and its consolidated Subsidiaries at such time. "MOODY'S" means Moody's Investors Service. "MORGAN" means Morgan Guaranty Trust Company of New York, and its successors. 9 "MORGAN GOLD LOANS" means the obligations of LL&E under the respective Credit Agreements dated as of December 23, 1994 and March 31, 1995 between LL&E and Morgan, or under any additional credit agreements on substantially similar terms, in each case, as amended, restated, extended or otherwise modified from time to time, provided that the aggregate outstanding amount borrowed thereunder shall at no time exceed 35,000 ounces of gold. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NEW LENDER" has the meaning specified in Section 2.20(b). "NEW LENDER AGREEMENT" has the meaning specified in Section 2.20(b). "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "NOTICE OF A BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF B BORROWING" has the meaning specified in Section 2.19(a). "OBJECTING LENDERS" has the meaning specified in Section 2.21(a). "OFFERED INCREASE AMOUNT" has the meaning specified in Section 2.20(a). "ORIGINAL EFFECTIVE DATE" means February 25, 1998. "OVERDUE REIMBURSEMENT OBLIGATIONS" means with respect to any Person non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not paid on or prior to the fifth Business Day after the due date therefor. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED ASSETS" means (i) hydrocarbon or other reserves (including proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) Equity Interests in any and all 10 Business Entities that are or become Subsidiaries of the Borrower owning assets referred to in any of the foregoing clauses. "Permitted Liens" means (i) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Borrower or any Subsidiary of the Borrower; (ii) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (iii) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (iv) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions which do not materially interfere with the operation, value or use of the properties affected thereby; (v) conventional provisions contained in any contracts or agreements affecting properties under which the Borrower or a Subsidiary of the Borrower is required immediately before the expiration, termination or abandonment of a particular property to reassign to the Borrower's or a Subsidiary's predecessor in title all or a portion of the Borrower's or such Subsidiary's rights, titles and interests in and to all or a portion of such property; (vi) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Borrower or any of its Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Borrower or such Subsidiary in such grant or conveyance; (vii) any Lien consisting of (A) statutory landlord's liens under leases to which the Borrower or any Subsidiary of the Borrower is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Borrower or any of its Subsidiaries or to use such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Borrower or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (viii) Liens on Equity Interests in, or Debt or other obligations of, CLAM owned by the Borrower or any of its Subsidiaries, which Liens secure Debt of CLAM; and 11 (ix) any Lien on any assets (including Equity Interests and other obligations) securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 360 days after the acquisition or completion of development, construction or installation thereof or improvement thereto. "PERSON" means an individual, a Business Entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PROJECT FINANCING" means any Debt incurred to finance or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Debt or Guaranty permitting or providing for recourse against the Borrower or any of its Subsidiaries other than (i) recourse to the Equity Interests in, Debt or other obligations of, or assets of, one or more Project Financing Subsidiaries, and (ii) such recourse as exists under any Contingent Guaranty. "PROJECT FINANCING SUBSIDIARY" means any Subsidiary of the Borrower whose principal purpose is to incur Project Financing, or to become a direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or Debt or other obligations of, one or more other such Subsidiaries or Business Entities. "RE-ALLOCATION DATE" has the meaning specified in Section 2.20(e). "REFERENCE BANKS" means JPMorgan Chase Bank, Citibank, N.A. and Bank of America, N.A. "REGISTER" has the meaning specified in Section 8.07(c). "REQUIRED LENDERS" means Lenders (i) that are not Objecting Lenders with respect to any previous Extension Request and (ii) that have Commitment Percentages aggregating at least 51% of the aggregate Commitment Percentages of such non-Objecting Lenders. "REVOLVING A ADVANCE" means an A Advance made or to be made by a Lender pursuant to Section 2.01(a). "S&P" means Standard and Poor's, a division of The McGraw-Hill Companies, Inc. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so 12 maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "STATED TERMINATION DATE" means December 5, 2002, or such later date as shall be determined pursuant to the provisions of Section 2.21 with respect to non-Objecting Lenders, provided that if such date is not a Business Day, the Stated Termination Date shall be the next preceding Business Day. "SUBSIDIARY" means, as to any Person, any Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "TERMINATION DATE" means the earlier of (i) the Stated Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of the Borrower or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or (vii) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TERM A ADVANCE" means an A Advance made or to be made by a Lender pursuant to Section 2.01(b). "TYPE" has the meaning specified in the definition of "A Advance". "UTILIZATION FEE PERIOD" means any period during the term of this Agreement commencing on the Effective Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Termination Date. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. 13 SECTION 1.02. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.03. Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles either (i) consistent with those principles applied in the preparation of the annual financial statements referred to in Section 4.01(e), or (ii) not so materially inconsistent with such principles that a covenant contained in Section 5.01 or 5.02 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (i) of this Section 1.03. "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. SECTION 1.04. References. The words "HEREOF", "HEREIN" and "HEREUNDER" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. (a) Revolving A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the Effective Date to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender's name on Schedule III hereto, or, if such Lender has entered into any Assignment and Acceptance or Commitment Increase Agreement or a New Lender Agreement, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "COMMITMENT"), provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the B Advances then outstanding and such deemed use of the aggregate amount of such Commitments shall be applied to all the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B REDUCTION"). Each A Borrowing consisting of Revolving A Advances shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof (or, in the case of an A Borrowing of Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may make more than one Borrowing on any Business Day and may borrow, prepay pursuant to Section 2.10, and reborrow under this Section 2.01(a). 14 (b) Term A Advances. Each Lender severally agrees, at the option of the Borrower and on the terms and conditions set forth in this Agreement, to make an A Advance to the Borrower on the Stated Termination Date in an aggregate amount up to but not exceeding the amount of its Commitment. Each A Borrowing consisting of Term A Advances shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof and shall consist of A Advances of the same Type made on the Stated Termination Date by the Lenders ratably according to their respective Commitments. SECTION 2.02. Making the A Advances. (a) Each A Borrowing shall be made on notice by the Borrower to the Administrative Agent (a "NOTICE OF A BORROWING") received by the Administrative Agent, (i) in the case of a proposed A Borrowing comprised of Base Rate Advances, not later than 10:00 A.M. (New York City time) on the Business Day of such proposed A Borrowing, and (ii) in the case of a proposed A Borrowing comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed A Borrowing. Each Notice of A Borrowing shall be by telecopy, telefax or other teletransmission or by telephone (and if by telephone, confirmed promptly by telecopier, telefax or other teletransmission), in substantially the form of Exhibit B hereto, specifying therein the requested (w) date of such A Borrowing, (x) Type of A Advances comprising such A Borrowing and, additionally, whether such A Borrowing consists of Revolving A Advances or Term A Advances, (y) aggregate amount of such A Borrowing, and (z) in the case of an A Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such A Advance. Each Lender shall, before 1:00 p.m. (New York City time) on the date of such A Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice from the Administrative Agent to the Lenders pursuant to Section 8.02, in same day funds, such Lender's ratable portion of such A Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at JPMorgan Chase Bank, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, or at any account of the Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b) Each Notice of A Borrowing shall be irrevocable and binding on the Borrower. In the case of any A Borrowing which the related Notice of A Borrowing specified is to be comprised of Eurodollar Rate Advances, if such A Advances are not made as a result of any failure to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article 3, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of such failure, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing. 15 (c) If any Lender makes a Term A Advance to the Borrower hereunder on a day on which the Borrower is to repay all or any part of an outstanding Revolving A Advance from such Lender, such Lender shall apply the proceeds of its Term A Advance to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Lender to the Administrative Agent as provided in subsection 2.02(a), or remitted by the Borrower to the Administrative Agent as provided in Section 2.14, as the case may be. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such A Borrowing in accordance with subsections (a) and (c) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance to the Borrower as part of such A Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. SECTION 2.03. Fees. (a) Facility Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Designated Bidder) a facility fee on the average daily amount of such Lender's Commitment, whether or not used or deemed used, from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender in the case of each other Lender, in each case until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment and on the Termination Date, at a rate per annum equal to the Facility Fee Percentage in effect from time to time. (b) Utilization Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (i) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 25% and less than or equal to 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.125% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period; and (ii) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility 16 Advances were greater than 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.25% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period. If a utilization fee is owing in respect of any Utilization Fee Period, such fee shall be payable on the last day of such Utilization Fee Period. (c) Agency Fee. The Borrower agrees to pay to the Administrative Agent, for its own account, such agency fees as may be separately agreed to in writing by the Borrower and the Administrative Agent, such fees to be in the amounts and payable on the dates as may be so agreed to. (d) Arrangement Fee. The Borrower agrees to pay to the Administrative Agent, for its own account, an arrangement fee in the amount and payable on the date separately agreed to in writing by the Administrative Agent and the Borrower. SECTION 2.04. Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the Commitments of the Lenders (being the amount by which such Commitments exceed the aggregate outstanding principal amount of all Advances), provided that each partial reduction shall be in the aggregate amount of $20,000,000 or any whole multiple of $1,000,000 in excess thereof. SECTION 2.05. Repayment of A Advances. (a) The Borrower shall repay to each Lender on the Termination Date the aggregate principal amount of the Revolving A Advances, together with accrued interest thereon, then owing to such Lender. (b) The Borrower shall repay to each Lender on the Final Maturity Date the aggregate principal amount of the Term A Advances, together with accrued interest thereon, then owing to such Lender. SECTION 2.06. Interest on A Advances. (a) Ordinary Interest. The Borrower shall pay interest on the unpaid principal amount of each A Advance owing to each Lender from the date of such A Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i) Base Rate Advances. During such periods as such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time plus, in the case of any Term A Advance, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). (ii) Eurodollar Rate Advances. During such periods as such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such A Advance to the sum of the Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time plus, in the case of any Term A 17 Advance, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such A Advance is Converted into a Base Rate Advance on any date other than the last day of any Interest Period for such A Advance, on the date of such Conversion or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the applicable Lender of the amount of unpaid interest accrued on such A Advance to the date of such Conversion. (iii) Additional Interest on Term A Advances. In addition to amounts payable under clause (i) or (ii) above in respect of any Term A Advance, the Borrower shall pay to each Lender hereunder as additional interest an amount in lieu of the utilization fee equal to 0.25% per annum on the average daily amount of such Lender's Term A Advances during any period (each such period, an "Additional Interest Period") commencing on the Termination Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Final Maturity Date (or, if any Term A Advances remain outstanding after the Final Maturity Date, such later date on which all such Advances are repaid in full). Additional interest owing in respect of any Additional Interest Period shall be payable on the last day of such Additional Interest Period; provided that additional interest owing after the Final Maturity Date shall be payable on demand. (b) Default Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such A Advance immediately prior to the date on which such amount became due and (ii) from and after the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, and at all times in the case of each Base Rate Advance or B Advance, to 1% per annum above the Base Rate in effect from time to time. SECTION 2.07. Additional Interest on Eurodollar Rate Advances. If any Lender shall determine in good faith that reserves under regulations of the Board of Governors of the Federal Reserve System are required to be maintained by it in respect of, or a portion of its costs of maintaining reserves under such regulations is properly attributable to, one or more of its Eurodollar Rate Advances, the Borrower shall pay to such Lender additional interest on the unpaid principal amount of each such Eurodollar Rate Advance payable on the same day or days on which interest is payable on such A Advance, at an interest rate per annum up to but not exceeding at all times during each Interest Period for such A Advance the excess of (i) the rate obtained by dividing the Eurodollar Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such Interest Period over (ii) the Eurodollar Rate for such Interest Period. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case 18 such additional interest on the Eurodollar Rate Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least five Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Business Days prior to each date on which interest is payable on the Eurodollar Rate Advances an officer's certificate setting forth the amount to which such Lender is then entitled under this Section, which certificate shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i) or (ii), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(a)(ii) or (iii). (c) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any applicable A Advances, (i) the Administrative Agent shall give the Borrower and each Lender prompt notice by telephone (confirmed in writing) that the interest rate cannot be determined for such applicable A Advances, (ii) each such A Advance that is a Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such A Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligations of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that as a result of conditions in or generally affecting the relevant market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon: (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and 19 (ii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Eurodollar Rate Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Eurodollar Rate Advances with an Interest Period of one month. (f) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such A Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such A Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be, or be elected to be Converted to, Eurodollar Rate Advances having the same Interest Period as Eurodollar Rate Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall, or upon such Conversion will, equal or exceed $20,000,000, the Borrower shall have the right to continue all such Eurodollar Rate Advances as, or to Convert all such A Advances into, Eurodollar Rate Advances having such Interest Period. SECTION 2.09. Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion, and subject to the provisions of Section 2.08, 2.11 and 2.13, Convert all A Advances of one Type comprising the same A Borrowing into A Advances of the other Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 8.04(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the A Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the Interest Period for each such Eurodollar Rate Advance. SECTION 2.10. Prepayments. The Borrower may, upon (i) in the case of Eurodollar Rate Advances, at least three Business Days notice or (ii) in the case of Base Rate Advances, telephonic notice not later than 12:00 noon (New York City time) on the date of prepayment, to the Administrative Agent which specifies the proposed date and aggregate principal amount of the prepayment and the Type of A Advances to be prepaid, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the A Advances comprising the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, the 20 Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 8.04(b); provided, further, however, that the Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. SECTION 2.11. Increased Costs. (a) If, due to either (i) the introduction after the Effective Date of or any change after the Effective Date (including any change by way of imposition or increase of reserve requirements or assessments other than those referred to in the definition of "Eurodollar Reserve Percentage" contained in Section 1.01) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request issued or made after the Effective Date from or by any central bank or other governmental authority (whether or not having the force of law), in each case above other than those referred to in Section 2.12, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining, Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.11(a) (except as otherwise expressly provided above in this Section 2.11(a)). A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Borrower of any increased costs pursuant to this Section 2.11, the Borrower may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of a Eurodollar Rate Advance by the Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to the A Advances of such Lender or Lenders during such Interest Period or portion thereof, and, in lieu thereof, such A Advances shall during such Interest Period or portion thereof be Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an Affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrower under this Section 2.11, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (b) In the event that any Lender shall change its Eurodollar Lending Office and such change results (at the time of such change) in increased costs to such Lender, the Borrower shall not be liable to such Lender for such increased costs incurred by such Lender to the extent, but only to the extent, that such increased costs shall exceed the increased costs which such Lender would have incurred if the Eurodollar Lending Office of such Lender had not been so changed, but, subject to subsection (a) of this Section 2.11 and to Section 2.13, nothing herein shall require any Lender to change its Eurodollar Lending Office for any reason. 21 SECTION 2.12. Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender (including any determination after the Effective Date by any such central bank, governmental authority or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less) and such Lender determines that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Borrower of the certificate referred to in the last sentence of this Section 2.12 by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.12 (except as otherwise expressly provided above in this Section 2.12). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Borrower and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.13. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Applicable Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Borrower and the Administrative Agent, suspend the right of the Borrower to elect Eurodollar Rate Advances from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Convert all such Eurodollar Rate Advances of such Lender to Base Rate Advances at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Conversion shall continue until such Lender notifies the Borrower and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances has been suspended under this Section 2.13, all Notices of A Borrowing specifying A Advances of such Type shall be deemed, as to such Lender, to be requests for Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an affiliate) to avoid any such illegality, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. 22 SECTION 2.14. Payments and Computations. (a) The Borrower shall make each payment hereunder (including under Section 2.03, 2.05, 2.06 or 2.19) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 1:00 P.M. (New York City time) without setoff, counterclaim, or any other deduction whatsoever, on the day when due in U.S. dollars to the Administrative Agent in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice to the Borrower from the Administrative Agent and agreed to by the Borrower, in same day funds. Each such payment made by the Borrower for the account of any Lender hereunder, when so made to the Administrative Agent, shall be deemed duly made for all purposes of this Agreement and the Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the bankruptcy, insolvency or reorganization of the Borrower or otherwise, such payment shall be deemed not to have been so made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Base Rate and of facility fees and utilization fees (or amounts in lieu thereof) shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, or the Effective Federal Funds Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by each Lender with respect to its own Eurodollar Rate Advances, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b), by each Lender with respect to its own Advances) of an interest rate or an increased cost, loss or expense or increased capital or of illegality or taxes hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of 23 interest or facility fees, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Effective Federal Funds Rate for such day. SECTION 2.15. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding in the case of each Indemnified Party, (i) all taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, imposed on or determined by reference to its income or profits, and all franchise taxes, and (ii) all other taxes, levies, imposts, deductions, charges, or withholdings in effect at the time that such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, and liabilities with respect thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower (or the Administrative Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Borrower (or the Administrative Agent, as applicable) shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Borrower shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this subsection (a) (or pursuant to Section 2.15(c), except to the extent Section 2.15(c) relates to Other Taxes) to any Indemnified Party that either (x) on the date such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, both (A) was not entitled to submit a U.S. Internal Revenue Service form W-8BEN (relating to such Indemnified Party, and entitling it to a complete 24 exemption from withholding on all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement or the Advances) or a U.S. Internal Revenue Service form W-8ECI (relating to all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement and the Advances) and (B) is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code), or (y) has failed to submit any form or certificate that it was required to file or provide pursuant to subsection (d) of this Section 2.15 and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Borrower from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations under clauses (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.15. If any Indemnified Party receives a net credit or refund in respect of such Taxes or amounts so paid by the Borrower, it shall promptly notify the Borrower of such net credit or refund and shall promptly pay such net credit or refund to the Borrower, provided that the Borrower agrees to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable, is required to repay it. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (c) The Borrower will indemnify each Indemnified Party for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to provide to the Borrower any form or certificate that it was required to provide pursuant to subsection (d) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (d) On or prior to the date on which each Indemnified Party that is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) executes this Agreement or otherwise becomes an "Indemnified Party" hereunder, such Indemnified Party shall provide the Borrower and the Administrative Agent with U.S. Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Borrower indicating that all payments to be made to such Indemnified Party hereunder are fully exempt from such taxes. Thereafter and from time to time, each such Indemnified Party shall submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms (or such 25 successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by the Borrower to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes, including fees. Upon the request of the Borrower from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Borrower a certificate to the effect that it is such a United States person. If any Indemnified Party determines, as a result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Borrower any form or certificate that such Indemnified Party is obligated to submit pursuant to this subsection (d), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Party shall promptly notify the Borrower and the Administrative Agent of such fact. (e) Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.15 shall use its best reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and each Indemnified Party contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder and under the Notes. SECTION 2.16. Sharing of Payments, Etc.. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15 or 8.04(b)) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the amount of the participation purchased from such Lender as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (A) the amount of such Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. 26 SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Advance made by such Lender hereunder, including the amounts of principal and interest payable and paid to such lender from time to time hereunder. (b) The Administrative Agent shall maintain accounts and records in which it shall record (i) the amount of each Advance made hereunder, the type of Advance and, in the cases of Eurodollar Rate Advances, the relevant Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to Sections 2.17(a) and (b) shall be conclusive evidence (absent manifest error) of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Advances in accordance with the terms of this Agreement. In the event of a conflict between the records maintained by the Administrative Agent and any Lender, the records maintained by the Lender shall govern. Any Lender may request that Loans made by it be evidenced by a Note. In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and substantially in the form attached as Exhibit A hereto. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 8.07) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if such Note is a registered Note, to such payee and its registered assigns). SECTION 2.18. Use of Proceeds. Proceeds of the Advances may be used for general corporate purposes of the Borrower and its Subsidiaries, including for acquisitions and for payment of commercial paper issued by the Borrower. SECTION 2.19. The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.19 from time to time on any Business Day during the period from the Effective Date until the earlier of (I) the Termination Date or (II) the date falling 30 days prior to the Stated Termination Date, in the manner set forth below; provided that (x) each B Borrowing shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof and (y) following the making of each B Borrowing, the aggregate number of outstanding B Borrowings shall not exceed seven and the aggregate amount of all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction). (i) The Borrower may request a B Borrowing under this Section 2.19 by delivering to the Administrative Agent, by telecopy, telefax or other teletransmission, a notice of a B Borrowing (a "NOTICE OF B BORROWING"), in substantially the form of Exhibit C hereto, specifying the date and aggregate amount of the proposed B Borrowing, 27 the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the earlier of (x) 180 days after the date of such B Borrowing or (y) the Stated Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of B Borrowing. (ii) Each Lender may, if in its sole and absolute discretion it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amount may, subject to clause (y) of the proviso to the first sentence of this Section 2.19(a), exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such B Advance; provided that if the Administrative Agent or an Affiliate thereof in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer before 9:45 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing. (iii) The Borrower shall, in turn, before 11:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either (A) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or 28 (B) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in order of the lowest to highest rates of interest or margins (or, if two or more Lenders bid at the same rates of interest, and the amount of accepted offers is less than the aggregate amount of such offers, the amount to be borrowed from such Lenders as part of such B Borrowing shall be allocated among such Lenders pro rata on the basis of the maximum amount offered by such Lenders at such rates or margin in connection with such B Borrowing), in any aggregate amount up to the aggregate amount initially requested by the Borrower in the relevant Notice of B Borrowing, by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect. (iv) If the Borrower notifies the Administrative Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(B) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing, and (C) each Lender that is to make a B Advance as part of such B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article 3. Each Lender that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article 3 and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. Promptly after each B Borrowing the Administrative Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. 29 (b) Within the limits and on the conditions set forth in this Section 2.19, the Borrower may from time to time borrow under this Section 2.19, repay or prepay pursuant to subsection (c) below, and reborrow under this Section 2.19. (c) The Borrower shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a Note, on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment in the related Notice of B Borrowing and provided in the Note, if any, evidencing such B Advance), the then unpaid principal amount of such B Advance. The Borrower shall have no right to prepay any B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to Section 2.19(a)(i) and set forth in the Note, if any, evidencing such B Advance or unless the holder of such B Advance otherwise consents in writing to such prepayment. (d) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice delivered pursuant to subsection (a)(ii) above on the interest date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing and set forth in the Note, if any, evidencing such B Advance, subject to Section 2.06(b). (e) Each time that the Borrower gives a Notice of B Borrowing, the Borrower shall pay to the Administrative Agent for its own account such fee as may be agreed between the Borrower and the Administrative Agent from time to time, whether or not any B Borrowing is in fact made. (f) Following the making of each B Borrowing, the Borrower agrees that it will be in compliance with the limitations set forth in clause (y) of the proviso to the first sentence of Section 2.19(a). (g) The failure of any Lender to make the B Advance to be made by it as part of any B Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its B Advance on the date of such B Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the B Advance to be made by such other Lender on the date of any B Borrowing. If any Designated Bidder fails to make the B Advance to be made by it as part of any B Borrowing, such Designated Bidder shall not thereafter have the right to offer to make any B Advance without the prior written consent of the Borrower and the Administrative Agent. SECTION 2.20. Increase of Commitments. (a) At any time after the Effective Date, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an increase of the aggregate Commitments by notice to the Administrative Agent in writing of the amount (the "OFFERED INCREASE AMOUNT") of such proposed increase (such notice, a "COMMITMENT INCREASE NOTICE"). Any such Commitment Increase Notice must offer each Lender the opportunity to subscribe for its pro rata share of the increased Commitments. If any portion of the increased Commitments is not subscribed for by the Lenders, the Borrower may, in its sole discretion, but 30 with the consent of the Administrative Agent as to any Person that is not at such time a Lender (which consent shall not be unreasonably withheld), offer to any existing Lender or to one or more additional banks or financial institutions the opportunity to participate in all or a portion of such unsubscribed portion of the increased Commitments pursuant to paragraph (b) or (c) below, as applicable. (b) Any additional bank or financial institution that the Borrower selects to offer participation in the increased Commitments, and that elects to become a party to this Agreement and obtain a Commitment, shall execute a New Lender Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit E (a "NEW LENDER AGREEMENT"), whereupon such bank or financial institution (a "NEW LENDER") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and the signature pages and Schedule III hereof shall be deemed to be amended to add the name and Commitment of such New Lender, provided that the Commitment of any such New Lender shall be in an amount not less than $10,000,000. (c) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant to this Section 2.20 shall, in each case, execute a Commitment Increase Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F (a "COMMITMENT INCREASE AGREEMENT"), whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule III hereof shall be deemed to be amended to so increase the Commitment of such Lender. (d) The effectiveness of any New Lender Agreement or Commitment Increase Agreement shall be contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrower and legal opinions of counsel to the Borrower as the Administrative Agent shall reasonably request with respect thereto, in each case, in form and substance satisfactory to the Administrative Agent. (e) If any bank or financial institution becomes a New Lender pursuant to Section 2.20(b) or any Lender's Commitment is increased pursuant to Section 2.20(c), additional A Advances made on or after the effectiveness thereof (the "RE-ALLOCATION DATE") shall be made pro rata based on the Commitment Percentages in effect on and after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Lender making an aggregate principal amount of A Advances in excess of its Commitment, in which case such excess amount will be allocated to, and made by, such New Lender and/or Lenders with such increased Commitments to the extent of, and pro rata based on, their respective Commitments), and continuations of Eurodollar Rate Advances outstanding on such Re-Allocation Date shall be effected by repayment of such Eurodollar Rate Advances on the last day of the Interest Period applicable thereto and the making of new Eurodollar Rate Advances pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Base Rate Advances, the Borrower shall make prepayments thereof and borrowings of Base Rate Advances so that, after giving effect thereto, the Base Rate Advances outstanding are held pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Eurodollar Rate Advances, such Eurodollar Rate Advances shall remain outstanding with the respective holders thereof until 31 the expiration of their respective Interest Periods (unless the applicable Borrower elects to prepay any thereof in accordance with the applicable provisions of this Agreement), and interest on and repayments of such Eurodollar Rate Advances will be paid thereon to the respective Lenders holding such Eurodollar Rate Advances pro rata based on the respective principal amounts thereof outstanding. (f) Notwithstanding anything to the contrary in this Section 2.20, (i) no increase pursuant to this Section 2.20 shall be effective without the consent of the Required Lenders, (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion and (iii) the aggregate amount by which the Commitments hereunder are increased pursuant to this Section 2.20 shall not exceed $120,000,000. (g) The Borrower shall execute and deliver a Note to each new bank or other financial institution becoming a Lender that requests one. SECTION 2.21. Extension of Stated Termination Date. (a) Not earlier than 65 days prior to and not later than 45 days prior to the Stated Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an extension of such Stated Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit G, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, by the later of (i) the date 30 days after its receipt from the Administrative Agent of the applicable Extension Request and (ii) the date 30 days prior to the Stated Termination Date, notify the Borrower and the Administrative Agent of its election to extend or not extend the Stated Termination Date as requested in such Extension Request. If the Required Lenders shall approve in writing the extension of the Stated Termination Date requested in such Extension Request, and unless the Borrower shall elect to give notice for a Term A Advance pursuant to Section 2.01(b), the Stated Termination Date shall automatically and without any further action by any Person be extended for an additional 364 days provided that the Commitment of any Lender that does not consent in writing within the period specified above (an "OBJECTING LENDER") shall, unless earlier terminated in accordance with this Agreement, expire on the Stated Termination Date in effect on the date of such Extension Request (such Stated Termination Date, if any, referred to as the "COMMITMENT EXPIRATION DATE" with respect to such Objecting Lender). If, within the period specified above, the Required Lenders shall not approve in writing the extension of the Stated Termination Date requested in an Extension Request, the Stated Termination Date shall not be extended pursuant to such Extension Request. The Administrative Agent shall promptly notify (y) the Lenders and the Borrower of any extension of the Stated Termination Date pursuant to this Section 2.21 and (z) the Borrower of any Lender that becomes an Objecting Lender. (b) A Advances owing to any Objecting Lender on the Commitment Expiration Date, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable with respect to such Lender shall be repaid in full on or before such Commitment Expiration Date. 32 (c) The Borrower shall have the right, so long as no Event of Default has occurred and is then continuing, upon giving notice to the Administrative Agent and the Objecting Lenders in accordance with Section 2.10, to prepay in full the A Advances of the Objecting Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable to the Objecting Lenders hereunder and, upon giving not less than three Business Days' notice to the Objecting Lenders and the Administrative Agent, to cancel the whole or part of the Commitments of the Objecting Lenders. (d) Notwithstanding the foregoing, if any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in the sole discretion and prior to the then Stated Termination Date, require such Lender (and each related Designated Bidder (as defined herein or in the Long-Term Revolving Credit Agreement or the Canadian Credit Agreement, as the case may be)) to transfer or assign, in whole or in part, without recourse (in accordance with Section 8.07), all or part of its interests, rights and obligations under this Agreement and, if the Borrower shall so determine in its sole discretion, the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the Borrower may determine in its sole discretion and specify by notice to such Lender, to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and all other amounts owed to it hereunder, including any amounts owing pursuant to Section 8.04(b), and, if the Borrower shall have so determined as specified above, the "Advances" made by it under, and as defined in, the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be, and all other amounts owed to it thereunder, including any amounts owing pursuant to the provision of the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be, comparable to Section 8.04 hereof) and any amounts that would be owing under such Section (or comparable provision) if such Advances and "Advances" (as so defined) were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee that becomes a Lender as a result of such an assignment made pursuant to this paragraph (d) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. SECTION 2.22. Replacement of Lenders. If any Lender requests compensation under Sections 2.07, 2.11 or 2.12 or if the Borrower is required to pay any additional amount to any Lender or any taxing authority or other authority for the account of any Lender pursuant to Section 2.15, or if any Lender suspends the right of the Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.13, or if any Lender defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 8.07), all its interests, rights and obligations under this Agreement (other than any outstanding B Advances held by it) and, if the Borrower shall so determine in its sole discretion, the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the Borrower may 33 determine in its sole discretion and specify by notice to such Lender (other than "B Advances" under, and as defined in, the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than B Advances) hereunder and, if the Borrower shall have so determined as specified above, its "Advances" (other than "B Advances") (each under and as defined in the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be), and all accrued interest thereon, accrued fees, accrued costs in connection with compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, if any, and all other amounts (other than B Advances) payable to it hereunder and, if the Borrower shall have so determined as specified above, under the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of the Amendment and Restatement of this Agreement. The amendment and restatement of this Agreement as of the Effective Date shall become effective when (i) it shall have been executed by the Borrower, the Administrative Agent and JPMorgan, in its capacity as Administrative Agent under this Agreement immediately prior to the effectiveness of the amendment and restatement of this Agreement, (ii) the Administrative Agent and the Borrower either shall have been notified by each Initial Lender that such Initial Lender has executed it or shall have received a counterpart of this Agreement executed by such Initial Lender, and (iii) the Administrative Agent shall have received the following, each dated the date of delivery thereof unless otherwise specified below (which date shall be selected by the Borrower and be the same for all documents and all Lenders), in form and substance satisfactory to the Administrative Agent and (except for the Notes, if any) in sufficient copies for each Lender: (a) the Notes, to the order of the Lenders requesting Notes, respectively; (b) certified copies of the resolutions of the Board of Directors of the Borrower approving the borrowings contemplated hereby and authorizing the execution of this Agreement and the Notes, if any, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes, if any; 34 (c) a certificate of the Secretary or an Assistant Secretary of the Borrower (i) certifying names and true signatures of officers of the Borrower authorized to sign this Agreement and the Notes, if any, and the other documents to be delivered hereunder and (ii) if the Effective Date is other than the date of this amendment and restatement, certifying that the representations and warranties contained in Section 4.01 are true and correct as of the Effective Date; (d) a favorable opinion of the Borrower's Vice President and General Counsel, in substantially the form of Exhibit H hereto; (e) a favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, in substantially the form of Exhibit I hereto; and (f) evidence satisfactory to the Administrative Agent of payment of any loans outstanding under this Agreement immediately prior to the effectiveness of such amendment and restatement, together with all accrued interest and fees thereunder. The Borrower and the Initial Lenders agree that upon the Effective Date the "Commitments" of the Initial Lenders shall be as set forth on Schedule III hereof under the caption "Commitments" and the Borrower and the Initial Lenders (for this purpose constituting the "Majority Lenders" under this Agreement immediately prior to such effectiveness) further agree that the Commitments of each Lender not continuing as an Initial Lender upon such effectiveness shall terminate automatically upon the Effective Date without further action by any party. SECTION 3.02. Conditions Precedent to Each A Borrowing. The obligation of each Lender to make an A Advance (including the initial A Advance) on the occasion of any A Borrowing shall be subject to the further conditions precedent that on or before the date of such A Borrowing this Agreement shall have become effective pursuant to Section 3.01 and that on the date of such A Borrowing, before and immediately after giving effect to such A Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of A Borrowing and the acceptance by the Borrower of the proceeds of such A Borrowing shall constitute its representation and warranty that on and as of the date of such A Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such A Borrowing) and under other agreements or facilities or evidenced by other instruments or 35 documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. SECTION 3.03. Conditions Precedent to Each B Borrowing. The obligation of each Lender which is to make a B Advance on the occasion of any B Borrowing (including the initial B Borrowing) shall be subject to the further conditions precedent that (i) at or before the time required by paragraph (iii) of Section 2.19(a), the Administrative Agent shall have received the written confirmatory notice of such B Borrowing contemplated by such paragraph, (ii) on or before the date of such B Borrowing this Agreement shall have become effective pursuant to Section 3.01, and (iii) on the date of such B Borrowing, before and immediately after giving effect to such B Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute its representation and warranty that on and as of the date of such B Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such B Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such B Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. The Borrower and each Material Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. Each Subsidiary which is, on and as of the Effective Date, a Material Subsidiary is listed on Schedule I hereto. 36 (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes, if any, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes, if any, which has not been duly made or obtained, except those (i) required in the ordinary course to comply with ongoing covenant obligations of the Borrower hereunder the performance of which is not yet due and (ii) that will, in the ordinary course of business in accordance with this Agreement, be duly made or obtained on or prior to the time or times the performance of such obligations shall be due. (d) This Agreement constitutes, and the Notes (if and when delivered hereunder) shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (e) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2000 and the related consolidated statements of income and cash flow for the fiscal year then ended, reported on by PricewaterhouseCoopers LLC, independent public accountants, and the consolidated balance sheet of the Borrower and its consolidated subsidiaries as at September 30, 2001 and the related consolidated statements of income and cash flow for the nine-month period then ended, certified by the chief financial officer of the Borrower, copies of each of which have been furnished to the Administrative Agent and the Initial Lenders, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at December 31, 2000, and September 30, 2001, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 2001, statements to normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied. From September 30, 2001 to and including the Effective Date there has been no material adverse change in such condition or results of operations. (f) As at the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or involving the Borrower or any Material Subsidiary in any court, or before any arbitrator of any kind, or before or by any governmental body, which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) would have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of this Agreement or the Notes, if any. (g) The Borrower and each consolidated Subsidiary have duly filed all tax returns required to be filed, and duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to file or pay which, as applicable, would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Borrower or the appropriate Subsidiary. 37 (h) Except to the extent permitted pursuant to Section 5.02(e), neither the Borrower nor any Material Subsidiary is subject to any contractual restrictions which limit the amount of dividends payable by any Subsidiary. (i) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 6.01(g). (j) Neither the Borrower nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan that, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), exceeds 5% of the Consolidated Tangible Net Worth of the Borrower. (k) Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization or termination would be the occurrence of an Event of Default under Section 6.01(i). (l) The Borrower is not an "investment company" or a "company" controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) The Borrower is not a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. All representations and warranties made by the Borrower herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes, if any. ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each Material Subsidiary to preserve and maintain, its existence, rights (organizational and statutory) and material franchises, except as otherwise contemplated or permitted by Section 5.02(c) or 5.02(d); provided, that any Material Subsidiary may change its form of organization to a partnership or other form of Business Entity. 38 (b) Compliance with Laws, Etc. Comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (including all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) Visitation Rights. At such reasonable times and intervals as the Administrative Agent or any of the Lenders (other than Designated Bidders) may desire, permit the Administrative Agent or any of the Lenders (other than Designated Bidders) to visit the Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of the Borrower and any of its Subsidiaries with officers of the Borrower and independent certified public accountants of the Borrower and any of its Subsidiaries, provided that if an Event of Default, or an event which with the giving of notice or the passage of time, or both, would become an Event of Default, has occurred and is continuing, the Administrative Agent or any Lender may, in addition to the other provisions of this subsection (c) and at such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, visit and inspect, under guidance of officers of the Borrower, any properties significant to the consolidated operations of the Borrower and its Subsidiaries, and to examine the books and records of account (other than with respect to any mineral reserve information that the Borrower determines to be confidential, except, during the continuation of an Event of Default, if such Lenders shall have entered into a confidentiality agreement with respect to such information satisfactory in form and substance to the Borrower) of the Borrower and any of its Subsidiaries and to discuss the affairs, finances and accounts of any of the Borrower's Subsidiaries with any of the officers of such Subsidiary. (d) Books and Records. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Subsidiary in accordance with generally accepted accounting principles either (i) consistently applied or (ii) applied in a changed manner that does not, under generally accepted accounting principles or public reporting requirements applicable to the Borrower, either require disclosure in the consolidated financial statements of the Borrower and its consolidated Subsidiaries or require the consent of the accountants which (as required by Section 5.03(b)) report on such financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.03(b)) report on the consolidated financial statements of the Borrower and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred, provided that if any change referred to in clause (ii) or (iii) above would not meet the standard set forth in clause (i) or (ii) of Section 1.03, the Administrative Agent, the Lenders and the Borrower agree to amend the covenants contained in Section 5.01 and 5.02 so that the relative protection afforded thereby to the Lenders and the relative flexibility afforded thereby to the Borrower will in substance be retained after such amendment, provided, however, that until such amendment becomes effective hereunder, the covenants as set forth herein shall remain in full force and effect and those accounting principles applicable to the Borrower and its consolidated 39 Subsidiaries which do meet the standards set forth in clause (i) or (ii) of Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants. (e) Maintenance of Properties, Etc. Maintain and preserve, and cause each Material Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) Maintenance of Insurance. Maintain, and cause each Material Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. SECTION 5.02. Negative Covenants. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, unless the Majority Lenders shall otherwise consent in writing: (a) Liens, Etc. (i) Create, assume or suffer to exist, or permit any Material Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the Equity Interests in any Material Subsidiary, whether now owned or hereafter acquired, or (ii) create or assume, or permit any Material Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of the Borrower and its consolidated Subsidiaries taken as a whole securing the payment of Debt and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) exceeding the greater of (x) $250,000,000 and (y) 10% of Consolidated Tangible Net Worth as at the date of such creation or assumption; provided, however, that this subsection (a) shall not apply to: (A) Liens on assets acquired by the Borrower or any of its Subsidiaries after the Original Effective Date to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (B) Liens on Equity Interests acquired after the Original Effective Date in a Business Entity which has become or becomes a Subsidiary of the Borrower, or on assets of any such Business Entity, to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (C) Liens on Margin Stock; (D) Liens on the Equity Interests in, or Debt or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, Debt or other obligations of any Business Entity which are owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; 40 (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Debt or Guaranty secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Debt or Guaranty is not increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) and such Debt or Guaranty is not secured by any additional assets that would not have been permitted by this Section to secure the Debt or Guaranty refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and property evidencing or embodying, or constituting rights or other general intangibles relating to, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.02. (b) Debt, Etc. Create, assume or suffer to exist, or permit any of its consolidated Subsidiaries to create, assume or suffer to exist, any Debt or any Guaranty unless, immediately after giving effect to such Debt or Guaranty and the receipt and application of any proceeds thereof or value received in connection therewith, (1) the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries plus (ii) the aggregate amount (determined on a consolidated basis) of Guaranties by the Borrower and its consolidated Subsidiaries is less than 60% of Capitalization, provided that Debt for borrowed money either maturing within one year and evidenced by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement or the Long-Term Revolving Credit Agreement or the Canadian Credit Agreement or any replacement therefor), shall not exceed the sum of the unused commitments under the Canadian Credit Agreement and the aggregate of the Borrower's unused bank lines of credit and unused credit available to the Borrower under financing arrangements with banks or other financial institutions; and (2) with respect to any such Debt created or assumed by a consolidated Subsidiary that is either a Subsidiary of the Borrower as of the Original Effective Date or a Subsidiary of the Borrower acquired or created after the Original Effective Date and owning a material portion of the consolidated operating assets existing at the Original Effective Date of 41 the Borrower and its Subsidiaries, the aggregate amount of Debt of the consolidated Subsidiaries of the Borrower referred to above in this paragraph (2) owing to Persons other than the Borrower and its consolidated Subsidiaries is less than the greater of (i) $500,000,000 (exclusive of public Debt of LL&E existing at the time LL&E became a Subsidiary, the principal amount of which at such time was approximately $400,000,000, and any refinancing of such Debt, in a principal amount not to exceed the principal amount refinanced) and (ii) 30% of Consolidated Tangible Net Worth as at the date of incurrence or creation of such Debt. (c) Sale, Etc. of Assets. Sell, lease or otherwise transfer, or permit any Material Subsidiary to sell, lease or otherwise transfer (in either case, whether in one transaction or in a series of transactions, and except, in either case, to the Borrower or an entity which after giving effect to such transfer will be or become a Material Subsidiary in which the Borrower's direct or indirect Equity Interests will be at least as great as its direct or indirect Equity Interests in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, notwithstanding the foregoing, the Borrower or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, so long as (A) such Permitted Assets are sold, leased or otherwise transferred in exchange for other Permitted Assets and/or (B) the proceeds from such sale, lease or other transfer, or an amount equal to the proceeds thereof, are (x) reinvested within one year from the date of receipt thereof in Permitted Assets and/or the development of Permitted Assets and/or (y) used to repay Debt the proceeds of which were or are being used for investment in, and/or the development of, Permitted Assets; provided further that, no such sale, lease or other transfer shall be permitted by the foregoing proviso unless either (1) after giving effect to such sale, lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) the Borrower or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. (d) Mergers, Etc. Merge, amalgamate or consolidate with any Person, or permit any Material Subsidiary to merge, amalgamate or consolidate with any Person, except that: (i) any Subsidiary may merge, amalgamate or consolidate with (or liquidate into) any other Subsidiary or may merge, amalgamate or consolidate with (or liquidate into) the Borrower, provided that (A) if such Subsidiary merges, amalgamates or consolidates with (or liquidates into) the Borrower, either the survivor or successor is the Borrower or such successor or surviving Business Entity is organized and existing under the laws of the United States and expressly assumes the obligations of the Borrower hereunder and under the Notes, (B) if any such Subsidiary merges, amalgamates or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one or more Business Entities that are Subsidiaries of the Borrower are the surviving or successor Business Entity(ies) and, if any such Subsidiary is not directly or indirectly wholly-owned by the Borrower, such merger, amalgamation or consolidation is on an arm's length basis and (C) as a result of such merger, amalgamation or consolidation, no Event 42 of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower or any Material Subsidiary may merge, amalgamate or consolidate with any other Business Entity (that is, in addition to the Borrower or any other Subsidiary), provided that (A) if the Borrower merges, amalgamates or consolidates with any such other Business Entity(ies), the survivor or successor Business Entity is the Borrower, (B) if any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, each surviving or successor Business Entity is a directly or indirectly wholly-owned Subsidiary, and (C) if either the Borrower or any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, after giving effect to such merger, amalgamation or consolidation no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. (e) Dividend Restrictions. Create, or consent or agree to, or permit any of its Material Subsidiaries existing on the Original Effective Date or any of its Subsidiaries thereafter created or acquired and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, to create, or consent or agree to, any restrictions, contained in any agreement or instrument relating to or evidencing Debt, on any such Subsidiary's ability to pay dividends or to make advances to the Borrower or any Subsidiary of the Borrower; provided, however, that this subsection (e) shall not apply to any such restrictions (including any extensions of the term of any thereof (by amendment, or continuation thereof in any refinancing of the Debt to which such restriction relates, or otherwise)) applicable to the Equity Interests in any Subsidiary of the Borrower the Equity Interests in which are acquired by the Borrower after the Original Effective Date and which restrictions are existing at the time such Subsidiary first becomes a Subsidiary of the Borrower and are not placed thereon by or with the consent of the Borrower in contemplation of such acquisition by the Borrower. SECTION 5.03. Reporting Requirements. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: (a) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of such quarter, and consolidated statements of income and cash flow of the Borrower and its consolidated Subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as to fairness and utilization of generally accepted accounting principles by the chief financial officer of the Borrower and accompanied by a certificate of such officer stating (i) that such statements of income and cash flow and such balance sheet have been prepared in accordance with generally accepted accounting principles, (ii) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (iii) all relevant facts in reasonable detail to evidence, and the computations as to, 43 whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of Section 5.02, and (iv) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (b) within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and its consolidated Subsidiaries containing financial statements for such year reported on by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with generally accepted accounting principles and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; (c) within 120 days after the close of each of the Borrower's fiscal years, a certificate of the chief financial officer of the Borrower stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of Section 5.02 and (iii) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (d) promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Borrower or any Material Subsidiary shall have sent to its public Equity Interest holders; (e) promptly upon their becoming publicly available, all regular and periodic financial reports and registration statements which the Borrower or any Material Subsidiary shall file with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registration statements of securities for selling security holders; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving the Borrower or any Material Subsidiary, except any litigation or proceeding which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Borrower obtains knowledge of the occurrence of any Event of Default which is continuing or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of 44 the Borrower of the steps being taken by the Borrower or the appropriate Subsidiary to cure the effect of such event; (h) as soon as practicable and in any event within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Borrower or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to subsections (a) and (b) of this Section 5.03 shall contain comparative information which conforms to the presentation required in Form 10-Q and Form 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: 45 (a) The Borrower shall fail to pay any principal of any Advance within two Business Days after the same shall be due, or any interest on any Advance or any other amount payable hereunder within five Business Days after the same shall be due; or (b) Any representation or warranty made or deemed made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or (d) The Borrower or any Material Subsidiary shall fail to pay any Debt or Guaranty (excluding any Advances) of the Borrower or such Subsidiary (as the case may be) in an aggregate principal amount in excess of the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate the maturity of such Debt; provided that, notwithstanding any provision contained in this subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt referred to in this subsection (d), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds thereof would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt extended pursuant thereto and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration, or the provisions hereof relating thereto, this Agreement or any Advance hereunder would otherwise be subject to the margin requirements or any other restriction under Regulation U issued by the Board of Governors of the Federal Reserve System, then such breach, default, event of default or acceleration shall not constitute a default or Event of Default under this subsection (d); or (e) (i) The Borrower or any Material Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by the Borrower or any such Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Borrower or any such Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions referred to above sought in such proceeding (including the entry of an order 46 for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Borrower or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time shall be rendered against the Borrower or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or (g) Any Termination Event with respect to a Material Plan shall have occurred and, 30 days after notice thereof shall have been given to the Borrower by the Lender, (i) such Termination Event shall still exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto), in each case in respect of which the Borrower or any ERISA Affiliate has liability, is equal to or greater than $50,000,000; or (h) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $50,000,000; or (i) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the Original Effective Date by an amount exceeding $50,000,000; or (j) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of the Borrower in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than the Borrower, a Subsidiary of the Borrower or any employee benefit plan maintained for employees of the Borrower and/or any of its Subsidiaries or the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess 47 of 50% of the outstanding capital stock of the Borrower entitled to vote in elections for directors of the Borrower and (ii) at any time before the later of (x) six months after the completion of such tender offer and (y) the next annual meeting of the shareholders of the Borrower following the completion of such tender offer more than half of the directors of the Borrower consists of individuals who (a) were not directors before the completion of such tender offer and (b) were not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) Any "Event of Default" as defined in the Long-Term Revolving Credit Agreement or the Canadian Credit Agreement shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that if an Event of Default under subsection (e) of this Section 6.01 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including enforcement of this Agreement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Nothing in this Agreement shall impose upon any Co-Syndication Agent or Co-Documentation Agent, in its capacity as such, any duty or liability whatsoever. SECTION 7.02. Administrative Agent's Reliance, Etc.. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken 48 or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. JPMorgan and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, JPMorgan shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include JPMorgan in its individual capacity. JPMorgan and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if JPMorgan were not the Administrative Agent and without any duty to account therefor to the other Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE ADVANCES THEN HELD BY EACH OF THEM (OR IF NO ADVANCES ARE AT THE TIME OUTSTANDING OR IF ANY ADVANCES ARE HELD BY PERSONS WHICH ARE NOT LENDERS, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS OR THE RESPECTIVE AMOUNTS OF THEIR 49 COMMITMENTS IMMEDIATELY PRIOR TO TERMINATION IF THE COMMITMENTS HAVE BEEN TERMINATED), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, OR ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILFUL MISCONDUCT. Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Administrative Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any of the Notes or any other instrument or document furnished pursuant hereto or in connection herewith to the extent that the Administrative Agent acts in its capacity as Administrative Agent and is not reimbursed for such expenses by the Borrower. SECTION 7.06. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then such retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized, or authorized to conduct a banking business, under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 50 SECTION 7.07. Auction Administrative Agent. The Administrative Agent shall until such time as it so notifies the Borrower and the Lenders discharge its duties under Section 2.19 through the Auction Administrative Agent and all references to the "Administrative Agent" or to JPMorgan relating to such duties or made in this Article 7 shall be deemed to also refer to the Auction Administrative Agent and any Affiliate of JPMorgan serving in such capacity. All payments to be made to or by the Auction Administrative Agent shall be made through the Administrative Agent. ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc.. An amendment or waiver of any provision of this Agreement or the Notes, or a consent to any departure by the Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but only if, it shall be in writing and signed by the Majority Lenders or, where so specified, the Required Lenders (except any amendment to give effect to increased Commitments and New Lenders, as contemplated by Section 2.20), and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Bidders), be effective to: (a) waive any of the conditions specified in Article 3, (b) except as contemplated by Section 2.20, increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (d) except as contemplated by Section 2.21, postpone any date fixed for any payment of principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, which shall be required for the Lenders or any of them to take any action under this Agreement, or (f) amend this Section 8.01; and, provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note. SECTION 8.02. Notices, Etc.. Except as otherwise provided in Section 2.02(a) or 2.10(ii), all notices and other communications provided for hereunder shall be in writing and mailed by certified mail, return receipt requested and postage prepaid, or telecopied, telefaxed or otherwise teletransmitted, or delivered, if to the Borrower, at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Telefax: (713) 624-9627; if to any Initial Lender, at its Domestic Lending Office set forth in such Initial Lender's Administrative Questionnaire; if to any other Lender at its Domestic Lending Office specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender or at the address for notices specified in the Designation Agreement pursuant to which it became a party hereto; if to the Administrative Agent, in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Telefax: (212) 552-3295, with a copy to JPMorgan Chase Bank, at 600 Travis Street, 20th Floor, Houston, TX 77002, Attention: Russell Johnson, Telefax: (713) 216-8870; and if to the Auction Administrative Agent, at JPMorgan Chase Bank, Agency Services, at One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Christopher Consomer, Telefax: (212) 552-5627; 51 or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective, (a) in the case of any notice or communication given by certified mail, when receipted for, (b) in the case of any notice or communication given by telecopy, telefax or other teletransmission, when confirmed by appropriate answerback, in each case addressed as aforesaid, and (c) in the case of any notice or communication delivered by hand or courier, when so delivered, except that notices and communications to the Administrative Agent pursuant to Article 2 or 7 shall not be effective until received by the Administrative Agent. A notice received by the Administrative Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the Borrower and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses; Indemnity. (a) The Borrower agrees to pay on demand (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate and (iii) all out-of-pocket costs and expenses, if any, of the Administrative Agent and the Lenders (including reasonable counsel fees and expenses and the allocated costs of in-house counsel), in connection with the enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder and thereunder. (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.10 or a Conversion pursuant to Section 2.08(f) or Section 2.09 or due to acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason attributable to the Borrower, or if the Borrower shall fail to borrow, convert, continue or prepay any Eurodollar Rate Advance on the date specified in any notice delivered pursuant hereto, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of 52 such payment or Conversion, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) THE BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO ANY ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE EQUITY INTERESTS IN, OR SUBSTANTIALLY ALL THE ASSETS OF, ANY PERSON OR ANY USE OR PROPOSED USE OF THE ADVANCES BY THE BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS, OR BY REASON OF ANY USE OR DISCLOSURE OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR USE OR PROPOSED USE OF THE PROCEEDS BY THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS). SECTION 8.05. Right of Set-off. Upon the declaration of the Advances as due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 8.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. SECTION 8.06. Binding Effect. This Agreement shall become effective in accordance with the provisions of Section 3.01, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of all of the Lenders. 53 SECTION 8.07. Assignments and Participations. (a) Each Lender (other than a Designated Bidder) may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, the A Advances owing to it and the Note or Notes held by it); provided, however, that each such assignment shall be to an Eligible Assignee, and the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except in the case of an assignment to a Lender Affiliate, a processing and recordation fee of $3,000, and shall send to the Borrower an executed counterpart of such Assignment and Acceptance, and provided further, however, that (i) the sum of (x) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment) plus (y) the amount of the "Commitment" of the assigning Lender under the Long-Term Revolving Credit Agreement and/or the Canadian Credit Agreement contemporaneously assigned by such assigning Lender to such assignee as contemplated by clause (iii) of this sentence must be equal to or greater than $25,000,000, or if less, the entire amount of such assigning Lender's "Commitment" (unless the Borrower and the Administrative Agent shall otherwise consent, which consent may be withheld for any reason) and must be an integral multiple of $1,000,000, (ii) any assignment to a Lender Affiliate will not relieve the assigning Lender of its obligation to make Advances hereunder timely in accordance with the terms hereof in the event such Lender Affiliate shall fail to do so and (iii) except in the case of an assignment to a Lender Affiliate or as required by the Borrower pursuant Section 2.21(d) or 2.22, each such assignment shall be of a constant, and not a varying, percentage of all such Lender's rights and obligations under this Agreement (other than any right to make B Advances, any B Advances or any Notes) and the same constant percentage of all such Lender's rights and obligations, if any, under the Long-Term Revolving Credit Agreement and the Canadian Credit Agreement unless the Long-Term Revolving Credit Agreement or the Canadian Agreement, as the case may be, has been terminated, shall be contemporaneously assigned by such assigning Lender to the same assignee pursuant to Section 8.07(a) of the Long-Term Revolving Credit Agreement and Section 9.07(a) of the Canadian Credit Agreement. Upon the execution, delivery, acceptance and recording of each Assignment and Acceptance by the parties thereto, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) except as otherwise provided in clause (ii) above, the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, except in the circumstances contemplated by clause (ii) above, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, provided, however, that such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04). (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the 54 other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance, each Designation Agreement, each New Lender Agreement and each Commitment Increase Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and, with respect to Lenders other than Designated Bidders, the Commitment of, and principal amount of the A Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for any surrendered Note or Notes a new Note to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender. Any such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. 55 (e) Each Lender (other than a Designated Bidder) may designate one or more banks or other entities to have a right to make B Advances as a Lender pursuant to Section 2.19; provided that (i) such Lender shall have obtained the written consent of the Administrative Agent and the Borrower, such consent not to be unreasonably withheld, (ii) no such Lender shall be entitled to make more than two such designations, (iii) each such Lender making one or more of such designations shall retain the right to make B Advances as a Lender pursuant to Section 2.19, (iv) each such designation shall be to a Designated Bidder and (v) the parties to each such designation shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Designation Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Designation Agreement, the designee thereunder shall be a party hereto with a right to make B Advances as a Lender pursuant to Section 2.19 and the obligations related thereto. (f) By executing and delivering a Designation Agreement, the Lender making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Designation Agreement; (iv) such designee will, independently and without reliance upon the Administrative Agent, such designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi) such designee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (g) Upon its receipt of a Designation Agreement executed by a designating Lender and a designee representing that it is a Designated Bidder, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit J hereto, (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (h) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely 56 responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such Lender's Advances or any facility fees or utilization fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Advances, or (D) consent to the assignment or the transfer by the Borrower of any of its rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (i) Any Lender may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree in writing for the benefit of the Borrower to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender in a manner consistent with Section 8.08. (j) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it) and the Notes, if any, issued to it hereunder in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. SECTION 8.08. Confidentiality. Each Lender and the Administrative Agent (each, a "PARTY") agrees that it will use its best reasonable efforts not to disclose, without the prior consent of the Borrower (other than to its, or its Affiliates, employees, auditors, accountants, counsel or other representatives, whether existing at the Original Effective Date or any subsequent time), any information with respect to the Borrower which is furnished pursuant to this Agreement, provided that any party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such party or to the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee, designee or participant in connection with any contemplated assignment of any rights or obligations hereunder, any designation or any sale of any participation therein, by 57 such party pursuant to Section 8.07, if such prospective assignee, designee or participant, as the case may be, executes an agreement with the Borrower containing provisions substantially similar to those contained in this Section 8.08; provided, however, that the Borrower acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. SECTION 8.09. Consent to Jurisdiction. (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by the Administrative Agent, the Arranger, any Lender or the holder of any Note in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Agreement or the Notes (such claims and causes of action, collectively, being "PERMITTED CLAIMS"), and the Borrower hereby irrevocably agrees that all Permitted Claims may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Service of the summons and complaint and any other process which may be served by the Administrative Agent, the Arranger, any Lender or the holder of any Note on the Borrower in any such action or proceeding in any aforementioned court in respect of Permitted Claims may be made by delivering separate copies of such process to the Borrower by courier and by certified mail (return receipt requested), fees and postage prepaid at the Borrower's address specified pursuant to Section 8.02, to the attention of each of the Treasurer and the Executive Vice President, Law. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 8.09 (i) shall affect the right of the Arranger, the Borrower, any Lender, the holder of any Note or the Administrative Agent to serve legal process in any other manner permitted by law or affect any right otherwise existing of the Borrower, any Lender, the Arranger, the holder of any Note or the Administrative Agent to bring any action or proceeding in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. SECTION 8.10. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. Delivery of an executed counterpart by facsimile shall be as effective as delivery of a manually executed original counterpart. 58 SECTION 8.12. Waiver of Jury Trial. THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. 59 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES INC. By: --------------------------------- Name: Title: 60 JPMORGAN CHASE BANK, in its individual capacity and as Administrative Agent and Auction Administrative Agent, By: -------------------------------------- Name: Title: 61 SCHEDULE I MATERIAL SUBSIDIARIES Burlington Resources Canada Ltd. Burlington Resources Canada Corporation Burlington Acquisition Corporation* Canadian Hunter Exploration Ltd. The Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company LP BROG GP Inc. BROG LP Inc. *until such time as the company amalgamates with Canadian Hunter Exploration Ltd. SCHEDULE II PRICING GRID
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI ------- -------- --------- -------- ------- -------- Basis for Pricing If the If the If the If the If the If Levels I-V Borrower's Borrower's Borrower's Borrower's Borrower's do not apply. senior senior senior senior senior unsecured long unsecured long unsecured long unsecured long unsecured long term debt is term debt is term debt is term debt is term debt is rated at least rated at least rated at least rated at least rated at least A by S&P or A2 A- by S&P or BBB+ by S&P or BBB by S&P or BBB- by S&P or by Moody's. A3 by Moody's. Baa1 by Moody's. Baa2 by Baa3 by Moody's. Moody's. Facility Fee .060% .080% .100% .125% .150% .200% Percentage LIBOR .290% .320% .400% .475% .700% .800% Applicable Margin
The applicable pricing level shall change on the date of any relevant change in the rating by S&P or Moody's of any public long term senior unsecured debt securities of the Borrower. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable pricing level is the higher of the two (e.g., A-/Baa1 results in Level II pricing), provided that in the event the split is more than one full category, the average (or the higher of two intermediate ratings) shall be used (e.g., A-/Baa2 results in Level III pricing, as does A-/Baa3). EX-10.19 4 h92808ex10-19.txt $600 MILLION LONG-TERM REVOLVING CREDIT AGMT. EXHIBIT 10.19 - -------------------------------------------------------------------------------- BURLINGTON RESOURCES INC. ---------- $600,000,000 LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 ---------- As Amended and Restated as of December 7, 2001 JPMORGAN CHASE BANK, as Administrative Agent and Auction Administrative Agent CITIBANK, N.A. FLEET NATIONAL BANK, as Co-Syndication Agents BANK OF AMERICA, N.A. TORONTO DOMINION (TEXAS), INC., as Co-Documentation Agents TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms.........................................1 SECTION 1.02. Computation of Time Periods..................................13 SECTION 1.03. Accounting and Other Terms...................................13 SECTION 1.04. References...................................................14 ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances...............................................14 SECTION 2.02. Making the A Advances........................................14 SECTION 2.03. Fees.........................................................16 SECTION 2.04. Reduction of the Commitments.................................16 SECTION 2.05. Repayment of A Advances......................................17 SECTION 2.06. Interest on A Advances.......................................17 SECTION 2.07. Additional Interest on Eurodollar Rate Advances..............17 SECTION 2.08. Interest Rate Determination..................................18 SECTION 2.09. Voluntary Conversion of A Advances...........................19 SECTION 2.10. Prepayments..................................................19 SECTION 2.11. Increased Costs..............................................20 SECTION 2.12. Increased Capital............................................21 SECTION 2.13. Illegality...................................................21 SECTION 2.14. Payments and Computations....................................22 SECTION 2.15. Taxes........................................................23 SECTION 2.16. Sharing of Payments, Etc.....................................25 SECTION 2.17. Evidence of Debt.............................................26 SECTION 2.18. Use of Proceeds..............................................26 SECTION 2.19. The B Advances...............................................26 SECTION 2.20. Increase of Commitments......................................29 SECTION 2.21. Extension of Stated Termination Date.........................31 SECTION 2.22. Replacement of Lenders.......................................32 ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of the Amendment and Restatement of this Agreement................................33 SECTION 3.02. Conditions Precedent to Each A Borrowing.....................34 SECTION 3.03. Conditions Precedent to Each B Borrowing.....................35 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower...............35
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PAGE ---- ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants........................................37 SECTION 5.02. Negative Covenants...........................................39 SECTION 5.03. Reporting Requirements.......................................42 ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. Events of Default............................................44 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action.....................................47 SECTION 7.02. Administrative Agent's Reliance, Etc.........................47 SECTION 7.03. JPMorgan and Affiliates......................................48 SECTION 7.04. Lender Credit Decision.......................................48 SECTION 7.05. Indemnification..............................................48 SECTION 7.06. Successor Administrative Agent...............................49 SECTION 7.07. Auction Administrative Agent.................................49 ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc..............................................50 SECTION 8.02. Notices, Etc.................................................50 SECTION 8.03. No Waiver; Remedies..........................................51 SECTION 8.04. Costs and Expenses; Indemnity................................51 SECTION 8.05. Right of Set-off.............................................52 SECTION 8.06. Binding Effect...............................................52 SECTION 8.07. Assignments and Participations...............................52 SECTION 8.08. Confidentiality..............................................56 SECTION 8.09. Consent to Jurisdiction......................................57 SECTION 8.10. Governing Law................................................57 SECTION 8.11. Execution in Counterparts....................................57 SECTION 8.12. WAIVER OF JURY TRIAL.........................................57 Schedule I -- Material Subsidiaries Schedule II -- Pricing Grid Schedule III -- Initial Commitments Exhibit A Form of Note Exhibit B Form of Notice of A Borrowing Exhibit C Form of Notice of B Borrowing Exhibit D Form of Assignment and Acceptance Exhibit E Form of New Lender Agreement Exhibit F Form of Commitment Increase Agreement
-ii- TABLE OF CONTENTS (continued) Exhibit G Form of Extension Request Exhibit H Form of Opinion of Vice President and General Counsel for Borrower Exhibit I Form of Opinion of Jones, Day, Reavis & Pogue, New York Counsel for Borrower Exhibit J Form of Designation Agreement -iii- LONG-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998 As Amended and Restated as of December 7, 2001 BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Initial Lenders") listed on the signature pages hereof, JPMORGAN CHASE BANK, as administrative agent and auction administrative agent for the Lenders hereunder (in such capacities, the "Administrative Agent" and "Auction Administrative Agent", respectively), CITIBANK, N.A. and FLEET NATIONAL BANK, as co-syndication agents, and BANK OF AMERICA, N.A. and TORONTO DOMINION (TEXAS), INC., as co-documentation agents, agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Lender to the Borrower as part of an A Borrowing, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "TYPE" of A Advance). "A BORROWING" means a borrowing consisting of A Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, it being understood that there may be more than one A Borrowing on a particular day. "ADMINISTRATIVE AGENT" has the meaning specified in the introduction hereto. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender. "ADVANCE" means an A Advance or a B Advance. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "CONTROL" (including the terms "CONTROLS", "CONTROLLED BY" or "UNDER COMMON CONTROL WITH") means, with respect to any Person, the possession, direct or indirect, of the power to vote 10% or more (or in the case of an "Affiliate" of any Lender, 5% or more) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. Neither a director nor an officer of the Borrower, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. 1 "AGREEMENT" means this Long-Term Revolving Credit Agreement, together with all exhibits and schedules hereto, as amended or otherwise modified from time to time pursuant to the terms hereof. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) in the case of an A Advance, such Lender's Domestic Lending Office in respect of Base Rate Advances and such Lender's Eurodollar Lending Office in respect of Eurodollar Rate Advances and (ii) in the case of a B Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such B Advance. "ARRANGER" means J.P. Morgan Securities Inc. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender (other than a Designated Bidder) and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "AUCTION ADMINISTRATIVE AGENT" has the meaning specified in the introduction hereto. "AVERAGE AGGREGATE FACILITY ADVANCES" means, for any Utilization Fee Period, the average daily outstanding amount of (i) all Advances hereunder and (ii) all "Advances" under, and as defined in, the Short-Term Revolving Credit Agreement and the Canadian Credit Agreement. "AVERAGE AGGREGATE FACILITY COMMITMENTS" means, for any Utilization Fee Period, the average daily amount of (i) all Commitments hereunder and (ii) all "Commitments" under, and as defined in, the Short-Term Revolving Credit Agreement and the Canadian Credit Agreement. "B ADVANCE" means an advance by a Lender to the Borrower as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.19. "B BORROWING" means a borrowing consisting of simultaneous B Advances to the Borrower from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Borrower under the auction bidding procedure described in Section 2.19, it being understood that there may be more than one B Borrowing on a particular day. "B REDUCTION" has the meaning specified in Section 2.01. "BASE RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) The rate of interest announced publicly by the Administrative Agent in the United States with respect to loans made in the United States, from time to time, as the Administrative Agent's base or prime rate as in effect for such day; and (ii) 0.50% per annum above the Effective Federal Funds Rate for such day. 2 "BASE RATE ADVANCE" means an A Advance which bears interest as provided in Section 2.06(a)(i). "BORROWER" has the meaning specified in the introduction hereto. "BORROWING" means an A Borrowing or a B Borrowing. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "BUSINESS ENTITY" means a partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. "CANADIAN CREDIT AGREEMENT" means the Credit Agreement dated as of March 31, 2000, as amended and restated as of December 7, 2001, among Burlington Resources Canada Ltd., as the borrower, Burlington Resources Inc., as parent, the financial institutions party thereto, JPMorgan, as administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "CAPITALIZATION" means the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries, plus (ii) the aggregate amount of Guaranties by the Borrower or its consolidated Subsidiaries, plus (iii) the sum of the preferred stock and common stockholders' equity of the Borrower, plus (iv) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997 (but excluding any such amount with respect to assets of Project Finance Subsidiaries), minus (v) to the extent otherwise included in determining the amounts computed under clause (iii) above, the aggregate investment (net of any Project Financing) of the Borrower and its consolidated Subsidiaries in Project Finance Subsidiaries. "CLAM" means CLAM Petroleum B.V., a Netherlands company, and CLAM's successors. "CLAM CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of July 25, 1985, among MaraLou Netherlands Partnership, CLAM, the banks parties thereto and Morgan, as agent for such banks, as amended and restated as of August 15, 1997, or any successor credit agreement entered into for the purpose of refinancing such Amended and Restated Credit Agreement, in each case, as amended, restated, extended or otherwise modified from time to time. "COMMITMENT" has the meaning specified in Section 2.01. "COMMITMENT EXPIRATION DATE" has the meaning specified in Section 2.21(a). "COMMITMENT INCREASE NOTICE" has the meaning specified in Section 2.20(a). 3 "COMMITMENT INCREASE AGREEMENT" has the meaning specified in Section 2.20(c). "COMMITMENT PERCENTAGE" means as to any Lender at any time, the percentage that such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "CONSOLIDATED TANGIBLE NET WORTH" means, on a consolidated basis, the excess of (i) the sum of (x) the preferred stock and common stockholders' equity of the Borrower and (y) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997, over (ii) the intangible assets of the Borrower and its consolidated Subsidiaries. "CONTINGENT GUARANTY" has the meaning specified in the definition of the term "Guaranty" contained in this Section 1.01. "CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of A Advances of one Type into A Advances of another Type pursuant to Section 2.08, 2.09 or 2.13. "DEBT" of any Person means, without duplication (i) indebtedness of such Person for borrowed money or in respect of bankers' acceptances, (ii) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion) to pay the deferred purchase price of property or services, (iii) obligations of such Person as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (iv) Overdue Reimbursement Obligations; provided, however, that where any such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties, which are not the Borrower or any of its consolidated Subsidiaries, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof, and provided, further, that the following shall not at any time constitute Debt: (1) obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not Overdue Reimbursement Obligations, (2) Project Financing, (3) the Morgan Gold Loans unless, at such time, for any reason whatsoever, (A) no royalty income shall have accrued under the Royalty Agreement dated as of December 5, 1984 between Copper Range Company, a Michigan corporation, and LL&E during the three consecutive fiscal quarters of LL&E most recently ended prior to such time or (B) any payment required to have been made to LL&E under such agreement prior to such time shall not have been paid on, or within 30 days after, the date such payment is due and (4) amounts borrowed by the Borrower and its Subsidiaries under life insurance policies issued to one or more of the foregoing and covering employees or former employees of one or more of the foregoing not in excess of the cash surrender value of such policies. 4 "DESIGNATED BIDDER" means (i) an Affiliate of a Lender or (ii) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" by Moody's or "A-1" by S&P or a comparable rating from the successor of either of them, that, in the case of either clause (i) or (ii) above, (1) is organized under the laws of the United States or any state thereof, (2) shall have become a party hereto pursuant to subsections (e), (f) and (g) of Section 8.07, and (3) is not otherwise a Lender. Notwithstanding the foregoing, each Designated Bidder shall be subject to the written consent of the Borrower and the Administrative Agent, such consent not to be unreasonably withheld. "DESIGNATION AGREEMENT" means a designation agreement entered into by the Borrower, a Lender (other than a Designated Bidder) and a Designated Bidder, and accepted by the Administrative Agent, in substantially the form of Exhibit J hereto. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" in its Administrative Questionnaire, or in the Assignment and Acceptance or New Lender Agreement pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EFFECTIVE DATE" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied (or compliance therewith shall have been waived by the Lenders), which date the Administrative Agent will promptly confirm to the Borrower and the Lenders in writing, and which date shall be no earlier than December 7, 2001. "EFFECTIVE FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 8.07, any bank or other entity approved in writing by the Borrower expressly with respect to such assignment and, except as to such an assignment by JPMorgan so long as JPMorgan is the Administrative Agent hereunder, the Administrative Agent shall be an Eligible Assignee for purposes of this Agreement, provided that neither the Administrative Agent's nor the Borrower's approval shall be unreasonably withheld, and provided further that no such approval shall be necessary if (i) the assignee is a Lender Affiliate, (ii) the assignee was a Lender immediately prior to such assignment or (iii) if an Event of Default shall then be continuing. "EQUITY INTERESTS" means any capital stock, partnership, joint venture, member or limited liability or unlimited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. 5 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. "ERISA AFFILIATE" means any Person who is a member of the Borrower's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" in its Administrative Questionnaire or in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such A Borrowing and for a period equal to such Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "EURODOLLAR RATE ADVANCE" means an A Advance which bears interest determined by reference to the Eurodollar Rate, as provided in Section 2.06(a)(ii). "EURODOLLAR RATE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labeled "LIBOR Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "EURODOLLAR RESERVE PERCENTAGE" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. 6 "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXTENSION REQUEST" means each request by the Borrower made pursuant to Section 2.21 for the Lenders to extend the Stated Termination Date, which shall contain the information in respect of such extension specified in Exhibit G and shall be delivered to the Administrative Agent in writing. "FACILITY FEE PERCENTAGE" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Facility Fee Percentage" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "GUARANTY", "GUARANTEED" and "GUARANTEEING" each means any act by which a Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Borrower or any of its consolidated Subsidiaries (excluding (i) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) any liability in connection with obligations of the Borrower or any of its consolidated Subsidiaries, including obligations under any conditional sales agreement, equipment trust financing or equipment lease, (iii) any liability or other act of the Borrower or any of its Subsidiaries under arrangements entered into in connection with the CLAM Credit Agreement, and (iv) any such act in connection with a Project Financing that either (A) guarantees to the provider of such Project Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is a direct guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (B) below) or (B) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence or existence of any event or condition other than or in addition to (1) the passage of time, (2) any Project Financing becoming due, (3) the commencement of bankruptcy, insolvency or similar proceedings by the obligor on any Project Financing or (4) the failure of the obligor on any Project Financing to satisfy a financial ratio, covenant or other similar financial measurement test, but only during such period as such act is not by its terms presently enforceable, or if so enforceable, there is not a reasonable probability that the guarantor will be called upon to perform thereunder (or to make capital contributions in lieu of performance thereunder) (any such act referred to in this clause (iv) being a "CONTINGENT GUARANTY")); provided, however, that for the purposes of this definition the liability of the Borrower or any of its Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. "INDEMNIFIED PARTY" means any or all of the Lenders, the Arranger and the Administrative Agent. 7 "INITIAL LENDERS" has the meaning specified in the introduction hereto. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same A Borrowing, the period beginning on the date of such Advance or the date of the Conversion of any Advance into such Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period for a Eurodollar Rate Advance shall be (i) one, two, three or six months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period, or (ii) subject to availability to each Lender, nine or twelve months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the fourth Business Day prior to the first day of such Interest Period, in each case as the Borrower may select; provided, however, that: (A) the duration of any Interest Period which commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date; (B) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; (C) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and (D) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (A) above, end on the last Business Day of a calendar month. "JPMORGAN" means JPMorgan Chase Bank, and its successors. "LENDER AFFILIATE" means, with respect to any Lender, (a) an Affiliate of such Lender or (b) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender (with such Lender or Affiliate having the sole right and responsibility with respect to the approval of amendments and waivers to this Agreement, the Notes and all related agreements and instruments entered into from time to time). "LENDERS" means the Initial Lenders, each bank or other financial institution that shall become a party hereto pursuant to Section 2.20, each Eligible Assignee that shall become a party hereto pursuant to Section 8.07(a), (b) and (d) and, except when used in reference to an A Advance, an A Borrowing, a Commitment or a term related to any of the foregoing, each Designated Bidder. 8 "LIEN" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Debt or any Guaranty of any Person; provided that (i) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest", farmouts, joint operating or unitization agreements, or other similar transactions in the ordinary course of business and (ii) borrowings under life insurance policies as described in clause (4) of the proviso to the definition of "Debt" shall not be deemed to create a Lien. "LL&E" means The Louisiana Land and Exploration Company, a Maryland corporation and a wholly-owned Subsidiary of the Borrower. "MAJORITY LENDERS" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the Advances held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "MARGIN STOCK" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition or operations of the Borrower and its consolidated Subsidiaries on a consolidated basis. "MATERIAL PLAN" means any Plan the assets of which exceed $50,000,000 or the liabilities of which for unfunded vested benefits determined on a plan termination basis (in accordance with Title IV of ERISA) exceed $10,000,000. "MATERIAL SUBSIDIARY" means, from time to time, any Subsidiary of the Borrower (other than a Project Financing Subsidiary) then owning assets (determined on a consolidated basis) that equal or exceed 10% of the book value of the consolidated assets of the Borrower and its consolidated Subsidiaries at such time. "MOODY'S" means Moody's Investors Service. "MORGAN" means Morgan Guaranty Trust Company of New York, and its successors. "MORGAN GOLD LOANS" means the obligations of LL&E under the respective Credit Agreements dated as of December 23, 1994 and March 31, 1995 between LL&E and Morgan, or under any additional credit agreements on substantially similar terms, in each case, as amended, restated, extended or otherwise modified from time to time, provided that the aggregate outstanding amount borrowed thereunder shall at no time exceed 35,000 ounces of gold. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. 9 "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NEW LENDER" has the meaning specified in Section 2.20(b). "NEW LENDER AGREEMENT" has the meaning specified in Section 2.20(b). "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "NOTICE OF A BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF B BORROWING" has the meaning specified in Section 2.19(a). "OBJECTING LENDERS" has the meaning specified in Section 2.21(a). "OFFERED INCREASE AMOUNT" has the meaning specified in Section 2.20(a). "ORIGINAL EFFECTIVE DATE" means February 25, 1998. "OVERDUE REIMBURSEMENT OBLIGATIONS" means with respect to any Person non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not paid on or prior to the fifth Business Day after the due date therefor. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED ASSETS" means (i) hydrocarbon or other reserves (including proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) Equity Interests in any and all Business Entities that are or become Subsidiaries of the Borrower owning assets referred to in any of the foregoing clauses. "PERMITTED LIENS" means (iii) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Borrower or any Subsidiary of the Borrower; 10 (iv) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (v) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (vi) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions which do not materially interfere with the operation, value or use of the properties affected thereby; (vii) conventional provisions contained in any contracts or agreements affecting properties under which the Borrower or a Subsidiary of the Borrower is required immediately before the expiration, termination or abandonment of a particular property to reassign to the Borrower's or a Subsidiary's predecessor in title all or a portion of the Borrower's or such Subsidiary's rights, titles and interests in and to all or a portion of such property; (viii) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Borrower or any of its Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Borrower or such Subsidiary in such grant or conveyance; (ix) any Lien consisting of (A) statutory landlord's liens under leases to which the Borrower or any Subsidiary of the Borrower is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Borrower or any of its Subsidiaries or to use such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Borrower or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (x) Liens on Equity Interests in, or Debt or other obligations of, CLAM owned by the Borrower or any of its Subsidiaries, which Liens secure Debt of CLAM; and (xi) any Lien on any assets (including Equity Interests and other obligations) securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 360 days after the acquisition or completion of development, construction or installation thereof or improvement thereto. "PERSON" means an individual, a Business Entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. 11 "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PROJECT FINANCING" means any Debt incurred to finance or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Debt or Guaranty permitting or providing for recourse against the Borrower or any of its Subsidiaries other than (i) recourse to the Equity Interests in, Debt or other obligations of, or assets of, one or more Project Financing Subsidiaries, and (ii) such recourse as exists under any Contingent Guaranty. "PROJECT FINANCING SUBSIDIARY" means any Subsidiary of the Borrower whose principal purpose is to incur Project Financing, or to become a direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or Debt or other obligations of, one or more other such Subsidiaries or Business Entities. "RE-ALLOCATION DATE" has the meaning specified in Section 2.20(e). "REFERENCE BANKS" means JPMorgan Chase Bank, Citibank, N.A. and Bank of America, N.A. "REGISTER" has the meaning specified in Section 8.07(c). "REQUIRED LENDERS" means Lenders (i) that are not Objecting Lenders with respect to any previous Extension Request and (ii) that have Commitment Percentages aggregating at least 51% of the aggregate Commitment Percentages of such non-Objecting Lenders. "S&P" means Standard and Poor's, a division of The McGraw-Hill Companies, Inc. "SHORT-TERM REVOLVING CREDIT AGREEMENT" means the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 among the Borrower, the financial institutions party thereto, JPMorgan, as administrative agent and auction administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "STATED TERMINATION DATE" means December 7, 2006, or such later date as shall be determined pursuant to the provisions of Section 2.21 with respect to non-Objecting Lenders 12 provided that if such date is not a Business Day, the Stated Termination Date shall be the next preceding Business Day. "SUBSIDIARY" means, as to any Person, any Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "TERMINATION DATE" means the earlier of (i) the Stated Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of the Borrower or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or (vii) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TYPE" has the meaning specified in the definition of "A Advance". "UTILIZATION FEE PERIOD" means any period during the term of this Agreement commencing on the Effective Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Termination Date. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.03. Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles either (i) consistent with those principles applied in the preparation of the annual 13 financial statements referred to in Section 4.01(e), or (ii) not so materially inconsistent with such principles that a covenant contained in Section 5.01 or 5.02 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (i) of this Section 1.03. "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. SECTION 1.04. References. The words "HEREOF", "HEREIN" and "HEREUNDER" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. The A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the Original Effective Date to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender's name on Schedule III hereto, or, if such Lender has entered into any Assignment and Acceptance or Commitment Increase Agreement or a New Lender Agreement, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "COMMITMENT"), provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to the extent of the aggregate amount of the B Advances then outstanding and such deemed use of the aggregate amount of such Commitments shall be applied to all the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B REDUCTION"). Each A Borrowing shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof (or, in the case of an A Borrowing of Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may make more than one Borrowing on any Business Day and may borrow, prepay pursuant to Section 2.10, and reborrow under this Section 2.01. SECTION 2.02. Making the A Advances. (a) Each A Borrowing shall be made on notice by the Borrower to the Administrative Agent (a "NOTICE OF A BORROWING") received by the Administrative Agent, (i) in the case of a proposed A Borrowing comprised of Base Rate Advances, not later than 10:00 A.M. (New York City time) on the Business Day of such proposed A Borrowing, and (ii) in the case of a proposed A Borrowing comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed A Borrowing. Each Notice of 14 A Borrowing shall be by telecopy, telefax or other teletransmission or by telephone (and if by telephone, confirmed promptly by telecopier, telefax or other teletransmission), in substantially the form of Exhibit B hereto, specifying therein the requested (w) date of such A Borrowing, (x) Type of A Advances comprising such A Borrowing, (y) aggregate amount of such A Borrowing, and (z) in the case of an A Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such A Advance. Each Lender shall, before 1:00 p.m. (New York City time) on the date of such A Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice from the Administrative Agent to the Lenders pursuant to Section 8.02, in same day funds, such Lender's ratable portion of such A Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at JPMorgan Chase Bank, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, or at any account of the Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b) Each Notice of A Borrowing shall be irrevocable and binding on the Borrower. In the case of any A Borrowing which the related Notice of A Borrowing specified is to be comprised of Eurodollar Rate Advances, if such A Advances are not made as a result of any failure to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article 3, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of such failure, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing. (c) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such A Borrowing in accordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance to the Borrower as part of such A Borrowing for purposes of this Agreement. (d) The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of 15 any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. SECTION 2.03. Fees. (a) FACILITY FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Designated Bidder) a facility fee on the average daily amount of such Lender's Commitment, whether or not used or deemed used, from the Original Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender in the case of each other Lender, in each case until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment and on the Termination Date, at a rate per annum equal to the Facility Fee Percentage in effect from time to time. (b) UTILIZATION FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (i) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 25% and less than or equal to 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.125% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period; (ii) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.25% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period; and (iii) after the Termination Date, if any Advances shall be outstanding, a utilization fee of 0.25% per annum on the daily amount of such Lender's Advances from and including the Termination Date to but excluding the date on which such Advances are repaid in full. If a utilization fee is owing in respect of (x) any Utilization Fee Period, such fee shall be payable on the last day of such Utilization Fee Period, and (y) any day after the Termination Date, such utilization fee shall be payable on demand. (c) AGENCY FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, such agency fees as may be separately agreed to in writing by the Borrower and the Administrative Agent, such fees to be in the amounts and payable on the dates as may be so agreed to. (d) ARRANGEMENT FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, an arrangement fee in the amount and payable on the date separately agreed to in writing by the Administrative Agent and the Borrower. SECTION 2.04. Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the Commitments of the Lenders (being the amount by which such Commitments exceed the aggregate outstanding principal amount of all Advances), provided that each partial reduction shall be in the aggregate amount of $20,000,000 or any whole multiple of $1,000,000 in excess thereof. 16 SECTION 2.05. Repayment of A Advances. The Borrower shall repay to each Lender on the Termination Date the aggregate principal amount of the A Advances, together with accrued interest thereon, then owing to such Lender. SECTION 2.06. Interest on A Advances. (a) ORDINARY INTEREST. The Borrower shall pay interest on the unpaid principal amount of each A Advance owing to each Lender from the date of such A Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i) BASE RATE ADVANCES. During such periods as such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). (ii) EURODOLLAR RATE ADVANCES. During such periods as such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such A Advance to the sum of the Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such A Advance is Converted into a Base Rate Advance on any date other than the last day of any Interest Period for such A Advance, on the date of such Conversion or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the applicable Lender of the amount of unpaid interest accrued on such A Advances to the date of such Conversion. (b) DEFAULT INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such A Advance immediately prior to the date on which such amount became due and (ii) from and after the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, and at all times in the case of each Base Rate Advance or B Advance, to 1% per annum above the Base Rate in effect from time to time. SECTION 2.07. Additional Interest on Eurodollar Rate Advances. If any Lender shall determine in good faith that reserves under regulations of the Board of Governors of the Federal Reserve System are required to be maintained by it in respect of, or a portion of its costs of maintaining reserves under such regulations is properly attributable to, one or more of its Eurodollar Rate Advances, the Borrower shall pay to such Lender additional interest on the unpaid principal amount of each such Eurodollar Rate Advance payable on the same day or days 17 on which interest is payable on such A Advance, at an interest rate per annum up to but not exceeding at all times during each Interest Period for such A Advance the excess of (i) the rate obtained by dividing the Eurodollar Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such Interest Period over (ii) the Eurodollar Rate for such Interest Period. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Eurodollar Rate Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least five Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Business Days prior to each date on which interest is payable on the Eurodollar Rate Advances an officer's certificate setting forth the amount to which such Lender is then entitled under this Section, which certificate shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.08. Interest Rate Determination. (a) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. (b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i) or (ii), and the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(a)(ii). (c) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any applicable A Advances, (i) the Administrative Agent shall give the Borrower and each Lender prompt notice by telephone (confirmed in writing) that the interest rate cannot be determined for such applicable A Advances, (ii) each such A Advance that is a Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such A Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and (iii) the obligations of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that as a result of conditions in or generally affecting the relevant market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders 18 of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon: (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Eurodollar Rate Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Eurodollar Rate Advances with an Interest Period of one month. (f) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such A Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such A Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be, or be elected to be Converted to, Eurodollar Rate Advances having the same Interest Period as Eurodollar Rate Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall, or upon such Conversion will, equal or exceed $20,000,000, the Borrower shall have the right to continue all such Eurodollar Rate Advances as, or to Convert all such A Advances into, Eurodollar Rate Advances having such Interest Period. SECTION 2.09. Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion, and subject to the provisions of Section 2.08, 2.11 and 2.13, Convert all A Advances of one Type comprising the same A Borrowing into A Advances of the other Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 8.04(b). Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the A Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the Interest Period for each such Eurodollar Rate Advance. SECTION 2.10. Prepayments. The Borrower may, upon (i) in the case of Eurodollar Rate Advances, at least three Business Days notice or (ii) in the case of Base Rate Advances, telephonic notice not later than 12:00 noon (New York City time) on the date of prepayment, to the Administrative Agent which specifies the proposed date and aggregate 19 principal amount of the prepayment and the Type of A Advances to be prepaid, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the A Advances comprising the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 8.04(b); provided, further, however, that the Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. SECTION 2.11. Increased Costs. (a) If, due to either (i) the introduction after the Effective Date of or any change after the Effective Date (including any change by way of imposition or increase of reserve requirements or assessments other than those referred to in the definition of "Eurodollar Reserve Percentage" contained in Section 1.01) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request issued or made after the Effective Date from or by any central bank or other governmental authority (whether or not having the force of law), in each case above other than those referred to in Section 2.12, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining, Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.11(a) (except as otherwise expressly provided above in this Section 2.11(a)). A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Borrower of any increased costs pursuant to this Section 2.11, the Borrower may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of a Eurodollar Rate Advance by the Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to the A Advances of such Lender or Lenders during such Interest Period or portion thereof, and, in lieu thereof, such A Advances shall during such Interest Period or portion thereof be Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an Affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrower under this Section 2.11, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. 20 (b) In the event that any Lender shall change its Eurodollar Lending Office and such change results (at the time of such change) in increased costs to such Lender, the Borrower shall not be liable to such Lender for such increased costs incurred by such Lender to the extent, but only to the extent, that such increased costs shall exceed the increased costs which such Lender would have incurred if the Eurodollar Lending Office of such Lender had not been so changed, but, subject to subsection (a) of this Section 2.11 and to Section 2.13, nothing herein shall require any Lender to change its Eurodollar Lending Office for any reason. SECTION 2.12. Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender and such Lender determines that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Borrower of the certificate referred to in the last sentence of this Section 2.12 by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.12 (except as otherwise expressly provided above in this Section 2.12). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Borrower and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.13. Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Applicable Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Borrower and the Administrative Agent, suspend the right of the Borrower to elect Eurodollar Rate Advances from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Convert all such Eurodollar Rate Advances of such Lender to Base Rate Advances at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Conversion shall continue until such Lender notifies the Borrower and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances has been suspended under this 21 Section 2.13, all Notices of A Borrowing specifying A Advances of such Type shall be deemed, as to such Lender, to be requests for Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an affiliate) to avoid any such illegality, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.14. Payments and Computations. (a) The Borrower shall make each payment hereunder (including under Section 2.03, 2.05, 2.06 or 2.19) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 1:00 P.M. (New York City time) without setoff, counterclaim, or any other deduction whatsoever, on the day when due in U.S. dollars to the Administrative Agent in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice to the Borrower from the Administrative Agent and agreed to by the Borrower, in same day funds. Each such payment made by the Borrower for the account of any Lender hereunder, when so made to the Administrative Agent, shall be deemed duly made for all purposes of this Agreement and the Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the bankruptcy, insolvency or reorganization of the Borrower or otherwise, such payment shall be deemed not to have been so made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Base Rate and of facility fees and utilization fees shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, or the Effective Federal Funds Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by each Lender with respect to its own Eurodollar Rate Advances, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b), by each Lender with respect to its own Advances) of an interest rate or an increased cost, loss or expense or increased capital or of illegality or taxes hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. 22 (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fees, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Effective Federal Funds Rate for such day. SECTION 2.15. Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding in the case of each Indemnified Party, (i) all taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, imposed on or determined by reference to its income or profits, and all franchise taxes, and (ii) all other taxes, levies, imposts, deductions, charges, or withholdings in effect at the time that such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, and liabilities with respect thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower (or the Administrative Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Borrower (or the Administrative Agent, as applicable) shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Borrower shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this subsection (a) (or pursuant to Section 2.15(c), except to the extent Section 2.15(c) relates to Other Taxes) to any Indemnified Party that either 23 (x) on the date such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, both (A) was not entitled to submit a U.S. Internal Revenue Service form W-8BEN (relating to such Indemnified Party, and entitling it to a complete exemption from withholding on all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement or the Advances) or a U.S. Internal Revenue Service form W-8ECI (relating to all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement and the Advances) and (B) is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code), or (y) has failed to submit any form or certificate that it was required to file or provide pursuant to subsection (d) of this Section 2.15 and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Borrower from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations under clauses (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.15. If any Indemnified Party receives a net credit or refund in respect of such Taxes or amounts so paid by the Borrower, it shall promptly notify the Borrower of such net credit or refund and shall promptly pay such net credit or refund to the Borrower, provided that the Borrower agrees to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable, is required to repay it. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (c) The Borrower will indemnify each Indemnified Party for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to provide to the Borrower any form or certificate that it was required to provide pursuant to subsection (d) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (d) On or prior to the date on which each Indemnified Party that is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) executes this Agreement or otherwise becomes an "Indemnified Party" hereunder, such Indemnified Party shall provide the Borrower and the Administrative Agent with U.S. Internal Revenue Service form W-8BEN or form W-8ECI, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Borrower indicating that all payments to be 24 made to such Indemnified Party hereunder are fully exempt from such taxes. Thereafter and from time to time, each such Indemnified Party shall submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by the Borrower to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes, including fees. Upon the request of the Borrower from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Borrower a certificate to the effect that it is such a United States person. If any Indemnified Party determines, as a result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Borrower any form or certificate that such Indemnified Party is obligated to submit pursuant to this subsection (d), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Party shall promptly notify the Borrower and the Administrative Agent of such fact. (e) Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.15 shall use its best reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and each Indemnified Party contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder and under the Notes. Section 2.16. Sharing of Payments, Etc.. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15 or 8.04(b)) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the amount of the participation purchased from such Lender as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (A) the amount of such Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights 25 of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Advance made by such Lender hereunder, including the amounts of principal and interest payable and paid to such lender from time to time hereunder. (b) The Administrative Agent shall maintain accounts and records in which it shall record (i) the amount of each Advance made hereunder, the type of Advance and, in the cases of Eurodollar Rate Advances, the relevant Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to Sections 2.17(a) and (b) shall be conclusive evidence (absent manifest error) of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Advances in accordance with the terms of this Agreement. In the event of a conflict between the records maintained by the Administrative Agent and any Lender, the records maintained by the Lender shall govern. Any Lender may request that Loans made by it be evidenced by a Note. In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and substantially in the form attached as Exhibit A hereto. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 8.07) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if such Note is a registered Note, to such payee and its registered assigns). SECTION 2.18. Use of Proceeds. Proceeds of the Advances may be used for general corporate purposes of the Borrower and its Subsidiaries, including for acquisitions and for payment of commercial paper issued by the Borrower. SECTION 2.19. The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.19 from time to time on any Business Day during the period from the Original Effective Date until the earlier of (I) the Termination Date or (II) the date falling 30 days prior to the Stated Termination Date, in the manner set forth below; provided that (x) each B Borrowing shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof and (y) following the making of each B Borrowing, the aggregate number of outstanding B Borrowings shall not exceed seven and the aggregate amount of all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction). 26 (i) The Borrower may request a B Borrowing under this Section 2.19 by delivering to the Administrative Agent, by telecopy, telefax or other teletransmission, a notice of a B Borrowing (a "NOTICE OF B BORROWING"), in substantially the form of Exhibit C hereto, specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the earlier of (x) 180 days after the date of such B Borrowing or (y) the Stated Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of B Borrowing. (ii) Each Lender may, if in its sole and absolute discretion it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amount may, subject to clause (y) of the proviso to the first sentence of this Section 2.19(a), exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such B Advance; provided that if the Administrative Agent or an Affiliate thereof in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer before 9:45 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing. (iii) The Borrower shall, in turn, before 11:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (y) three Business Days 27 before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either (A) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or (B) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in order of the lowest to highest rates of interest or margins (or, if two or more Lenders bid at the same rates of interest, and the amount of accepted offers is less than the aggregate amount of such offers, the amount to be borrowed from such Lenders as part of such B Borrowing shall be allocated among such Lenders pro rata on the basis of the maximum amount offered by such Lenders at such rates or margin in connection with such B Borrowing), in any aggregate amount up to the aggregate amount initially requested by the Borrower in the relevant Notice of B Borrowing, by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect. (iv) If the Borrower notifies the Administrative Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(B) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing, and (C) each Lender that is to make a B Advance as part of such B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article 3. Each Lender that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article 3 and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. Promptly 28 after each B Borrowing the Administrative Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. (b) Within the limits and on the conditions set forth in this Section 2.19, the Borrower may from time to time borrow under this Section 2.19, repay or prepay pursuant to subsection (c) below, and reborrow under this Section 2.19. (c) The Borrower shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a Note, on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment in the related Notice of B Borrowing and provided in the Note, if any, evidencing such B Advance), the then unpaid principal amount of such B Advance. The Borrower shall have no right to prepay any B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to Section 2.19(a)(i) and set forth in the Note, if any, evidencing such B Advance or unless the holder of such B Advance otherwise consents in writing to such prepayment. (d) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice delivered pursuant to subsection (a)(ii) above on the interest date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing and set forth in the Note, if any, evidencing such B Advance, subject to Section 2.06(b). (e) Each time that the Borrower gives a Notice of B Borrowing, the Borrower shall pay to the Administrative Agent for its own account such fee as may be agreed between the Borrower and the Administrative Agent from time to time, whether or not any B Borrowing is in fact made. (f) Following the making of each B Borrowing, the Borrower agrees that it will be in compliance with the limitations set forth in clause (y) of the proviso to the first sentence of Section 2.19(a). (g) The failure of any Lender to make the B Advance to be made by it as part of any B Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its B Advance on the date of such B Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the B Advance to be made by such other Lender on the date of any B Borrowing. If any Designated Bidder fails to make the B Advance to be made by it as part of any B Borrowing, such Designated Bidder shall not thereafter have the right to offer to make any B Advance without the prior written consent of the Borrower and the Administrative Agent. SECTION 2.20. Increase of Commitments. (a) (a) At any time after the Effective Date, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an increase of the aggregate Commitments by notice to the Administrative Agent in writing of the amount (the "OFFERED INCREASE AMOUNT") of such proposed increase (such notice, a "COMMITMENT INCREASE NOTICE"). Any such Commitment Increase Notice must offer each 29 Lender the opportunity to subscribe for its pro rata share of the increased Commitments. If any portion of the increased Commitments is not subscribed for by the Lenders, the Borrower may, in its sole discretion, but with the consent of the Administrative Agent as to any Person that is not at such time a Lender (which consent shall not be unreasonably withheld), offer to any existing Lender or to one or more additional banks or financial institutions the opportunity to participate in all or a portion of such unsubscribed portion of the increased Commitments pursuant to paragraph (b) or (c) below, as applicable. (b) Any additional bank or financial institution that the Borrower selects to offer participation in the increased Commitments, and that elects to become a party to this Agreement and obtain a Commitment, shall execute a New Lender Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit E (a "NEW LENDER AGREEMENT"), whereupon such bank or financial institution (a "NEW LENDER") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and the signature pages and Schedule III hereof shall be deemed to be amended to add the name and Commitment of such New Lender, provided that the Commitment of any such New Lender shall be in an amount not less than $10,000,000. (c) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant to this Section 2.20 shall, in each case, execute a Commitment Increase Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F (a "COMMITMENT INCREASE AGREEMENT"), whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule III hereof shall be deemed to be amended to so increase the Commitment of such Lender. (d) The effectiveness of any New Lender Agreement or Commitment Increase Agreement shall be contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrower and legal opinions of counsel to the Borrower as the Administrative Agent shall reasonably request with respect thereto, in each case, in form and substance satisfactory to the Administrative Agent. (e) If any bank or financial institution becomes a New Lender pursuant to Section 2.20(b) or any Lender's Commitment is increased pursuant to Section 2.20(c), additional A Advances made on or after the effectiveness thereof (the "RE-ALLOCATION DATE") shall be made pro rata based on the Commitment Percentages in effect on and after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Lender making an aggregate principal amount of A Advances in excess of its Commitment, in which case such excess amount will be allocated to, and made by, such New Lender and/or Lenders with such increased Commitments to the extent of, and pro rata based on, their respective Commitments), and continuations of Eurodollar Rate Advances outstanding on such Re-Allocation Date shall be effected by repayment of such Eurodollar Rate Advances on the last day of the Interest Period applicable thereto and the making of new Eurodollar Rate Advances pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Base Rate Advances, the Borrower shall make prepayments thereof and borrowings of Base Rate Advances so that, after giving effect thereto, the Base Rate Advances outstanding are held pro rata based on such new Commitment Percentages. In the event that on 30 any such Re-Allocation Date there is an unpaid principal amount of Eurodollar Rate Advances, such Eurodollar Rate Advances shall remain outstanding with the respective holders thereof until the expiration of their respective Interest Periods (unless the applicable Borrower elects to prepay any thereof in accordance with the applicable provisions of this Agreement), and interest on and repayments of such Eurodollar Rate Advances will be paid thereon to the respective Lenders holding such Eurodollar Rate Advances pro rata based on the respective principal amounts thereof outstanding. (f) Notwithstanding anything to the contrary in this Section 2.20, (i) no increase pursuant to this Section 2.20 shall be effective without the consent of the Required Lenders, (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion and (iii) the aggregate amount by which the Commitments hereunder are increased pursuant to this Section 2.20 shall not exceed $180,000,000. (g) The Borrower shall execute and deliver a Note to each new bank or other financial institution becoming a Lender that requests one. SECTION 2.21. Extension of Stated Termination Date. (a) (a) Not later than 45 days prior to the Stated Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an extension of such Stated Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit G, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, no later than 30 days after receiving from the Administrative Agent the applicable Extension Request, notify the Borrower and the Administrative Agent of its election to extend or not extend the Stated Termination Date as requested in such Extension Request. If the Required Lenders shall approve in writing the extension of the Stated Termination Date requested in such Extension Request, the Stated Termination Date shall automatically and without any further action by any Person be extended for the period specified in such Extension Request; provided that (i) each extension pursuant to this Section 2.21 shall be for a maximum of one year, (ii) the Commitment of any Lender that does not consent in writing within 30 days after receiving from the Administrative Agent the applicable Extension Request (an "OBJECTING LENDER") shall, unless earlier terminated in accordance with this Agreement, expire on the Stated Termination Date in effect on the date of such Extension Request (such Stated Termination Date, if any, referred to as the "COMMITMENT EXPIRATION DATE" with respect to such Objecting Lender) and (iii) the Borrower may exercise no more than two extensions pursuant to this Section 2.21, so that the Stated Termination Date shall not in any event extend beyond the second anniversary of the initial Stated Termination Date hereunder. If, within 30 days after receiving from the Administrative Agent the applicable Extension Request, the Required Lenders shall not approve in writing the extension of the Stated Termination Date requested in an Extension Request, the Stated Termination Date shall not be extended pursuant to such Extension Request. The Administrative Agent shall promptly notify (y) the Lenders and the Borrower of any extension of the Stated Termination Date pursuant to this Section 2.21 and (z) the Borrower of any Lender that becomes an Objecting Lender. (b) A Advances owing to any Objecting Lender on the Commitment Expiration Date, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other 31 amounts payable with respect to such Lender shall be repaid in full on or before such Commitment Expiration Date. (c) The Borrower shall have the right, so long as no Event of Default has occurred and is then continuing, upon giving notice to the Administrative Agent and the Objecting Lenders in accordance with Section 2.10, to prepay in full the A Advances of the Objecting Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable to the Objecting Lenders hereunder and, upon giving not less than three Business Days' notice to the Objecting Lenders and the Administrative Agent, to cancel the whole or part of the Commitments of the Objecting Lenders. (d) Notwithstanding the foregoing, if any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in the sole discretion and prior to the then Stated Termination Date, require such Lender (and each related Designated Bidder (as defined herein or in the Short-Term Revolving Credit Agreement or the Canadian Credit Agreement, as the case may be)) to transfer or assign, in whole or in part, without recourse (in accordance with Section 8.07), all or part of its interests, rights and obligations under this Agreement and, if the Borrower shall so determine in its sole discretion, the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the Borrower may determine in its sole discretion and specify by notice to such Lender, to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and all other amounts owed to it hereunder, including any amounts owing pursuant to Section 8.04(b), and, if the Borrower shall have so determined as specified above, the "Advances" made by it under, and as defined in, the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be and all other amounts owed to it thereunder, including any amounts owing pursuant to the provision of the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be, comparable to Section 8.04(b) hereof) and any amounts that would be owing under such Section (or comparable provision) if such Advances and "Advances" (as so defined) were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee that becomes a Lender as a result of such an assignment made pursuant to this paragraph (d) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. SECTION 2.22. Replacement of Lenders. If any Lender requests compensation under Sections 2.07, 2.11 or 2.12 or if the Borrower is required to pay any additional amount to any Lender or any taxing authority or other authority for the account of any Lender pursuant to Section 2.15, or if any Lender suspends the right of the Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.13, or if any Lender defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 8.07), 32 all its interests, rights and obligations under this Agreement (other than any outstanding B Advances held by it) and, if the Borrower shall so determine in its sole discretion, the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the Borrower may determine in its sole discretion and specify by notice to such Lender (other than "B Advances" under, and as defined in, the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than B Advances) hereunder and, if the Borrower shall have so determined as specified above, its "Advances" (other than "B Advances") (each under and as defined in the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be), and all accrued interest thereon, accrued fees, accrued costs in connection with compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, if any, and all other amounts (other than B Advances) payable to it hereunder and, if the Borrower shall have so determined as specified above, under the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement, as the case may be, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. Conditions Precedent to Effectiveness of the Amendment and Restatement of this Agreement. The amendment and restatement of this Agreement as of the Effective Date shall become effective when (i) it shall have been executed by the Borrower and the Administrative Agent, (ii) the Administrative Agent and the Borrower either shall have been notified by each Initial Lender that such Initial Lender has executed it or shall have received a counterpart of this Agreement executed by such Initial Lender, and (iii) the Administrative Agent shall have received the following, each dated the date of delivery thereof unless otherwise specified below (which date shall be selected by the Borrower and be the same for all documents and all Lenders), in form and substance satisfactory to the Administrative Agent and (except for the Notes, if any) in sufficient copies for each Lender: (a) the Notes, to the order of the Lenders requesting Notes, respectively; (b) certified copies of the resolutions of the Board of Directors of the Borrower approving the borrowings contemplated hereby and authorizing the execution of this Agreement and the Notes, if any, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes, if any; 33 (c) a certificate of the Secretary or an Assistant Secretary of the Borrower (i) certifying names and true signatures of officers of the Borrower authorized to sign this Agreement and the Notes, if any, and the other documents to be delivered hereunder and (ii) if the Effective Date is other than the date of this amendment and restatement, certifying that the representations and warranties contained in Section 4.01 are true and correct as of the Effective Date; (d) a favorable opinion of the Borrower's Vice President and General Counsel, in substantially the form of Exhibit H hereto; (e) a favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, in substantially the form of Exhibit I hereto; and (f) evidence satisfactory to the Administrative Agent of payment of any loans outstanding under this Agreement immediately prior to the effectiveness of such amendment and restatement, together with all accrued interest and fees thereunder. The Borrower and the Initial Lenders agree that upon the Effective Date the "Commitments" of the Initial Lenders shall be as set forth on Schedule III hereof under the caption "Commitments" and the Borrower and the Initial Lenders (for this purpose constituting the "Majority Lenders" under this Agreement immediately prior to such effectiveness) further agree that the Commitments of each Lender not continuing as an Initial Lender upon such effectiveness shall terminate automatically upon the Effective Date without further action by any party. SECTION 3.02. Conditions Precedent to Each A Borrowing. The obligation of each Lender to make an A Advance (including the initial A Advance) on the occasion of any A Borrowing shall be subject to the further conditions precedent that on or before the date of such A Borrowing this Agreement shall have become effective pursuant to Section 3.01 and that on the date of such A Borrowing, before and immediately after giving effect to such A Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of A Borrowing and the acceptance by the Borrower of the proceeds of such A Borrowing shall constitute its representation and warranty that on and as of the date of such A Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such A Borrowing) and under other agreements or facilities or evidenced by other instruments or 34 documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. SECTION 3.03. Conditions Precedent to Each B Borrowing. The obligation of each Lender which is to make a B Advance on the occasion of any B Borrowing (including the initial B Borrowing) shall be subject to the further conditions precedent that (i) at or before the time required by paragraph (iii) of Section 2.19(a), the Administrative Agent shall have received the written confirmatory notice of such B Borrowing contemplated by such paragraph, (ii) on or before the date of such B Borrowing this Agreement shall have become effective pursuant to Section 3.01, and (iii) on the date of such B Borrowing, before and immediately after giving effect to such B Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute its representation and warranty that on and as of the date of such B Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such B Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such B Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. The Borrower and each Material Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. Each Subsidiary which is, on and as of the Original Effective Date, a Material Subsidiary is listed on Schedule I hereto. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes, if any, are within the Borrower's corporate powers, have been duly authorized by all 35 necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes, if any, which has not been duly made or obtained, except those (i) required in the ordinary course to comply with ongoing covenant obligations of the Borrower hereunder the performance of which is not yet due and (ii) that will, in the ordinary course of business in accordance with this Agreement, be duly made or obtained on or prior to the time or times the performance of such obligations shall be due. (d) This Agreement constitutes, and the Notes (if and when delivered hereunder) shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (e) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2000 and the related consolidated statements of income and cash flow for the fiscal year then ended, reported on by PricewaterhouseCoopers LLC, independent public accountants, and the consolidated balance sheet of the Borrower and its consolidated subsidiaries as at September 30, 2001 and the related consolidated statements of income and cash flow for the nine-month period then ended, certified by the chief financial officer of the Borrower, copies of each of which have been furnished to the Administrative Agent and the Initial Lenders, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at December 31, 2000, and September 30, 2001, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 2001, statements to normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied. From September 30, 2001 to and including the Effective Date there has been no material adverse change in such condition or results of operations. (f) As at the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the Borrower threatened, against or involving the Borrower or any Material Subsidiary in any court, or before any arbitrator of any kind, or before or by any governmental body, which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) would have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of this Agreement or the Notes, if any. (g) The Borrower and each consolidated Subsidiary have duly filed all tax returns required to be filed, and duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to file or pay which, as applicable, would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Borrower or the appropriate Subsidiary. 36 (h) Except to the extent permitted pursuant to Section 5.02(e), neither the Borrower nor any Material Subsidiary is subject to any contractual restrictions which limit the amount of dividends payable by any Subsidiary. (i) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 6.01(g). (j) Neither the Borrower nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan that, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), exceeds 5% of the Consolidated Tangible Net Worth of the Borrower. (k) Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization or termination would be the occurrence of an Event of Default under Section 6.01(i). (l) The Borrower is not an "investment company" or a "company" controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) The Borrower is not a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. All representations and warranties made by the Borrower herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes, if any. ARTICLE 5 COVENANTS OF THE BORROWER SECTION 5.01. Affirmative Covenants. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each Material Subsidiary to preserve and maintain, its existence, rights (organizational and statutory) and material franchises, except as otherwise contemplated or permitted by Section 5.02(c) or 5.02(d); provided, that any Material Subsidiary may change its form of organization to a partnership or other form of Business Entity. 37 (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (including all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) VISITATION RIGHTS. At such reasonable times and intervals as the Administrative Agent or any of the Lenders (other than Designated Bidders) may desire, permit the Administrative Agent or any of the Lenders (other than Designated Bidders) to visit the Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of the Borrower and any of its Subsidiaries with officers of the Borrower and independent certified public accountants of the Borrower and any of its Subsidiaries, provided that if an Event of Default, or an event which with the giving of notice or the passage of time, or both, would become an Event of Default, has occurred and is continuing, the Administrative Agent or any Lender may, in addition to the other provisions of this subsection (c) and at such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, visit and inspect, under guidance of officers of the Borrower, any properties significant to the consolidated operations of the Borrower and its Subsidiaries, and to examine the books and records of account (other than with respect to any mineral reserve information that the Borrower determines to be confidential, except, during the continuation of an Event of Default, if such Lenders shall have entered into a confidentiality agreement with respect to such information satisfactory in form and substance to the Borrower) of the Borrower and any of its Subsidiaries and to discuss the affairs, finances and accounts of any of the Borrower's Subsidiaries with any of the officers of such Subsidiary. (d) BOOKS AND RECORDS. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Subsidiary in accordance with generally accepted accounting principles either (i) consistently applied or (ii) applied in a changed manner that does not, under generally accepted accounting principles or public reporting requirements applicable to the Borrower, either require disclosure in the consolidated financial statements of the Borrower and its consolidated Subsidiaries or require the consent of the accountants which (as required by Section 5.03(b)) report on such financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.03(b)) report on the consolidated financial statements of the Borrower and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred, provided that if any change referred to in clause (ii) or (iii) above would not meet the standard set forth in clause (i) or (ii) of Section 1.03, the Administrative Agent, the Lenders and the Borrower agree to amend the covenants contained in Section 5.01 and 5.02 so that the relative protection afforded thereby to the Lenders and the relative flexibility afforded thereby to the Borrower will in substance be retained after such amendment, provided, however, that until such amendment becomes effective hereunder, the covenants as set forth herein shall remain in full force and effect and those accounting principles applicable to the Borrower and its consolidated 38 Subsidiaries which do meet the standards set forth in clause (i) or (ii) of Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants. (e) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause each Material Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) MAINTENANCE OF INSURANCE. Maintain, and cause each Material Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. SECTION 5.02. Negative Covenants. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, unless the Majority Lenders shall otherwise consent in writing: (a) LIENS, ETC. (i) Create, assume or suffer to exist, or permit any Material Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the Equity Interests in any Material Subsidiary, whether owned on the Original Effective Date or thereafter acquired, or (ii) create or assume, or permit any Material Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of the Borrower and its consolidated Subsidiaries taken as a whole securing the payment of Debt and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) exceeding the greater of (x) $250,000,000 and (y) 10% of Consolidated Tangible Net Worth as at the date of such creation or assumption; provided, however, that this subsection (a) shall not apply to: (A) Liens on assets acquired by the Borrower or any of its Subsidiaries after the Original Effective Date to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (B) Liens on Equity Interests acquired after the Original Effective Date in a Business Entity which has become or becomes a Subsidiary of the Borrower, or on assets of any such Business Entity, to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (C) Liens on Margin Stock; (D) Liens on the Equity Interests in, or Debt or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, Debt or other obligations of any Business Entity which are owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; 39 (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Debt or Guaranty secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Debt or Guaranty is not increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) and such Debt or Guaranty is not secured by any additional assets that would not have been permitted by this Section to secure the Debt or Guaranty refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and property evidencing or embodying, or constituting rights or other general intangibles relating to, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.02. (b) DEBT, ETC. Create, assume or suffer to exist, or permit any of its consolidated Subsidiaries to create, assume or suffer to exist, any Debt or any Guaranty unless, immediately after giving effect to such Debt or Guaranty and the receipt and application of any proceeds thereof or value received in connection therewith, (1) the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries plus (ii) the aggregate amount (determined on a consolidated basis) of Guaranties by the Borrower and its consolidated Subsidiaries is less than 60% of Capitalization, provided that Debt for borrowed money either maturing within one year and evidenced by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement or the Short-Term Revolving Credit Agreement or the Canadian Credit Agreement or any replacement therefor), shall not exceed the sum of the unused commitments under the Canadian Credit Agreement and the aggregate of the Borrower's unused bank lines of credit and unused credit available to the Borrower under financing arrangements with banks or other financial institutions; and (2) with respect to any such Debt created or assumed by a consolidated Subsidiary that is either a Subsidiary of the Borrower as of the Original Effective Date or a Subsidiary of the Borrower acquired or created after the Original Effective Date and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, the aggregate amount of Debt of the consolidated Subsidiaries of the Borrower referred to above in this paragraph (2) owing to Persons other than the Borrower and its consolidated Subsidiaries is less than the greater of (i) 40 $500,000,000 (exclusive of public Debt of LL&E existing at the time LL&E became a Subsidiary, the principal amount of which at such time was approximately $400,000,000, and any refinancing of such Debt, in a principal amount not to exceed the principal amount refinanced) and (ii) 30% of Consolidated Tangible Net Worth as at the date of incurrence or creation of such Debt. (c) SALE, ETC. OF ASSETS. Sell, lease or otherwise transfer, or permit any Material Subsidiary to sell, lease or otherwise transfer (in either case, whether in one transaction or in a series of transactions, and except, in either case, to the Borrower or an entity which after giving effect to such transfer will be or become a Material Subsidiary in which the Borrower's direct or indirect Equity Interests will be at least as great as its direct or indirect Equity Interests in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, notwithstanding the foregoing, the Borrower or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, so long as (A) such Permitted Assets are sold, leased or otherwise transferred in exchange for other Permitted Assets and/or (B) the proceeds from such sale, lease or other transfer, or an amount equal to the proceeds thereof, are (x) reinvested within one year from the date of receipt thereof in Permitted Assets and/or the development of Permitted Assets and/or (y) used to repay Debt the proceeds of which were or are being used for investment in, and/or the development of, Permitted Assets; provided further that, no such sale, lease or other transfer shall be permitted by the foregoing proviso unless either (1) after giving effect to such sale, lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) the Borrower or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. (d) MERGERS, ETC. Merge, amalgamate or consolidate with any Person, or permit any Material Subsidiary to merge, amalgamate or consolidate with any Person, except that: (i) any Subsidiary may merge, amalgamate or consolidate with (or liquidate into) any other Subsidiary or may merge, amalgamate or consolidate with (or liquidate into) the Borrower, provided that (A) if such Subsidiary merges, amalgamates or consolidates with (or liquidates into) the Borrower, either the survivor or successor is the Borrower or such successor or surviving Business Entity is organized and existing under the laws of the United States and expressly assumes the obligations of the Borrower hereunder and under the Notes, (B) if any such Subsidiary merges, amalgamates or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one or more Business Entities that are Subsidiaries of the Borrower are the surviving or successor Business Entity(ies) and, if such Subsidiary is not directly or indirectly wholly-owned by the Borrower, such merger, amalgamation or consolidation is on an arm's length basis and (C) as a result of such merger, amalgamation or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and 41 (ii) the Borrower or any Material Subsidiary may merge, amalgamate or consolidate with any other Business Entity (that is, in addition to the Borrower or any other Subsidiary), provided that (A) if the Borrower merges, amalgamates or consolidates with any such other Business Entity(ies), the survivor or successor Business Entity is the Borrower, (B) if any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, each surviving or successor Business Entity is a directly or indirectly wholly-owned Subsidiary, and (C) if either the Borrower or any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, after giving effect to such merger, amalgamation or consolidation no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. (e) DIVIDEND RESTRICTIONS. Create, or consent or agree to, or permit any of its Material Subsidiaries existing on the Original Effective Date or any of its Subsidiaries thereafter created or acquired and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, to create, or consent or agree to, any restrictions, contained in any agreement or instrument relating to or evidencing Debt, on any such Subsidiary's ability to pay dividends or to make advances to the Borrower or any Subsidiary of the Borrower; provided, however, that this subsection (e) shall not apply to any such restrictions (including any extensions of the term of any thereof (by amendment, or continuation thereof in any refinancing of the Debt to which such restriction relates, or otherwise)) applicable to the Equity Interests in any Subsidiary of the Borrower the Equity Interests in which are acquired by the Borrower after the Original Effective Date and which restrictions are existing at the time such Subsidiary first becomes a Subsidiary of the Borrower and are not placed thereon by or with the consent of the Borrower in contemplation of such acquisition by the Borrower. SECTION 5.03. Reporting Requirements. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: (a) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of such quarter, and consolidated statements of income and cash flow of the Borrower and its consolidated Subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as to fairness and utilization of generally accepted accounting principles by the chief financial officer of the Borrower and accompanied by a certificate of such officer stating (i) that such statements of income and cash flow and such balance sheet have been prepared in accordance with generally accepted accounting principles, (ii) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (iii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of 42 Section 5.02, and (iv) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (b) within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and its consolidated Subsidiaries containing financial statements for such year reported on by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with generally accepted accounting principles and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; (c) within 120 days after the close of each of the Borrower's fiscal years, a certificate of the chief financial officer of the Borrower stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in subsection (b) of Section 5.02 and (iii) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (d) promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Borrower or any Material Subsidiary shall have sent to its public Equity Interest holders; (e) promptly upon their becoming publicly available, all regular and periodic financial reports and registration statements which the Borrower or any Material Subsidiary shall file with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registration statements of securities for selling security holders; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving the Borrower or any Material Subsidiary, except any litigation or proceeding which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Borrower obtains knowledge of the occurrence of any Event of Default which is continuing or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of the Borrower of the steps being taken by the Borrower or the appropriate Subsidiary to cure the effect of such event; 43 (h) as soon as practicable and in any event (i) within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Borrower or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to subsections (a) and (b) of this Section 5.03 shall contain comparative information which conforms to the presentation required in Form 10-Q and Form 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance within two Business Days after the same shall be due, or any interest on any Advance or any other amount payable hereunder within five Business Days after the same shall be due; or 44 (b) Any representation or warranty made or deemed made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or (d) The Borrower or any Material Subsidiary shall fail to pay any Debt or Guaranty (excluding any Advances) of the Borrower or such Subsidiary (as the case may be) in an aggregate principal amount in excess of the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate the maturity of such Debt; provided that, notwithstanding any provision contained in this subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt referred to in this subsection (d), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds thereof would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt extended pursuant thereto and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration, or the provisions hereof relating thereto, this Agreement or any Advance hereunder would otherwise be subject to the margin requirements or any other restriction under Regulation U issued by the Board of Governors of the Federal Reserve System, then such breach, default, event of default or acceleration shall not constitute a default or Event of Default under this subsection (d); or (e) (i) The Borrower or any Material Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by the Borrower or any such Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Borrower or any such Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions referred to above sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Borrower or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or 45 (f) Any judgment or order for the payment of money in excess the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time shall be rendered against the Borrower or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or (g) Any Termination Event with respect to a Material Plan shall have occurred and, 30 days after notice thereof shall have been given to the Borrower by the Lender, (i) such Termination Event shall still exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto), in each case in respect of which the Borrower or any ERISA Affiliate has liability, is equal to or greater than $50,000,000; or (h) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $50,000,000; or (i) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the Original Effective Date by an amount exceeding $50,000,000; or (j) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of the Borrower in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than the Borrower, a Subsidiary of the Borrower or any employee benefit plan maintained for employees of the Borrower and/or any of its Subsidiaries or the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess of 50% of the outstanding capital stock of the Borrower entitled to vote in elections for directors of the Borrower and (ii) at any time before the later of (x) six months after the completion of such tender offer and (y) the next annual meeting of the shareholders of the Borrower following the completion of such tender offer more than half of the directors of the Borrower consists of individuals who (a) were not directors before the completion of such tender offer and (b) were 46 not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) Any "Event of Default" as defined in the Short-Term Revolving Credit Agreement or the Canadian Credit Agreement shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that if an Event of Default under subsection (e) of this Section 6.01 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including enforcement of this Agreement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Nothing in this Agreement shall impose upon any Co-Syndication Agent or Co-Documentation Agent, in its capacity as such, any duty or liability whatsoever. SECTION 7.02. Administrative Agent's Reliance, Etc.. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as 47 assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. JPMorgan and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, JPMorgan shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include JPMorgan in its individual capacity. JPMorgan and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any Subsidiary, all as if JPMorgan were not the Administrative Agent and without any duty to account therefor to the other Lenders. SECTION 7.04. Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. Indemnification. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE ADVANCES THEN HELD BY EACH OF THEM (OR IF NO ADVANCES ARE AT THE TIME OUTSTANDING OR IF ANY ADVANCES ARE HELD BY PERSONS WHICH ARE NOT LENDERS, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS OR THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS IMMEDIATELY PRIOR TO TERMINATION IF THE COMMITMENTS HAVE BEEN TERMINATED), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR 48 ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, OR ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILFUL MISCONDUCT. Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Administrative Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any of the Notes or any other instrument or document furnished pursuant hereto or in connection herewith to the extent that the Administrative Agent acts in its capacity as Administrative Agent and is not reimbursed for such expenses by the Borrower. SECTION 7.06. Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then such retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized, or authorized to conduct a banking business, under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. SECTION 7.07. Auction Administrative Agent. The Administrative Agent shall until such time as it so notifies the Borrower and the Lenders discharge its duties under Section 2.19 through the Auction Administrative Agent and all references to the "Administrative Agent" or to JPMorgan relating to such duties or made in this Article 7 shall be deemed to also refer to the Auction Administrative Agent and any Affiliate of JPMorgan serving in such 49 capacity. All payments to be made to or by the Auction Administrative Agent shall be made through the Administrative Agent. ARTICLE 8 MISCELLANEOUS SECTION 8.01. Amendments, Etc.. An amendment or waiver of any provision of this Agreement or the Notes, or a consent to any departure by the Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but only if, it shall be in writing and signed by the Majority Lenders or, where so specified, the Required Lenders (except any amendment to give effect to increased Commitments and New Lenders, as contemplated by Section 2.20), and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Bidders), be effective to: (a) waive any of the conditions specified in Article 3, (b) except as contemplated by Section 2.20, increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (d) except as contemplated by Section 2.21, postpone any date fixed for any payment of principal of, or interest on, the Advances or any facility fees or utilization fee hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, which shall be required for the Lenders or any of them to take any action under this Agreement, or (f) amend this Section 8.01; and, provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note. SECTION 8.02. Notices, Etc.. Except as otherwise provided in Section 2.02(a) or 2.10(ii), all notices and other communications provided for hereunder shall be in writing and mailed by certified mail, return receipt requested and postage prepaid, or telecopied, telefaxed or otherwise teletransmitted, or delivered, if to the Borrower, at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Telefax: (713) 624-9627; if to any Initial Lender, at its Domestic Lending Office set forth in such Initial Lender's Administrative Questionnaire; if to any other Lender at its Domestic Lending Office specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender or at the address for notices specified in the Designation Agreement pursuant to which it became a party hereto; and if to the Administrative Agent, at JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna, Telefax: (212) 552-3295, with a copy to JPMorgan Chase Bank, at 600 Travis Street, 20th Floor, Houston, TX 77002, Attention: Russell Johnson, Telefax: (713) 216-8870; and if to the Auction Administrative Agent, at JPMorgan Chase Bank, Agency Services, at One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Christopher Consomer, Telefax: (212) 552-5627; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective, (a) in the case of any notice or communication given by certified mail, when receipted for, (b) in the case of any notice or communication given by telecopy, telefax or other teletransmission, when confirmed by appropriate answerback, in each case addressed as aforesaid, and (c) in the case of any notice or communication delivered by hand or courier, when so delivered, except that notices 50 and communications to the Administrative Agent pursuant to Article 2 or 7 shall not be effective until received by the Administrative Agent. A notice received by the Administrative Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the Borrower and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. SECTION 8.03. No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8.04. Costs and Expenses; Indemnity. (a) The Borrower agrees to pay on demand (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate and (iii) all out-of-pocket costs and expenses, if any, of the Administrative Agent and the Lenders (including reasonable counsel fees and expenses and the allocated costs of in-house counsel), in connection with the enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder and thereunder. (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.10 or a Conversion pursuant to Section 2.08(f) or Section 2.09 or due to acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason attributable to the Borrower, or if the Borrower shall fail to borrow, convert, continue or prepay any Eurodollar Rate Advance on the date specified in any notice delivered pursuant hereto, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) THE BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER FROM 51 AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO ANY ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE EQUITY INTERESTS IN, OR SUBSTANTIALLY ALL THE ASSETS OF, ANY PERSON OR ANY USE OR PROPOSED USE OF THE ADVANCES BY THE BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS, OR BY REASON OF ANY USE OR DISCLOSURE OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR USE OR PROPOSED USE OF THE PROCEEDS BY THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS). SECTION 8.05. Right of Set-off. Upon the declaration of the Advances as due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 8.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. SECTION 8.06. Binding Effect. This Agreement shall become effective in accordance with the provisions of Section 3.01, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of all of the Lenders. SECTION 8.07. Assignments and Participations. (a) Each Lender (other than a Designated Bidder) may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, the A Advances owing to it and the Note or Notes held by it); provided, however, that each such assignment shall be to an Eligible Assignee, and the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except in the case of an assignment to a Lender Affiliate, a 52 processing and recordation fee of $3,000, and shall send to the Borrower an executed counterpart of such Assignment and Acceptance, and provided further, however, that (i) the sum of (x) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment) plus (y) the amount of the "Commitment" of the assigning Lender under the Short-Term Revolving Credit Agreement and/or the Canadian Credit Agreement contemporaneously assigned by such assigning Lender to such assignee as contemplated by clause (iii) of this sentence must be equal to or greater than $25,000,000, or if less, the entire amount of such assigning Lender's "Commitment" (unless the Borrower and the Administrative Agent shall otherwise consent, which consent may be withheld for any reason) and must be an integral multiple of $1,000,000, (ii) any assignment to a Lender Affiliate will not relieve the assigning Lender of its obligation to make Advances hereunder timely in accordance with the terms hereof in the event such Lender Affiliate shall fail to do so and (iii) except in the case of an assignment to a Lender Affiliate or as required by the Borrower pursuant Section 2.21(d) or 2.22, each such assignment shall be of a constant, and not a varying, percentage of all such Lender's rights and obligations under this Agreement (other than any right to make B Advances, any B Advances or any Notes) and the same constant percentage of all such Lender's rights and obligations, if any, under the Short-Term Revolving Credit Agreement and the Canadian Credit Agreement unless the Short-Term Revolving Credit Agreement or the Canadian Agreement, as the case may be, has been terminated, shall be contemporaneously assigned by such assigning Lender to the same assignee pursuant to Section 8.07(a) of the Short-Term Revolving Credit Agreement and Section 9.07(a) of the Canadian Credit Agreement. Upon the execution, delivery, acceptance and recording of each Assignment and Acceptance by the parties thereto, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) except as otherwise provided in clause (ii) above, the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, except in the circumstances contemplated by clause (ii) above, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, provided, however, that such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04). (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this 53 Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance, each Designation Agreement, each New Lender Agreement and each Commitment Increase Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and, with respect to Lenders other than Designated Bidders, the Commitment of, and principal amount of the A Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for any surrendered Note or Notes a new Note to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender. Any such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (e) Each Lender (other than a Designated Bidder) may designate one or more banks or other entities to have a right to make B Advances as a Lender pursuant to Section 2.19; provided that (i) such Lender shall have obtained the written consent of the Administrative Agent and the Borrower, such consent not to be unreasonably withheld, (ii) no such Lender shall be entitled to make more than two such designations, (iii) each such Lender making one or more of such designations shall retain the right to make B Advances as a Lender pursuant to Section 2.19, (iv) each such designation shall be to a Designated Bidder and (v) the parties to each such designation shall execute and deliver to the Administrative Agent, for its acceptance and 54 recording in the Register, a Designation Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Designation Agreement, the designee thereunder shall be a party hereto with a right to make B Advances as a Lender pursuant to Section 2.19 and the obligations related thereto. (f) By executing and delivering a Designation Agreement, the Lender making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Designation Agreement; (iv) such designee will, independently and without reliance upon the Administrative Agent, such designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi) such designee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (g) Upon its receipt of a Designation Agreement executed by a designating Lender and a designee representing that it is a Designated Bidder, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit J hereto, (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (h) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such 55 Lender's Advances or any facility fees or utilization fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Advances, or (D) consent to the assignment or the transfer by the Borrower of any of its rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (i) Any Lender may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree in writing for the benefit of the Borrower to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender in a manner consistent with Section 8.08. (j) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it) and the Notes, if any, issued to it hereunder in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. SECTION 8.08. Confidentiality. Each Lender and the Administrative Agent (each, a "PARTY") agrees that it will use its best reasonable efforts not to disclose, without the prior consent of the Borrower (other than to its, or its Affiliates, employees, auditors, accountants, counsel or other representatives, whether existing at the Original Effective Date or any subsequent time), any information with respect to the Borrower which is furnished pursuant to this Agreement, provided that any party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such party or to the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee, designee or participant in connection with any contemplated assignment of any rights or obligations hereunder, any designation or any sale of any participation therein, by such party pursuant to Section 8.07, if such prospective assignee, designee or participant, as the case may be, executes an agreement with the Borrower containing provisions substantially similar to those contained in this Section 8.08; provided, however, that the Borrower acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. 56 SECTION 8.09. Consent to Jurisdiction. (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by the Administrative Agent, the Arranger, any Lender or the holder of any Note in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Agreement or the Notes (such claims and causes of action, collectively, being "PERMITTED CLAIMS"), and the Borrower hereby irrevocably agrees that all Permitted Claims may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Service of the summons and complaint and any other process which may be served by the Administrative Agent, the Arranger, any Lender or the holder of any Note on the Borrower in any such action or proceeding in any aforementioned court in respect of Permitted Claims may be made by delivering separate copies of such process to the Borrower by courier and by certified mail (return receipt requested), fees and postage prepaid at the Borrower's address specified pursuant to Section 8.02, to the attention of each of the Treasurer and the Executive Vice President, Law. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 8.09 (i) shall affect the right of the Arranger, the Borrower, any Lender, the holder of any Note or the Administrative Agent to serve legal process in any other manner permitted by law or affect any right otherwise existing of the Borrower, any Lender, the Arranger, the holder of any Note or the Administrative Agent to bring any action or proceeding in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. SECTION 8.10. Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 8.11. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. Delivery of an executed counterpart by facsimile shall be as effective as delivery of a manually executed original counterpart. SECTION 8.12. WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. 57 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES INC. By: ------------------------------------ Name: Title: JPMORGAN CHASE BANK, in its individual capacity and as Administrative Agent and Auction Administrative Agent, By: ----------------------------- Name: Title: Commitments The Initial Lenders Total Commitments $ 600,000,000 SCHEDULE I MATERIAL SUBSIDIARIES Burlington Resources Canada Ltd. Burlington Resources Canada Corporation Burlington Acquisition Corporation* Canadian Hunter Exploration Ltd. The Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company LP BROG GP Inc. BROG LP Inc. *until such time as the company amalgamates with Canadian Hunter Exploration Ltd. SCHEDULE II PRICING GRID
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI ------- -------- --------- -------- ------- -------- Basis for Pricing If the If the If the If the If the If Levels I-V do Borrower's Borrower's Borrower's Borrower's Borrower's not exist. senior senior senior unsecured senior unsecured senior unsecured unsecured long term debt long term debt unsecured long long term long term is rated at is rated at term debt is debt is debt is rated least BBB+ by least BBB by S&P rated at least rated at at least A- S&P or Baa1 by or Baa2 by BBB- by S&P or least A by by S&P or A3 Moody's. Moody's. Baa3 by Moody's. S&P or A2 by by Moody's. Moody's. Facility Fee Percentage .080% .100% .125% .150% .200% .250% LIBOR Applicable Margin .270% .300% .375% .450% .650% .750%
The applicable pricing level shall change on the date of any relevant change in the rating by S&P or Moody's of any public long term senior unsecured debt securities of the Borrower. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable pricing level is the higher of the two (e.g., A-/Baa1 results in Level II pricing), provided that in the event the split is more than one full category, the average (or the higher of two intermediate ratings) shall be used (e.g., A-/Baa2 results in Level III pricing, as does A-/Baa3). EXHIBIT A FORM OF NOTE New York, New York [Date] For value received, Burlington Resources Inc., a Delaware corporation (the "BORROWER"), promises to pay to the order of ______________________ (the "LENDER"), for the account of its Applicable Lending Office, the unpaid principal amount of each Advance made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Advance on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna. All Advances made by the Lender, the respective types thereof and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make (or any error in making) any such recordation or endorsement shall not affect the Borrower's obligations hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Long-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001, among JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents (as the same may be amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. BURLINGTON RESOURCES INC. By: -------------------------- Name: Title: ADVANCES AND PAYMENTS OF PRINCIPAL
AMOUNT OF AMOUNT OF DATE ADVANCE TYPE OF ADVANCE PRINCIPAL REPAID NOTATION MADE BY - --------- --------- --------------- ---------------- ----------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
EXHIBIT B FORM OF NOTICE OF A BORROWING Date ___________ JPMorgan Chase Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Muniram Appanna Tel: (212) 552-7943 Fax: (212) 552-3295 copy to: JPMorgan Chase Bank, as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Long-Term Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. Pursuant to Section 2.02(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an A Borrowing under the Credit Agreement (the "PROPOSED A BORROWING"), and in that connection sets forth below the information relating to such A Borrowing: 1. The Business Day of the Proposed A Borrowing is _________ __. 2. The Type of A Advances comprising the Proposed A Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. 3. The aggregate amount of the Proposed A Borrowing is $_______. 4(1) The Interest Period for each Eurodollar Rate Advance made as part of the Proposed A Borrowing is [__] month[s]. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By: ------------------------- Name: Title: - ---------- (1) To be used for Eurodollar Rate Advances only. EXHIBIT C FORM OF NOTICE OF B BORROWING Date ___________ JPMorgan Chase Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Christopher Consomer Tel: (212) 552-7259 Fax: (212) 552-5627 copy to: JPMorgan Chase Bank, as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Long-Term Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. Pursuant to Section 2.19 of the Credit Agreement, the Borrower hereby gives you notice of and requests a B Borrowing under the Credit Agreement (the "PROPOSED B BORROWING"), and in that connection sets forth the terms on which such B Borrowing is requested to be made: 1. Date of B Borrowing ---------------------- 2. Proposed Amount of B Borrowing ---------------------- 3. Maturity Date ---------------------- 4. Interest Rate Basis ---------------------- 5. Interest Payment Date(s) ---------------------- 6. [Other Terms] ---------------------- The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (b) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By: -------------------------- Name: Title: EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE Dated: _________, 20_ Reference is made to the Long-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows: Section (A). The Assignor hereby sells and assigns to the Assignee, without recourse, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of B Advances) which represents the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances), including such interest in the Assignor's Commitment, the A Advances owing to the Assignor, and the Note[s] held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the A Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1 hereof. Section (B). The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) represents and warrants that it has made or is contemporaneously making herewith, to the Assignee as contemplated by Section 8.07 of the Credit Agreement, an assignment under the Short-Term Revolving Credit Agreement, unless the Short-Term Revolving Credit Agreement has been terminated; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; [and (v) requests that the Administrative Agent arrange for the issuance of a new Note or Notes payable to the order of the Assignee]. Section (C). The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) confirms that it has entered into or is contemporaneously herewith entering into, with the Assignor as contemplated by Section 8.07 of the Credit Agreement, an assignment under the Short-Term Revolving Credit Agreement, unless the Short-Term Revolving Credit Agreement has been terminated; (iii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vii) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [;and (viii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement and the Notes or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty](2) Section (D). Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance shall be at least five Business Days after the execution and delivery thereof to the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "EFFECTIVE DATE"). Section (E). Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04 of the Credit Agreement. Section (F). Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including all payments of - ---------- (2) If the Assignee is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code). principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. Section (G). This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized as of the date specified thereon. Schedule 1 to Assignment and Acceptance Dated __________ Section 1. ________% Percentage Interest assigned: Section 2. $________ $________ Assignee's Commitment: Aggregate Outstanding Principal Amount of [A Advances] owing to the Assignee: Section 3. Effective Date(3) [NAME OF ASSIGNOR] [NAME OF ASSIGNOR] By: ------------------------- Name: Title: [NAME OF ASSIGNEE] By: ------------------------- Name: Title: Domestic Lending Office: [Address] Eurocurrency Lending Office: [Address] - ---------- (3) This date should be no earlier than at least five Business Days after the execution and delivery thereof to the Administrative Agent. Accepted and Consented to - ---------------------------- this __ day of __________, ____: JPMORGAN CHASE BANK, as Administrative Agent By: ---------------------------------------- Name: Title: Consented to this __ day of __________, ____: BURLINGTON RESOURCES INC. By: ---------------------------------------- Name: Title: EXHIBIT E FORM OF NEW LENDER AGREEMENT This New Lender Agreement dated as of ___________, ____ (this "AGREEMENT") is by and among (i) Burlington Resources Inc., a Delaware corporation (the "BORROWER"), (ii) JPMorgan Chase Bank, in its capacity as Administrative Agent (the "ADMINISTRATIVE AGENT") under the Long-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (as may be amended or otherwise modified from time to time, the "CREDIT AGREEMENT", capitalized terms that are defined in the Credit Agreement and not defined herein are used herein as therein defined) among the Borrower, the lenders party thereto, JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents, and (iii) _________ ("NEW LENDER"). Preliminary Statements A. Pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the total Commitments under the Credit Agreement by adding to the Credit Agreement one or more banks or other financial institutions. B. The Borrower has given notice to the Administrative Agent of its intention to increase the total Commitments pursuant to such Section 2.20 by adding the New Lender to the Credit Agreement as a Lender with a Commitment of $___________, and the Administrative Agent is willing to consent thereto. Accordingly, the parties hereto agree as follows: Section 1. Addition of New Lender. Pursuant to Section 2.20 of the Credit Agreement, the New Lender is hereby added to the Credit Agreement as a Lender with a Commitment of $________________. The New Lender specifies as its Domestic Lending Office and Eurodollar Lending Office the following: Domestic Lending Address: Office: Attention: Telephone: Telecopy: Eurodollar Lending Address: Office: Attention: Telephone: Telecopy: Section 2. New Note. The Borrower agrees to promptly execute and deliver to the New Lender a Note ("NEW NOTE"). Section 3. Consent. The Administrative Agent and the Borrower hereby consent to the increase in the Commitments and addition of the New Lender effectuated hereby. Section 4. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Section 5. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 6. Lender Credit Decision. The New Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to agree to the various matters set forth herein. The New Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement. Section 7. Representations and Warranties of the Borrower . The Borrower represents and warrants as follows: A. The execution, delivery and performance by the Borrower of this Agreement and the New Note are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. B. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the New Note which has not been duly made or obtained. C. This Agreement constitutes, and the New Note when delivered hereunder shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. D. The aggregate amount by which the Commitments under the Credit Agreement have been increased does not exceed $180,000,000. E. No event has occurred and is continuing which constitutes an Event of Default. F. Unless the Short-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the New Lender to become a party to the Short-Term Revolving Credit Agreement pursuant to Section 2.20 thereof with a "Commitment" (under and as defined in the Short-Term Revolving Credit Agreement) that constitutes the same percentage of all "Commitments" thereunder as the percentage that the New Lender's Commitment under the Credit Agreement constitutes of all Commitments under the Credit Agreement. G. Prior to the increase in Commitment pursuant to this Agreement, the Borrower has offered the Lenders the right to participate in such increase by increasing their respective Commitments. H. Attached hereto are resolutions duly adopted by the Board of Directors of the Borrower sufficient to authorize this Agreement and the New Note, and such resolutions are in full force and effect. Section 8. Default. Without limiting any other event that may constitute an Event of Default, in the event any representation or warranty set forth herein shall prove to have been incorrect in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement. Section 9. Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement and the New Note, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. Section 10. Effectiveness. When, and only when, the Administrative Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Administrative Agent and the New Lender, this Agreement shall become effective as of the date first written above. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: BURLINGTON RESOURCES INC. By: -------------------------- Name: ------------------------ Title: ----------------------- ADMINISTRATIVE AGENT: THE CHASE MANHATTAN BANK, as Administrative Agent. By: -------------------------- Name: ------------------------ Title: ----------------------- NEW LENDER: ----------------------------- By: -------------------------- Name: ------------------------ Title: ----------------------- EXHIBIT F FORM OF COMMITMENT INCREASE AGREEMENT This Commitment Increase Agreement dated as of ___________, ____ (this "AGREEMENT") is by and among (i) Burlington Resources Inc., a Delaware corporation (the "BORROWER"), (ii) JPMorgan Chase Bank, in its capacity as administrative agent (the "ADMINISTRATIVE AGENT") under the Long-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (as the same may be amended or otherwise modified from time to time, the "CREDIT AGREEMENT", capitalized terms that are defined in the Credit Agreement and not defined herein are used herein as therein defined) among the Borrower, the lenders party thereto, JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents, and (iii) _________ ("INCREASING LENDER"). Preliminary Statements A. Pursuant to Section 2.20 of the Credit Agreement, the Borrower has the right, subject to the terms and conditions thereof, to effectuate from time to time an increase in the total Commitments under the Credit Agreement by agreeing with a Lender to increase that Lender's Commitment. B. The Borrower has given notice to the Administrative Agent of its intention to increase the total Commitments pursuant to such Section 2.20 by increasing the Commitment of the Increasing Lender from $_______ to $________, and the Administrative Agent is willing to consent thereto. Accordingly, the parties hereto agree as follows: Section 1. Increase of Commitment. Pursuant to Section 2.20 of the Credit Agreement, the Commitment of the Increasing Lender is hereby increased from $________ to $__________. Section 2. Consent. The Administrative Agent hereby consents to the increase in the Commitment of the Increasing Lender effectuated hereby. Section 3. Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of New York. Section 4. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 5. Lender Credit Decision. The Increasing Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and to agree to the various matters set forth herein. The Increasing Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement. Section 6. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporation action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (b) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement which has not been duly made or obtained. (c) This Agreement constitutes legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (d) The aggregate amount by which the Commitments under the Credit Agreement have been increased does not exceed $180,000,000. (e) No event has occurred and is continuing which constitutes an Event of Default. (f) Unless the Short-Term Revolving Credit Agreement has been terminated, the Borrower has caused, or is simultaneously causing, the Increasing Lender's "Commitment" (as defined in the Short-Term Revolving Credit Agreement) to be increased pursuant to Section 2.20 thereof by the same percentage as the Increasing Lender's Commitment under the Credit Agreement is being increased pursuant to Section 2.20 of the Credit Agreement. (g) Attached hereto are resolutions duly adopted by the Board of Directors of the Borrower sufficient to authorize this Agreement, and such resolutions are in full force and effect. Section 7. Default. Without limiting any other event that may constitute an Event of Default, in the event any representation or warranty set forth herein shall prove to have been incorrect in any material respect when made, such event shall constitute an "Event of Default" under the Credit Agreement. Section 8. Expenses. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto. Section 9. Effectiveness. When, and only when, the Administrative Agent shall have received counterparts of, or telecopied signature pages of, this Agreement executed by the Borrower, the Administrative Agent and the Increasing Lender, this Agreement shall become effective as of the date first written above. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWER: BURLINGTON RESOURCES INC. By: -------------------------- Name: ------------------------ Title: ----------------------- ADMINISTRATIVE AGENT: THE CHASE MANHATTAN BANK, as Administrative Agent. By: -------------------------- Name: ------------------------ Title: ----------------------- INCREASING LENDER: ----------------------------- By: -------------------------- Name: ------------------------ Title: ----------------------- EXHIBIT G FORM OF EXTENSION REQUEST JPMorgan Chase Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Muniram Appanna Tel: (212) 552-7943 Fax: (212) 552-3295 copy to: JPMorgan Chase Bank, as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Long-Term Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (as the same may be amended from time to time, the "CREDIT AGREEMENT", the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. Pursuant to Section 2.21(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an extension of the Stated Termination Date under the Credit Agreement, and in that connection sets forth below the information relating to such extension: 1. The requested Stated Termination Date is _______________ __, ____(4) 2. This Extension Request constitutes the [first] [second] of the Borrower's right to extend the Stated Termination Date. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date the Stated Termination Date is extended: - ---------- (4) Such requested Stated Termination Date shall be no more than one year from the presently effective Stated Termination Date. (a) his Extension Request is being made not later than 45 days prior to the Stated Termination Date now in effect; (b) no event has occurred and is continuing which constitutes an Event of Default. BURLINGTON RESOURCES INC. By: -------------------------- Name: ------------------------ Title: ----------------------- EXHIBIT H FORM OF OPINION OF SENIOR VICE PRESIDENT, LAW FOR BORROWER ____, 2001 To each of the Lenders and the Agents Referred to Below c/o JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.01(d) of the Long-Term Revolving Credit Agreement, dated as of February 25, 1998, as amended and restated as of December 7, 2001 (the "Credit Agreement"), among Burlington Resources Inc., a Delaware corporation (the "Borrower"), the financial institutions party thereto (each a "Lender," and together the "Lenders"), JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. I am Senior Vice President, Law of the Borrower, and I, or attorneys over whom I exercise supervision, have acted as counsel for the Borrower in connection with the preparation, execution and delivery of the Credit Agreement. In that connection, I or such attorneys have examined: (1) The Credit Agreement, executed by the parties thereto; (2) The Notes executed by the Borrower; and (3) The other documents furnished by the Borrower pursuant to Section 3.01 of the Credit Agreement. I, or attorneys over whom I exercise supervision, have also examined the originals, or copies certified to our satisfaction, of the agreements, instruments and other documents, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the Borrower's ability to perform the Borrower's obligations under the Credit Agreement or the Notes (collectively referred to herein as the "Documents"). In addition, I, or attorneys over whom I exercise supervision, have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions hereinafter expressed. In all such examinations, I, or attorneys over whom I exercise supervision, have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified, conformed or reproduction copies of documents of all parties (other than, with respect to the Documents, the Borrower), the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to such attorneys or me as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, I have relied upon, and assume the accuracy of, representations and warranties contained in the Credit Agreement and certificates and oral or written statements and other information of or from public officials, officers and/or representatives of the Borrower and others. To the extent it may be relevant to the opinions expressed herein, I have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such documents and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding bligations of, such parties. The opinions expressed below are limited to the federal laws of the United States and, to the extent relevant hereto, the General Corporation Law of the State of Delaware, as currently in effect. I assume no obligation to supplement this opinion if any applicable laws change after the date hereof or if I become aware of any facts that might change the opinions expressed herein after the date hereof. Based upon the foregoing and upon such investigation as I have deemed necessary, and subject to the limitations, qualifications and assumptions set forth herein, I am of the following opinion: 1. The Borrower (i) is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware, and (ii) possesses all the corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. 2. The execution, delivery and performance by the Borrower of the Documents are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action in respect of or by the Borrower (except to the extent that the Borrower seeks to exercise its right under Section 2.20 of the Credit Agreement to effect an increase of Commitments), and do not contravene (i) the Borrower's Certificate of Incorporation or By-Laws, in each case as amended, (ii) any federal law, rule or regulation applicable to the Borrower (excluding provisions of federal law expressly referred to in and covered by the opinion of Jones, Day, Reavis & Pogue delivered to you in connection with the transactions contemplated hereby), or (iii) any contractual restriction binding on or affecting the Borrower. The Documents have been duly executed and delivered on behalf of the Borrower. 3. No authorization or approval or other action by, and no notice to or filing with, any federal governmental authority or regulatory body (including, without limitation, the Federal Energy Regulatory Commission) is required for the due execution, delivery and performance by the Borrower of the Documents, except those required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants and warranties contained in the Documents. 4. To the best of my knowledge, there is no action, suit or proceeding pending or overtly threatened against or involving the Borrower or any of its Material Subsidiaries, which, in my reasonable judgment (taking into account the exhaustion of all appeals), would have a material adverse effect upon the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of any Document. These opinions are given as of the date hereof and are solely for your benefit in connection with the transactions contemplated by the Credit Agreement. These opinions may not be relied upon by you for any other purpose or relied upon by any other person for any purpose without my prior written consent. Very truly yours, L. David Hanower Senior Vice President, Law ----------------, ----- EXHIBIT I FORM OF OPINION OF JONES, DAY, REAVIS & POGUE, NEW YORK COUNSEL FOR BORROWER ___, 2001 To Each of the Lenders and the Administrative Agent Referred to Below c/o JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Re: Long-Term Revolving Credit Agreement, dated as of February 25, 1998, as amended and restated as of December 7, 2001 Ladies and Gentlemen: We have acted as special New York counsel for Burlington Resources Inc., a Delaware corporation (the "Borrower"), in connection with the Long-Term Revolving Credit Agreement, dated as of February 25, 1998, as amended and restated as of December 7, 2001 (the "Credit Agreement"), among the Borrower, the financial institutions party thereto (each a "Lender," and together the "Lenders"), JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. This opinion is delivered to you pursuant to Section 3.01(e) of the Credit Agreement. All capitalized terms used herein that are defined in, or by reference in, the Credit Agreement have the meanings assigned to such terms therein, or by reference therein, unless otherwise defined herein. With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of such assumptions or items relied upon. In connection with this opinion, we have (i) investigated such questions of law, (ii) examined originals or certified, conformed or reproduction copies of such documents, and (iii) received such information from officers and representatives of the Borrower as we have deemed necessary or appropriate for the purposes of this opinion. We have examined, among other documents, the following: (a) A facsimile of an executed copy of the Credit Agreement; (b) A facsimile of an executed copy of each of the __ Notes; and (c) A facsimile of the Officer's Certificate of the Borrower delivered to us in connection with this opinion, a copy of which is attached hereto as Annex A. The documents referred to in items (a) and (b) above are referred to herein collectively as the "Documents." In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Documents and certificates and oral or written statements and other information of or from representatives of the Borrower and others. With respect to the opinions expressed in paragraph (a) below, our opinions are limited (x) to our actual knowledge of the Borrower's specially regulated business activities and properties based solely upon an officer's certificate in respect of such matters and without any independent investigation or verification on our part and (y) to our review of only those laws and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Documents. To the extent it may be relevant to the opinions expressed herein, we have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such documents and that such documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: (a) The execution and delivery to the Administrative Agent and the Lenders by the Borrower of the Documents and the performance by the Borrower of its obligations thereunder (i) do not require under present law any filing or registration by the Borrower with, or approval or consent to the Borrower of, any governmental agency or authority of the State of New York, except those, if any, required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants and warranties contained in the Documents and (ii) do not violate any present law, or present regulation of any governmental agency or authority, of the State of New York applicable to the Borrower or its property. (b) The Documents constitute the legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms. (c) The borrowings by the Borrower under the Credit Agreement and the applications of the proceeds thereof as provided in the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following qualifications: (A) We express no opinion as to: (i) the validity, binding effect or enforceability (a) of any provision of the Documents relating to indemnification, contribution or exculpation in connection with violations of any securities laws or statutory duties or public policy, or in connection with willful, reckless or criminal acts or gross negligence of the indemnified or exculpated party or the party receiving contribution; or (b) of any provision of any of the Documents relating to exculpation of any party in connection with its own negligence that a court would determine in the circumstances under applicable law to be unfair or insufficiently explicit; (ii) the validity, binding effect or enforceability of (a) any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "Waiver") by the Borrower under the Documents to the extent limited by provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for discharge otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under provisions of applicable law (including judicial decisions) or (b) any provision of any Document relating to choice of governing law to the extent that the validity, binding effect or enforceability of any such provision is to be determined by any court other than a court of the State of New York; (iii) the enforceability of any provision in the Documents specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of the Documents; (iv) the effect of any law of any jurisdiction other than the State of New York wherein the Administrative Agent or any Lender may be located or wherein enforcement of any document referred to above may be sought that limits the rates of interest legally chargeable or collectible; and (v) any approval, consent or authorization of the Federal Energy Regulatory Commission or any other United States federal agency or authority needed in connection with the execution, delivery and performance by the Borrower of the Documents, the consummation of the transactions contemplated thereby and compliance with the terms and conditions thereof. (B) Our opinions above are subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws from time to time in effect affecting creditors' rights generally, (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness), whether such principles are considered in a proceeding at law or in equity and (iii) the qualification that certain other provisions of the Documents may be unenforceable in whole or in part under the laws (including judicial decisions) of the State of New York or the United States of America, but the inclusion of such provisions does not affect the validity as against the Borrower of the Documents as a whole, and the Documents contain adequate provisions for enforcing payment of the obligations governed thereby, subject to the other qualifications contained in this letter. (C) For purposes of the opinions set forth in paragraph (c) above, we have assumed that (i) neither the Administrative Agent nor any of the Lenders has or will have the benefit of any agreement or arrangement (excluding the Documents) pursuant to which any Advances are directly or indirectly secured by Margin Stock, (ii) neither the Administrative Agent nor any of the Lenders nor any of their respective affiliates has extended or will extend any other credit to the Borrower directly or indirectly secured by Margin Stock and (iii) neither the Administrative Agent nor any of the Lenders has relied or will rely upon any Margin Stock as collateral in extending or maintaining any Advances pursuant to the Credit Agreement. (D) For purposes of our opinions above, insofar as they relate to the Borrower, we have assumed that (i) the Borrower is a corporation validly existing in good standing in its jurisdiction of incorporation, has all requisite power and authority, and has obtained all requisite corporate, shareholder, third party and governmental authorizations, consents and approvals, and made all requisite filings and registrations, necessary to execute, deliver and perform the Documents (except to the extent noted in paragraph (a) above), and that such execution, delivery and performance will not violate or conflict with any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to the Borrower or its properties (except to the extent noted in paragraph (a) above), and (ii) the Documents have been duly executed and delivered by the Borrower. We express no opinion as to the effect of the compliance or noncompliance of each of the addressees with any state or federal laws or regulations applicable to each of them by reason of their status as or affiliation with a federally insured depository institution, except as expressly set forth in paragraph (c) above. The opinions expressed herein are limited to the federal laws of the United States of America (in the case of the matters covered in paragraph (c) above) and the laws of the State of New York (in the case of the matters covered in paragraphs (a) and (b) above), as currently in effect. The opinions expressed herein are solely for the benefit of the Administrative Agent and the Lenders and may not be relied on in any manner or for any purpose by any other person or entity. Very truly yours, Jones, Day, Reavis & Pogue EXHIBIT J FORM OF DESIGNATION AGREEMENT Dated __________, 20__ Reference is made to the Long-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, being the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), JPMorgan Chase Bank, as Administrative Agent for the Lenders thereunder and Auction Administrative Agent for the Lenders, Citibank, N.A. and Fleet National Bank, as Co-Syndication Agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as Co-Documentation Agents. Terms defined in the Credit Agreement are used herein with the same meaning. ______________ (the "DESIGNATOR"), ____________ (the "DESIGNEE"), and Burlington Resources Inc., a Delaware corporation (the "BORROWER"), agree as follows: 1. The Designator designates the Designee, and the Designee hereby accepts such designation, to have a right to make B Advances pursuant to Section 2.19 of the Credit Agreement. 2. The Designator makes no representations or warranties and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto and (ii) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Designator or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a Designated Bidder; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) specifies as its Applicable Lending Office with respect to B Advances (and address for notices) the offices set forth beneath its name on the signature pages hereof. 4. Following the execution of this Designation Agreement by the Designator, the Designee and the Borrower, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Designation Agreement shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on the signature page hereto (the "EFFECTIVE DATE"). 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make B Advances as a Lender pursuant to Section 2.19 of the Credit Agreement and the rights and obligations of a Lender related thereto. 6. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Designation Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. Effective Date:(5) _______________, 20___ [NAME OF DESIGNATOR] By: -------------------------- Name: ------------------------ Title: ----------------------- - ---------- (5) This date should be no earlier than the date of acceptance by the Administrative Agent. [NAME OF DESIGNEE] By: -------------------------- Name: ------------------------ Title: ----------------------- Applicable Lending Office (and addresses for notices) [Address] BURLINGTON RESOURCES INC. By: -------------------------- Name: ------------------------ Title: ----------------------- Accepted and Approved this ____ day of ___________, 20__ JPMORGAN CHASE BANK, as Administrative Agent By: ----------------------------- Name: Title: EX-10.32 5 h92808ex10-32.txt CANADIAN CREDIT AGREEMENT EXHIBIT 10.32 - -------------------------------------------------------------------------------- BURLINGTON RESOURCES CANADA LTD. BURLINGTON RESOURCES INC. ---------- Cdn.$471,420,000 CANADIAN CREDIT AGREEMENT Dated as of March 31, 2000, as Amended and Restated as of December 7, 2001 ---------- J.P. MORGAN BANK CANADA, as Administrative Agent CITIBANK CANADA FLEET NATIONAL BANK, as Co-Syndication Agents BANK OF AMERICA CANADA THE TORONTO-DOMINION BANK, as Co-Documentation Agents - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS Section 1.01. Certain Defined Terms......................................................................1 Section 1.02. Computation of Time Periods...............................................................18 Section 1.03. Accounting and Other Terms................................................................18 Section 1.04. References................................................................................18 Section 1.05. Schedule III Banks........................................................................18 ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES Section 2.01. Revolving Advances........................................................................18 Section 2.02. Making the Advances.......................................................................19 Section 2.03. Fees......................................................................................21 Section 2.04. Reduction of the Commitments..............................................................22 Section 2.05. Repayment of Advances.....................................................................22 Section 2.06. Interest on Advances......................................................................22 Section 2.07. [Intentionally omitted]...................................................................25 Section 2.08. Rate Determination........................................................................25 Section 2.09. Voluntary Continuation of Advances........................................................27 Section 2.10. Prepayments...............................................................................27 Section 2.11. Bankers' Acceptances......................................................................28 Section 2.12. Increased Costs...........................................................................31 Section 2.13. Increased Capital.........................................................................32 Section 2.14. Illegality................................................................................32 Section 2.15. Payments and Computations.................................................................33 Section 2.16. Taxes.....................................................................................34 Section 2.17. Sharing of Payments, Etc..................................................................38 Section 2.18. Evidence of Debt..........................................................................38 Section 2.19. Use of Proceeds...........................................................................39 Section 2.20. Increase of Commitments...................................................................39 Section 2.21. Extension of Revolving Commitment Termination Date........................................41 Section 2.22. Replacement of Lenders....................................................................42 Section 2.23. Currency Indemnity........................................................................43 Section 2.24. Exchange Rate Calculations................................................................43 ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING Section 3.01. Conditions Precedent to Effectiveness of this Agreement...................................44 Section 3.02. Conditions Precedent to Each Borrowing....................................................45 ARTICLE 4 REPRESENTATIONS AND WARRANTIES Section 4.01. Representations and Warranties of the Borrower............................................46
i TABLE OF CONTENTS (continued)
PAGE ---- ARTICLE 5 COVENANTS Section 5.01. Affirmative Covenants.....................................................................48 Section 5.02. Negative Covenants........................................................................50 Section 5.03. Reporting Requirements....................................................................53 ARTICLE 6 EVENTS OF DEFAULT Section 6.01. Events of Default.........................................................................55 ARTICLE 7 THE ADMINISTRATIVE AGENT Section 7.01. Authorization and Action..................................................................58 Section 7.02. Administrative Agent's Reliance, Etc......................................................58 Section 7.03. Administrative Agent and Affiliates.......................................................59 Section 7.04. Lender Credit Decision....................................................................59 Section 7.05. Indemnification...........................................................................59 Section 7.06. Successor Administrative Agent............................................................60 ARTICLE 8 GUARANTY ARTICLE 9 MISCELLANEOUS Section 9.01. Amendments, Etc...........................................................................62 Section 9.02. Notices, Etc..............................................................................63 Section 9.03. No Waiver; Remedies.......................................................................64 Section 9.04. Costs and Expenses; Indemnity.............................................................64 Section 9.05. Right of Set-off..........................................................................65 Section 9.06. Binding Effect............................................................................65 Section 9.07. Assignments and Participations............................................................66 Section 9.08. Confidentiality...........................................................................68 Section 9.09. Consent to Jurisdiction...................................................................69 Section 9.10. Governing Law.............................................................................69 Section 9.11. Execution in Counterparts.................................................................69 Section 9.12. Waiver of Jury Trial......................................................................70
ii CANADIAN SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of March 31, 2000, as amended and restated as of December 7, 2001 BURLINGTON RESOURCES CANADA LTD., an Alberta corporation (together with its permitted successors and assigns, the "BORROWER"), Burlington Resources Inc., a Delaware corporation (together with its permitted successors and assignees, the "PARENT"), the financial institutions (the "INITIAL LENDERS") listed on the signature pages hereof, J.P. MORGAN BANK CANADA, as administrative agent for the Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT"), CITIBANK CANADA and FLEET NATIONAL BANK, as co-syndication agents, and BANK OF AMERICA CANADA and THE TORONTO-DOMINION BANK, as co-documentation agents, agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACCEPTANCE FEE" means a fee payable in Cdn. Dollars by the Borrower to the Administrative Agent for the account of a Lender with respect to the acceptance of a B/A on the date of such acceptance, calculated on the face amount of the B/A at the rate per annum applicable on such date as set forth in the row labeled "Applicable Margin" on Schedule II hereto (which is based on the ratings (or lack thereof) by Moody's or S&P or both of them of the public long-term senior unsecured debt securities of the Parent) on the basis of the number of days in the applicable Contract Period (including the date of acceptance and excluding the date of maturity) and a year of 365 days. "ADMINISTRATIVE AGENT" has the meaning specified in the introduction to this Agreement. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender. "ADVANCE" means an advance by a Lender to the Borrower as part of a Borrowing, and refers to a Prime Rate Advance, a Base Rate Advance, a Cdn. Dollar Eurodollar Rate Advance, a U.S. Dollar Eurodollar Rate Advance or a B/A Advance (each of which shall be a "TYPE" of Advance). "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "CONTROL" (including the terms "CONTROLS", "CONTROLLED BY" or "UNDER COMMON CONTROL WITH") means, with respect to any Person, the possession, direct or indirect, of the power to vote 10% or more (or in the case of an "AFFILIATE" of any Lender, 5% or more) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. Neither a director nor an officer of the Borrower or Parent, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. "AGREEMENT" means this Canadian Short-Term Revolving Credit Agreement, together with all exhibits and schedules hereto, as amended or otherwise modified from time to time pursuant to the terms hereof. "APPLICABLE LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Applicable Lending Office" in its Administrative Questionnaire, or in the Assignment and Acceptance or New Lender Agreement pursuant to which it became a Lender, and/or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent with respect to any Type of Advance. "APPLICABLE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of Parent. "ARRANGER" means J.P. Morgan Securities Inc. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "AVERAGE AGGREGATE FACILITY ADVANCES" means, for any Utilization Fee Period, the average daily outstanding amount of (i) all Advances hereunder and (ii) all "Advances" under, and as defined in, the U.S. Short-Term Revolving Credit Agreement and the U.S. Long-Term Revolving Credit Agreement. "AVERAGE AGGREGATE FACILITY COMMITMENTS" means, for any Utilization Fee Period, the average daily amount of (i) all Commitments hereunder and (ii) all "Commitments" under, and as defined in, the U.S. Short-Term Revolving Credit Agreement and the U.S. Long-Term Revolving Credit Agreement. "B/A ADVANCE" means a Borrowing comprised of one or more Bankers' Acceptances or, as applicable, B/A Loans. "B/A LOAN" has the meaning specified in Section 2.11(i). "BANKERS' ACCEPTANCE" and "B/A" mean a non-interest bearing instrument denominated in Cdn. Dollars, drawn by the Borrower and accepted by a Lender in accordance with this Agreement, and includes a depository note within the meaning of the Depository Bills and Notes Act (Canada) and a bill of exchange within the meaning of the Bills of Exchange Act (Canada). 2 "BASE RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) the annual rate of interest announced publicly by the Administrative Agent and in effect as its base rate at its principal office in Toronto, Ontario on such day for determining interest rates on U.S. Dollar-denominated commercial loans made in Canada; and (ii) 0.50% per annum above the Effective Federal Funds Rate for such day. "BASE RATE ADVANCE" means an Advance denominated in U.S. Dollars that bears interest based upon the Base Rate, as provided in Section 2.06(a)(ii). "BORROWER" has the meaning specified in the introduction to this Agreement. "BORROWING" means a borrowing consisting of Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, (i) in the case of Eurodollar Rate Advances, having Interest Periods of the same duration; and, (ii) in the case of B/A Advances, having Contract Periods of the same duration; it being understood that there may be more than one Borrowing on a particular day. "BUSINESS DAY" means any day that is not a Saturday, Sunday or other day of the year on which banks are not required or authorized to close in Calgary, Alberta, Toronto, Ontario or New York, New York, and, if the applicable Business Day relates to any Eurodollar Rate Advances, a day on which banks are not required or authorized to close in London, England. "BUSINESS ENTITY" means a partnership, limited partnership, limited liability partnership, corporation (including a business trust), limited liability company, unlimited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. "CALCULATION DATE" shall mean the last Business Day of each month. "CANADIAN CERTIFICATION REQUIREMENTS" has the meaning specified in Section 2.16(g) of this Agreement. "CANADIAN TAXES" has the meaning specified in Section 2.16(a) of this Agreement. "CAPITALIZATION" means the sum (without duplication) of (i) consolidated Debt of the Parent and its consolidated Subsidiaries, plus (ii) the aggregate amount of Guarantees by the Parent or its consolidated Subsidiaries, plus (iii) the sum of the preferred stock and common stockholders' equity of the Parent, plus (iv) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997 (but excluding any such amount with respect to assets 3 of Project Finance Subsidiaries), minus (v) to the extent otherwise included in determining the amounts computed under clause (iii) above, the aggregate investment (net of any Project Financing) of the Parent and its consolidated Subsidiaries in Project Finance Subsidiaries. "CDN.$" and "CDN. DOLLAR" mean lawful money of Canada. "CDN.$ EQUIVALENT" means, at the date of determination, (i) with respect to any amount in Cdn. Dollars, such amount and (ii) with respect to any amount in U.S. Dollars, the equivalent in Cdn. Dollars of such amount, determined by the Administrative Agent pursuant to Section 2.24 using the Exchange Rate with respect to U.S. Dollars in effect for such amount under the provisions of such Section. "CDN. DOLLAR EURODOLLAR RATE" means, for any Interest Period for each Cdn. Dollar Eurodollar Rate Advance comprising part of the same Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in Cdn. Dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such Borrowing and for a period equal to such Interest Period. The Cdn. Dollar Eurodollar Rate for the Interest Period for each Cdn. Dollar Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "CDN. DOLLAR EURODOLLAR RATE ADVANCE" means an Advance denominated in Cdn. Dollars that bears interest determined by reference to the Cdn. Dollar Eurodollar Rate, as provided in Section 2.06(a)(iii)(x). "CDOR RATE" means, for each day in any period, the annual rate of interest that is the rate based on an average rate applicable to Cdn. Dollar bankers' acceptances for a term equal to the term of the relevant Contract Period (or for a term of 30 days for purposes of determining the Prime Rate) appearing on the "Reuters Screen CDOR Page" (as defined in the International Swaps and Derivatives Association, Inc. definitions, as modified and amended from time to time) at approximately 8:00 a.m. (Calgary local time), on such date, or if such date is not a Business Day, on the immediately preceding Business Day, provided that if such rate does not appear on the Reuters Screen CDOR Page on such date as contemplated, then the CDOR Rate on such date shall be the arithmetic average of the Discount Rate quoted by each Schedule I Reference Bank (determined by the Administrative Agent as of 8:00 a.m. Calgary local time on such date) which would be applicable to Cdn. Dollar Bankers' Acceptances quoted by the banks listed in Schedule I of the Bank Act (Canada) as of 8:00 a.m. (Calgary local time) on such date or, if such date is not a Business Day, on the immediately preceding Business Day. "CHANGE IN LAW" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any governmental authority after the date of this Agreement or 4 (c) compliance by any Lender with any request, guideline or directive (whether or not having the force of law) of any governmental authority if such request, guideline or directive is made or issued after the date of this Agreement and reflects a change after the date of this Agreement in the policies or practices to which such request, guideline or directive relates. "CLAM" means CLAM Petroleum B.V., a Netherlands company, and CLAM's successors. "CLAM CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of July 25, 1985, among MaraLou Netherlands Partnership, CLAM, the banks parties thereto and Morgan, as agent for such banks, as amended and restated as of August 15, 1997, or any successor credit agreement entered into for the purpose of refinancing such Amended and Restated Credit Agreement, in each case, as amended, restated, extended or otherwise modified from time to time. "COMMITMENT" has the meaning specified in Section 2.01(a). "COMMITMENT INCREASE NOTICE" has the meaning specified in Section 2.20(a). "COMMITMENT INCREASE AGREEMENT" has the meaning specified in Section 2.20(c). "COMMITMENT PERCENTAGE" means, as to any Lender at any time, the percentage that such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "CONSOLIDATED TANGIBLE NET WORTH" means, on a consolidated basis, the excess of (i) the sum of (x) the preferred stock and common stockholders' equity of Parent and (y) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997, over (ii) the intangible assets of Parent and its consolidated Subsidiaries. "CONTINGENT GUARANTY" has the meaning specified in the definition of the term "Guaranty" contained in this Section 1.01. "CONTINUE", "CONTINUATION" and "CONTINUED" each refers to a continuation of Advances of one Type as Advances of another Type pursuant to Section 2.08, 2.09 or 2.14 or the continuation of Advances of the same Type for additional Interest Periods or Contract Periods, as applicable. "CONTRACT PERIOD" means (a) with respect to Bankers' Acceptances, the term of a B/A Advance selected by the Borrower in accordance with Section 2.02 commencing on the date of such B/A Advance and expiring on a Business Day which shall be either 30 days, 60 days, 90 days, 180 days or, with the consent of each Lender, any other number of days from 1 to 180, provided that (i) subject to subparagraph (ii) below, each such period shall be subject to such extensions or reductions as may be determined by the Administrative Agent to ensure that each 5 Contract Period shall expire on a Business Day, and (ii) no Contract Period shall extend beyond the Revolving Commitment Termination Date and (b) with respect to a B/A Loan, an Interest Period equal to the Contract Period of the Bankers' Acceptances for which it is a substitute. "CURRENCY DUE" has the meaning specified in Section 2.23. "DEBT" of any Person means, without duplication (i) indebtedness of such Person for borrowed money or in respect of bankers' acceptances, (ii) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion) to pay the deferred purchase price of property or services, (iii) obligations of such Person as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases, and (iv) Overdue Reimbursement Obligations; provided, however, that where any such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties, which are not the Borrower or Parent, or any of their consolidated Subsidiaries, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof, and provided, further, that the following shall not at any time constitute Debt: (1) obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not Overdue Reimbursement Obligations, (2) Project Financing, (3) the Morgan Gold Loans unless, at such time, for any reason whatsoever, (A) no royalty income shall have accrued under the Royalty Agreement dated as of December 5, 1984 between Copper Range Company, a Michigan corporation, and LL&E during the three consecutive fiscal quarters of LL&E most recently ended prior to such time or (B) any payment required to have been made to LL&E under such agreement prior to such time shall not have been paid on, or within 30 days after, the date such payment is due, and (4) amounts borrowed by the Borrower or Parent and their consolidated Subsidiaries under life insurance policies issued to one or more of the foregoing and covering employees or former employees of one or more of the foregoing not in excess of the cash surrender value of such policies. "DISCOUNT PROCEEDS" means, for any B/A, an amount (rounded up to the nearest whole cent, and with one-half of one cent being rounded up) calculated on the date of the Borrowing by multiplying: (i) the face amount of the B/A; by (ii) the quotient of one divided by the sum of one plus the product of (A) the Discount Rate (expressed as a decimal) applicable to such B/A, multiplied by (B) a fraction, the numerator of which is the Contract Period of the B/A and the denominator of which is 365, with such quotient being rounded up or down to the nearest fifth decimal place, and with .000005 being rounded up. 6 "DISCOUNT RATE" means: (i) with respect to any Lender which is a Schedule I chartered bank under the Bank Act (Canada), as applicable to a B/A being purchased by such Lender on any day, the CDOR Rate; and (ii) with respect to any Lender which is not a Schedule I chartered bank under the Bank Act (Canada), as applicable to a B/A being purchased by such Lender on any day, the lesser of (A) the CDOR Rate plus 10 basis points (0.10%), and (B) the average (as determined by the Administrative Agent in good faith) of the respective percentage discount rates (expressed to two decimal places and rounded upward, if not in an increment of 1/100th of 1%, to the nearest 0.01%) quoted by the Schedule II/III Reference Banks as the percentage discount rates at which the Schedule II/III Reference Banks would, in accordance with their normal market practices, at or about 10:00 a.m. (Toronto, Ontario time) on such date, be prepared to purchase bankers' acceptances accepted by the Schedule II/III Reference Banks having a face amount and term comparable to the face amount and term of such B/A. "EFFECTIVE DATE" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied (or compliance therewith shall have been waived by the Lenders), which date the Administrative Agent will promptly confirm to the Borrower and the Lenders in writing, and which date shall be no earlier than December 7, 2001. "EFFECTIVE FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 9.07, any bank or other entity approved in writing by the Borrower expressly with respect to such assignment and, except as to such an assignment by JPMorgan so long as JPMorgan is the Administrative Agent hereunder, the Administrative Agent shall be an Eligible Assignee for purposes of this Agreement, provided that neither the Administrative Agent's nor the Borrower's approval shall be unreasonably withheld, and provided further that no such approval shall be necessary if (i) the assignee is a Lender Affiliate, (ii) the assignee was a Lender immediately prior to such assignment, or (iii) if an Event of Default shall then be continuing. "EQUITY INTERESTS" means any capital stock, partnership, joint venture, member or limited liability or unlimited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. 7 "ERISA AFFILIATE" means any Person who is a member of Parent's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. "EURODOLLAR RATE" means the Cdn. Dollar Eurodollar Rate or the U.S. Dollar Eurodollar Rate, as applicable. "EURODOLLAR RATE ADVANCE" means a Cdn. Dollar Eurodollar Rate Advance or a U.S. Dollar Eurodollar Rate Advance, as applicable. "EURODOLLAR RATE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of Parent. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXCHANGE RATE" shall mean with respect to U.S. Dollars on a particular date, the rate at which U.S. Dollars may be exchanged into Cdn. Dollars as quoted by the Bank of Canada on the Reuters Bank of Canada page (or, if not so quoted, the spot rate of exchange quoted for wholesale transactions made by the Administrative Agent at Calgary, Alberta) at 12:00 noon, Toronto, Ontario time, on the relevant Reuters screen currency page; provided, that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems applicable to determine such rate, and such determination shall be conclusive absent manifest error. "EXTENSION REQUEST" means each request by the Borrower made pursuant to Section 2.21 for the Lenders to extend the Revolving Commitment Termination Date, which shall contain the information in respect of such extension specified in Exhibit G and shall be delivered to the Administrative Agent in writing. "FACILITY FEE PERCENTAGE" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Facility Fee Percentage" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of Parent. "FINAL MATURITY DATE" means the date occurring five years and one day after the Revolving Commitment Termination Date or, if such day is not a Business Day, the next succeeding Business Day. "FINANCING DOCUMENTS" means this Agreement, the Notices of Borrowing and the Notes, and each other instrument or agreement entered into by Parent or the Borrower in connection with this Agreement, as such instrument or agreement may be amended, modified or supplemented from time to time in accordance herewith. "FOREIGN LENDER" means any Lender that is neither a resident of Canada for purposes of the Income Tax Act nor a Schedule III Bank which receives all amounts paid under this Agreement in respect of its "Canadian banking business", as defined in the Income Tax Act. 8 For purposes of this definition, Canada and each province thereof shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America, as in effect from time to time. "GUARANTEED PARTIES" means the Administrative Agent, the Arranger, the Lenders and each other Person to whom any of the Obligations are or shall be owed. "GUARANTY", "GUARANTEED" and "GUARANTEEING" each means any act by which a Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Borrower, the Parent or any of their consolidated Subsidiaries (excluding (i) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) any liability in connection with obligations of the Borrower, Parent or any of their consolidated Subsidiaries, including obligations under any conditional sales agreement, equipment trust financing or equipment lease, (iii) any liability or other act of the Borrower, Parent or any of their consolidated Subsidiaries under arrangements entered into in connection with the CLAM Credit Agreement, U.S. Short-Term Revolving Credit Agreement or the U.S. Long-Term Revolving Credit Agreement, and (iv) any such act in connection with a Project Financing that either (A) guarantees to the provider of such Project Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is a direct guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (B) below) or (B) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence or existence of any event or condition other than or in addition to (1) the passage of time, (2) any Project Financing becoming due, (3) the commencement of bankruptcy, insolvency or similar proceedings by the obligor on any Project Financing or (4) the failure of the obligor on any Project Financing to satisfy a financial ratio, covenant or other similar financial measurement test, but only during such period as such act is not by its terms presently enforceable, or if so enforceable, there is not a reasonable probability that the guarantor will be called upon to perform thereunder (or to make capital contributions in lieu of performance thereunder) (any such act referred to in this clause (iv) being a "Contingent Guaranty")); provided, however, that for the purposes of this definition the liability of the Borrower, Parent or any of their Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. "INCOME TAX ACT" means the Income Tax Act (Canada), as amended from time to time. 9 "INDEMNIFIED PARTY" means any or all of the Lenders, the Arranger and the Administrative Agent. "INITIAL LENDERS" has the meaning specified in the introduction to this Agreement. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means (a) for each Eurodollar Rate Advance (other than a B/A Loan) comprising part of the same Borrowing, the period beginning on the date of such Advance or the date of the Continuation of any Advance as such Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below and (b) for each B/A Loan, the period beginning on the date of such B/A Loan and ending on the last day of the Contract Period of the Bankers' Acceptances for which such B/A Loan is a substitute. The duration of each such Interest Period for a Eurodollar Rate Advance (other than a B/A Loan) shall be (i) one, two, three or six months upon notice received by the Administrative Agent not later than 10:00 a.m. (Calgary local time) on the third Business Day prior to the first day of such Interest Period, or (ii) subject to availability to each Lender, nine or twelve months upon notice received by the Administrative Agent not later than 10:00 a.m. (Calgary local time) on the fourth Business Day prior to the first day of such Interest Period, in each case as the Borrower may select; provided, however, that: (A) the duration of any Interest Period which commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date and the duration of any Interest Period which would otherwise end after the Final Maturity Date shall end on the Final Maturity Date; (B) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; (C) Interest Periods commencing on the same date for Advances comprising the same Borrowing shall be of the same duration; and (D) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (A) above, end on the last Business Day of a calendar month. "JPMORGAN" means J.P. Morgan Bank Canada. "JUDGMENT CURRENCY" has the meaning specified in Section 2.23. 10 "LENDER AFFILIATE" means, with respect to any Lender, (a) an Affiliate of such Lender or (b) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender (with such Lender or Affiliate having the sole right and responsibility with respect to the approval of amendments and waivers to this Agreement, the Notes and all related agreements and instruments entered into from time to time). "LENDERS" means the Initial Lenders, each bank or other financial institution that shall become a party hereto pursuant to Section 2.20, and each Eligible Assignee that shall become a party hereto pursuant to Section 9.07(a), (b) and (d). "LIEN" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Debt or any Guaranty of any Person; provided that (i) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest", farmouts, joint operating or unitization agreements, or other similar transactions in the ordinary course of business and (ii) borrowings under life insurance policies as described in clause (4) of the proviso to the definition of "Debt" shall not be deemed to create a Lien. "LL&E" means The Louisiana Land and Exploration Company, a Maryland corporation and a wholly-owned Subsidiary of the Parent. "MAJORITY LENDERS" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the Advances held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "MARGIN STOCK" means "margin stock" as defined in Regulation U of the Board of Governors of the United States Federal Reserve System, as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition or operations of Parent and its consolidated Subsidiaries on a consolidated basis. "MATERIAL PLAN" means any Plan the assets of which exceed U.S.$50,000,000 or the liabilities of which for unfunded vested benefits determined on a plan termination basis (in accordance with Title IV of ERISA) exceed U.S.$10,000,000. "MATERIAL SUBSIDIARY" means, from time to time, any Subsidiary of Parent (other than a Project Financing Subsidiary) then owning assets (determined on a consolidated basis) that equal or exceed 10% of the book value of the consolidated assets of Parent and its consolidated Subsidiaries at such time; provided that for purposes of this definition the term "Material Subsidiary" shall always include the Borrower and its successors. "MOODY'S" means Moody's Investors Service, Inc. "MORGAN" means Morgan Guaranty Trust Company of New York, and its successors. 11 "MORGAN GOLD LOANS" means the obligations of LL&E under the respective Credit Agreements dated as of December 23, 1994 and March 31, 1995 between LL&E and Morgan, or under any additional credit agreements on substantially similar terms, in each case, as amended, restated, extended or otherwise modified from time to time, provided that the aggregate outstanding amount borrowed thereunder shall at no time exceed 35,000 ounces of gold. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which Parent or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of Parent or an ERISA Affiliate and at least one Person other than the Borrower, Parent and its ERISA Affiliates or (ii) was so maintained and in respect of which Parent or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NEW LENDER" has the meaning specified in Section 2.20(b). "NEW LENDER AGREEMENT" has the meaning specified in Section 2.20(b). "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "NOTICE OF BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF CONTINUATION" has the meaning specified in Section 2.09. "OBJECTING LENDERS" has the meaning specified in Section 2.21(a). "OBLIGATIONS" means (a) the Borrower's obligations in respect of the due and punctual payment of (i) the principal of and interest on the Advances and the Notes when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all fees, expenses, indemnities, expense reimbursement obligations and other obligations, monetary or otherwise, of the Borrower under this Agreement or any other Financing Document and (b) all other obligations, monetary or otherwise, of the Borrower under each Financing Document to which it is a party. "OFFERED INCREASE AMOUNT" has the meaning specified in Section 2.20(a). "ORIGINAL EFFECTIVE DATE" means February 25, 1998. "OTHER TAXES" has the meaning specified in Section 2.16(d) of this Agreement. 12 "OVERDUE REIMBURSEMENT OBLIGATIONS" means, with respect to any Person, non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not paid on or prior to the fifth Business Day after the due date therefor. "PARENT" has the meaning specified in the introduction to this Agreement. "PAYMENT OFFICE" means the Administrative Agent's office located at 200 Bay Street, Suite 1800, Royal Bank Plaza, South Tower, Toronto, Ontario M5J 2J2 (or such other office or individual as the Administrative Agent may hereafter designate in writing to the other parties hereto). "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED ASSETS" means (i) hydrocarbon or other reserves (including proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) Equity Interests in any and all Business Entities that are or become Subsidiaries of the Borrower or Parent owning assets referred to in any of the foregoing clauses. "PERMITTED LIENS" means: (i) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Borrower, Parent or any of their respective Subsidiaries; (ii) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (iii) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (iv) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions which do not materially interfere with the operation, value or use of the properties affected thereby; (v) conventional provisions contained in any contracts or agreements affecting properties under which the Borrower, Parent or any of their respective Subsidiaries is required immediately before the expiration, termination or abandonment of a particular property to reassign to such Person's predecessor in title all or a portion of the such Person's rights, titles and interests in and to all or a portion of such property; 13 (vi) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Borrower, Parent or any of their respective Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Borrower, Parent or any such Subsidiary in such grant or conveyance; (vii) any Lien consisting of (A) statutory landlord's liens under leases to which the Borrower, Parent or any of their respective Subsidiaries is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Borrower, Parent or any of their respective Subsidiaries, or to use such property in any manner which does not materially impair the use of such property for the purposes for which it is held by the Borrower, Parent or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (viii) Liens on Equity Interests in, or Debt or other obligations of, CLAM owned by the Parent, the Borrower or any of their respective Subsidiaries, which Liens secure Debt of CLAM; and (ix) any Lien on any assets (including Equity Interests and other obligations) securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 360 days after the acquisition or completion of development, construction or installation thereof or improvement thereto. "PERSON" means an individual, a Business Entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PRIME RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) the annual rate of interest announced publicly by the Administrative Agent and in effect as its prime rate at its principal office in Toronto, Ontario on such day for determining interest rates on Cdn. Dollar-denominated commercial loans made in Canada; and (ii) 0.50% per annum above the 30 day CDOR Rate in effect on such date. "PRIME RATE ADVANCE" means an Advance denominated in Cdn. Dollars that bears interest at a rate based on the Prime Rate, as provided in Section 2.06(a)(i). 14 "PRIME RATE BORROWING" means a Borrowing comprised of one or more Prime Rate Advances. "PROJECT FINANCING" means any Debt incurred to finance or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Debt or Guaranty permitting or providing for recourse against Parent, the Borrower or any of their respective Subsidiaries other than (i) recourse to the Equity Interests in, Debt or other obligations of, or assets of, one or more Project Financing Subsidiaries, and (ii) such recourse as exists under any Contingent Guaranty. "PROJECT FINANCING SUBSIDIARY" means any Subsidiary of Parent or the Borrower whose principal purpose is to incur Project Financing, or to become a direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or Debt or other obligations of, one or more other such Subsidiaries or Business Entities. "RE-ALLOCATION DATE" has the meaning specified in Section 2.20(e). "REFERENCE BANKS" means JPMorgan, Citibank Canada and Bank of America Canada. "REGISTER" has the meaning specified in Section 9.07(c). "REQUIRED LENDERS" means Lenders (i) that are not Objecting Lenders with respect to any previous Extension Request and (ii) that have Commitment Percentages aggregating at least 51% of the aggregate Commitment Percentages of such non-Objecting Lenders. "RESET DATE" has the meaning specified in Section 2.24. "REVOLVING ADVANCE" means an Advance made or to be made by a Lender pursuant to Section 2.01(a). "REVOLVING COMMITMENT TERMINATION DATE" means December 5, 2002, or, at the option of the Borrower, such later date as shall be determined pursuant to the provisions of Section 2.21 with respect to non-Objecting Lenders, provided that if such date is not a Business Day, the Revolving Commitment Termination Date shall be the next preceding Business Day. "S&P" means Standard and Poor's, a division of The McGraw-Hill Companies, Inc. "SCHEDULE I BANKS" means a bank that is a Canadian chartered bank listed on Schedule I under the Bank Act (Canada). 15 "SCHEDULE I REFERENCE BANKS" means each of Royal Bank of Canada and such other Schedule I Banks as are agreed to from time to time by the Borrower and the Administrative Agent, each acting reasonably; provided that there shall be no more than three Schedule I Reference Banks at any one time. "SCHEDULE II LENDER" has the meaning specified in Section 1.05 of this Agreement. "SCHEDULE II/III REFERENCE BANKS" means JPMorgan Chase Bank, Toronto Branch, Citibank Canada and Bank of America Canada or such other Schedule II chartered banks under the Bank Act (Canada) or Schedule III Banks as are mutually agreed upon by the Administrative Agent and the Borrower. "SCHEDULE III BANK" means a bank listed on Schedule III under the Bank Act (Canada). "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of Parent or an ERISA Affiliate and no Person other than Parent and its ERISA Affiliates or (ii) was so maintained and in respect of which Parent or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "SUBSIDIARY" means, as to any Person, any Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of Parent. "TAXES" has the meaning specified in Section 2.16(b) of this Agreement. "TERMINATION DATE" means the earlier of (i) the Revolving Commitment Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of Parent or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by Parent or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of Parent or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (vi) the adoption of an amendment to a Plan 16 requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or (vii) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TERM ADVANCE" means an Advance made or to be made by a Lender pursuant to Section 2.01(b). "TRANSACTIONS" means the execution, delivery and performance by the Borrower and Parent (as applicable) of this Agreement and the other Financing Documents and the borrowing of Advances. "TYPE" has the meaning specified in the definition of "Advance". "U.S.$" and "U.S. DOLLARS" means lawful money of the United States of America. "U.S. DOLLAR EURODOLLAR RATE" means, for any Interest Period for each U.S. Dollar Eurodollar Rate Advance comprising part of the same Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. Dollars are offered by the principal office of each of the Reference Banks in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such Borrowing and for a period equal to such Interest Period. The U.S. Dollar Eurodollar Rate for the Interest Period for each U.S. Dollar Eurodollar Rate Advance comprising part of the same Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Banks two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "U.S. DOLLAR EURODOLLAR RATE ADVANCE" means an Advance denominated in U.S. Dollars that bears interest determined by reference to the U.S. Dollar Eurodollar Rate, as provided in Section 2.06(a)(iii)(y). "U.S. LONG-TERM REVOLVING CREDIT AGREEMENT" means the Long-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001, and as may be further amended from time to time hereafter, among the Parent, the financial institutions party thereto, JPMorgan Chase Bank, as administrative agent and auction administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "U.S. SHORT-TERM REVOLVING CREDIT AGREEMENT" means the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated as of December 7, 2001, and as may be further amended from time to time hereafter, among the Parent, the financial institutions party thereto, JPMorgan Chase Bank, as administrative agent and auction administrative agent for such financial institutions, Citibank, N.A. and Fleet National 17 Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "UTILIZATION FEE PERIOD" means any period during the term of this Agreement commencing on the Effective Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Termination Date. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. COMPUTATION OF TIME PERIODS. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 1.03. ACCOUNTING AND OTHER TERMS. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, either (i) consistent with those principles applied in the preparation of the annual financial statements referred to in Section 4.01(e), or (ii) not so materially inconsistent with such principles that a covenant contained in Section 5.01 or 5.02 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (i) of this Section 1.03. "Include", "includes" and "including" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. SECTION 1.04. REFERENCES. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. SECTION 1.05. SCHEDULE III BANKS. Upon the assignment in accordance with Section 9.07 by any Lender that is a Schedule II chartered bank under the Bank Act (Canada) (a "Schedule II Lender") of the rights and obligations of such Schedule II Lender hereunder to its Lender Affiliate that is a Schedule III Bank, all references herein to such Schedule II Lender shall be deemed to be references to such Schedule III Bank. ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01. REVOLVING ADVANCES. (a) (a) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Advances to the Borrower from time to time on any Business Day during the period from the Effective Date to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set 18 forth opposite such Lender's name on Schedule III hereto, or, if such Lender has entered into any Assignment and Acceptance or Commitment Increase Agreement or a New Lender Agreement, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 9.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "Commitment"). Subject to Section 2.11(e) with respect to B/A Advances, each Borrowing consisting of Revolving Advances shall be in an aggregate amount that is (a) not less than Cdn.$5,000,000 in the case of a Borrowing comprised of Prime Rate Advances, (b) not less than U.S.$5,000,000 in the case of a Borrowing comprised of Base Rate Advances, (c) not less than Cdn.$10,000,000 in the case of a Borrowing comprised of Cdn. Dollar Eurodollar Rate Advances, and (d) not less than U.S.$10,000,000 in the case of a Borrowing comprised of U.S. Dollar Eurodollar Rate Advances (or, in the case of a Borrowing of Prime Rate Advances or Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Notwithstanding the foregoing, a Foreign Lender shall not accept Bankers' Acceptances, and shall not be required to make Prime Rate Advances and no Lender (other than a Foreign Lender pursuant to Section 2.11(i)) shall be required to make Cdn. Dollar Eurodollar Rate Advances. If a Borrowing of Prime Rate Advances is requested, a Foreign Lender will participate in such Borrowing by way of Base Rate Advances. If a Borrowing by way of Bankers' Acceptances is requested, a Foreign Lender will participate in such Borrowing by way of Cdn. Dollar Eurodollar Rate Advances in accordance with Section 2.11(i). Within the limits of each Lender's Commitment, the Borrower may make more than one Borrowing on any Business Day and may borrow, prepay pursuant to Section 2.10, and reborrow under this Section 2.01(a). (b) TERM ADVANCES. On the Revolving Commitment Termination Date (unless the Commitments shall have been terminated in full pursuant to Article 6), each outstanding Revolving Advance will Continue as a Term Advance of like amount. Term Advances that are repaid or prepaid, and not Continued, may not be reborrowed; provided, however, that Advances may be Continued, at the election of the Borrower, through the Final Maturity Date by the delivery of a Notice of Continuation. Eurodollar Rate Advances and B/A Loans for which the Interest Period shall not have terminated as of the Revolving Commitment Termination Date shall be Continued as Eurodollar Rate Advances or B/A Loans, as the case may be, for the then applicable Interest Period and Prime Rate Advances and Base Rate Advances shall be Continued as Prime Rate Advances or Base Rate Advances, as applicable, after the Revolving Commitment Termination Date, unless the Borrower shall have elected otherwise by delivery of a Notice of Continuation. In accordance with Section 2.08, the Borrower may elect to Continue Borrowings as Borrowings of the same or a different Type or, in the case of a Eurodollar Rate Advance or B/A Advance, may elect Interest Periods or Contract Periods therefor; provided that the Borrower shall not be entitled to elect to Continue any Borrowings if the Interest Period or Contract Period requested with respect thereto would end after the Final Maturity Date. After the Revolving Commitment Termination Date, no Lender shall have any further Commitment to make additional Advances. SECTION 2.02. MAKING THE ADVANCES. (a) (a) Each Borrowing shall be made on notice by the Borrower to the Administrative Agent (a "NOTICE OF BORROWING") received by the Administrative Agent: 19 (i) in the case of a proposed Borrowing comprised of Prime Rate Advances or Base Rate Advances on the day of notice, provided that notice is received by the Administrative Agent not later than 9:00 A.M. (Calgary local time) on the Business Day of such proposed Borrowing; (ii) in the case of a proposed Borrowing comprised of Eurodollar Rate Advances, not later than 10:00 a.m. (Calgary local time) on the third Business Day prior to the date of such proposed Borrowing; and (iii) in the case of a proposed Borrowing comprised of B/A Advances, not later than 10:00 a.m. (Calgary local time) on the second Business Day prior to the date of such proposed Borrowing or, if such Borrowing shall include B/A Loans, on the third Business Day prior to the date of such proposed Borrowing. Each Notice of Borrowing shall be by telecopy, telefax or other teletransmission or by telephone (and if by telephone, confirmed promptly by telecopier, telefax or other teletransmission), in substantially the form of Exhibit B hereto, specifying therein the requested (w) date of such Borrowing, (x) Type of Advances comprising such Borrowing and, additionally, whether such Borrowing consists of Revolving Advances or Term Advances, (y) aggregate amount of such Borrowing, and (z) in the case of a Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period and currency for each such Advance, and in the case of a B/A Advance, the initial Contract Period for such B/A Advance. Promptly following receipt of the Notice of Borrowing (and in any event not later than 10:00 a.m. (Calgary local time) on the date of the proposed Borrowing), the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Advance to be made as part of the requested Borrowing. Each Lender shall, before 11:00 a.m. (Calgary local time) on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent in care of its Payment Office, or at such other location designated by notice from the Administrative Agent to the Lenders pursuant to Section 9.02, in same day funds, such Lender's ratable portion of such Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, but no later than 12:00 noon (Calgary local time) on the same date the Administrative Agent will make such funds available to the Borrower at the Payment Office of the Administrative Agent, or at any account of the Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b) If no election as to the Type or duration of Advance is specified, then the requested Advance shall be a Prime Rate Advance (if denominated in Cdn. Dollars) or a Base Rate Advance (if denominated in U.S. Dollars). If no currency is specified, the Advance shall be denominated in Cdn. Dollars. (c) Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing which the related Notice of Borrowing specified is to be comprised of Eurodollar Rate Advances, if such Advances are not made as a result of any failure to fulfill on or before the date specified for such Borrowing the applicable conditions set forth in Article 3, the Borrower shall indemnify each Lender against any loss, cost or expense incurred 20 by such Lender as a result of such failure, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing. (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing in accordance with subsections (a) and (c) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Prime Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's Advance to the Borrower as part of such Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing. SECTION 2.03. FEES. (a) FACILITY FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee on the average daily amount of such Lender's Commitment, whether or not used or deemed used, from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender in the case of each other Lender, in each case until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment and on the Termination Date, at a rate per annum equal to the Facility Fee Percentage in effect from time to time. (b) UTILIZATION FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (i) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 25% and less than or equal to 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.125% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period; and (ii) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.25% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period. If a utilization fee is owing in respect of any Utilization Fee Period, such fee shall be payable on the last day of such Utilization Fee Period. 21 (c) AGENCY FEE. The Borrower agrees to pay to the Administrative Agent, for its own account, such agency fees as may be separately agreed to in writing by the Borrower and the Administrative Agent, such fees to be in the amounts and payable on the dates as may be so agreed to. SECTION 2.04. REDUCTION OF THE COMMITMENTS. The Borrower shall have the right, upon at least three Business Days' written notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the Commitments of the Lenders (being the amount by which such Commitments exceed the aggregate outstanding principal amount of all Advances), provided that each partial reduction shall be in the aggregate amount of Cdn.$10,000,000 or any whole multiple of Cdn.$1,000,000 in excess thereof. SECTION 2.05. REPAYMENT OF ADVANCES. (a) (a) The Borrower shall repay to each Lender on the Final Maturity Date the aggregate principal amount of the Advances, together with accrued interest thereon, then owing to such Lender. (b) Subject to Section 2.05(c), after the Revolving Commitment Termination Date, the Borrower shall repay the principal amount of the Advances in equal semi-annual installments, each in an amount equal to two and one-half percent (2.5%) of the aggregate outstanding principal amount of the Advances on the Revolving Commitment Termination Date. Such installments shall be due and payable on each June 30 and December 31 of each year, the first such installment being due and payable on the first December 31 occurring after the Revolving Commitment Termination Date, with the final installment due and payable on the Final Maturity Date in an amount equal to the aggregate unpaid principal amount of such Advances outstanding on the Final Maturity Date. (c) Subject to Article 6, but notwithstanding any other provision of this Agreement, the Borrower shall not be required to repay more than 25% of the principal amount (as defined in the Income Tax Act) of the Advances made to it prior to five years and one day after the Revolving Commitment Termination Date, including, but not limited to payments under Section 2.05(b) and Section 2.10(b). (d) The Borrower shall provide written notice to the Administrative Agent substantially in the form of Exhibit C hereto of any repayments pursuant to this Section 2.05 at least 2 Business Days prior to such repayment. SECTION 2.06. INTEREST ON ADVANCES. (a) ORDINARY INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender from the date of such Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i) PRIME RATE ADVANCES. During such periods as such Advance is a Prime Rate Advance, a rate per annum equal at all times to the Prime Rate in effect from time to time plus, following the Revolving Commitment Termination Date, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during 22 such periods and on the date such Prime Rate Advance shall be Continued or due (whether at stated maturity, by acceleration or otherwise). (ii) BASE RATE ADVANCES. During such periods as such Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time plus, following the Revolving Commitment Termination Date, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Continued or due (whether at stated maturity, by acceleration or otherwise). (iii) EURODOLLAR RATE ADVANCES. During such periods as such Advance is (x) a Cdn. Dollar Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the Cdn. Dollar Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time plus, following the Revolving Commitment Termination Date, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such Advance is Continued as a Prime Rate Advance on any date other than the last day of any Interest Period for such Advance, on the date of such Continuation or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the applicable Lender of the amount of unpaid interest accrued on such Advance to the date of such Continuation and (y) a U.S. Dollar Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Advance to the sum of the U.S. Dollar Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time plus, following the Revolving Commitment Termination Date, as additional interest in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such Advance is Continued as a Base Rate Advance on any date other than the last day of any Interest Period for such Advance, on the date of such Continuation or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the applicable Lender of the amount of unpaid interest accrued on such Advance to the date of such Continuation. (iv) B/A ADVANCES. Each Advance comprised of Bankers' Acceptances shall be subject to an Acceptance Fee, payable by the Borrower on the date of acceptance of the relevant B/A and computed as set forth in the definition of "Acceptance Fee" in Section 1.01 plus, following the Revolving Commitment Termination Date, as an additional acceptance fee in lieu of the facility fee, the Facility Fee Percentage in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such B/A Advance shall be Continued or due (whether at stated maturity, by acceleration or otherwise). 23 (v) ADDITIONAL INTEREST. In addition to amounts payable under clause (i), (ii), (iii) or (iv) above in respect of any Advance following the Revolving Commitment Termination Date, the Borrower shall pay to each Lender hereunder as additional interest an amount in lieu of the utilization fee equal to 0.25% per annum on the average daily amount of such Lender's Term Advances during any period (each such period, an "ADDITIONAL INTEREST PERIOD") during the term of this Agreement commencing on the Termination Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Final Maturity Date (or, if any Term Advances remain outstanding after the Final Maturity Date, such later date on which all such Advances are repaid in full). Additional interest owing in respect of any Additional Interest Period shall be payable on the last day of such Additional Interest Period; provided that additional interest owing after the Final Maturity Date shall be payable on demand. (b) DEFAULT INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such Advance immediately prior to the date on which such amount became due and (ii) from and after the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, and at all times in the case of each Prime Rate Advance and each Base Rate Advance, to 1% per annum above the Prime Rate or Base Rate, as applicable, in effect from time to time. (c) INTEREST ACT CANADA. For the purposes of the Interest Act (Canada) and disclosure thereunder, whenever any interest or fee to be paid hereunder or in connection herewith is to be calculated on the basis of any period of time that is less than a calendar year, the yearly rate of interest to which the rate used in such calculation is equivalent is the rate so used multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by 360 or 365, as applicable. The rates of interest under this Agreement are nominal rates, and not effective rates or yields. The principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement. (d) NO CRIMINAL RATE. If any provision of this Agreement would oblige the Borrower to make any payment of interest or other amount payable to any Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by that Lender of "interest" at a "criminal rate" (as such terms are construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by that Lender of "interest" at a "criminal rate", such adjustment to be effected, to the extent necessary (but only to the extent necessary), as follows: 24 (i) first, by reducing the amount or rate of interest or the amount or rate of any Acceptance Fee required to be paid to the affected Lender under Section 2.06(a)(iv); and (ii) thereafter, by reducing any fees, commissions, premiums and other amounts required to be paid to the affected Lender which would constitute interest for purposes of Section 347 of the Criminal Code (Canada). SECTION 2.07. [INTENTIONALLY OMITTED] SECTION 2.08. RATE DETERMINATION. (a) All interest hereunder shall be payable for the actual number of days elapsed (including the first day but excluding the last day). Any Advance that is repaid on the same day on which it is made shall bear interest for one day unless such repayment and notice thereof are received by 12:00 noon, Toronto, Ontario time, on such day. The applicable Prime Rate, Base Rate, Eurodollar Rate or Discount Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. (b) Each Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. If any one or more of the Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining any such interest rate, the Administrative Agent shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. Each Schedule II/III Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Discount Rate. If any one or more of the Schedule II/III Reference Banks shall not furnish such timely information to the Administrative Agent for the purpose of determining such Discount Rate, the Administrative Agent shall determine such Discount Rate on the basis of timely information furnished by the remaining Schedule II/III Reference Banks. (c) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i), (ii) or (iii), the applicable rate, if any, furnished by each Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(a)(iii), and the applicable Discount Rate, if any, furnished by each Schedule II/III Reference Bank for the purpose of determining the applicable Discount Rate under Section 2.11(f). (d) If fewer than two Reference Banks furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any applicable Advances, (i) the Administrative Agent shall give the Borrower and each Lender prompt notice by telephone (confirmed in writing) that the interest rate cannot be determined for such applicable Advances, (ii) (x) to the extent such applicable Advances are Cdn. Dollar Eurodollar Rate Advances, each such Advance will automatically, on the last day of the then existing Interest Period therefor, Continue as a Prime Rate Advance (or if such Advance is then a Prime Rate Advance, will Continue as a Prime Rate Advance), and (y) to the extent such 25 applicable Advances are U.S. Dollar Eurodollar Rate Advances, each such Advance will automatically, on the last day of the then existing Interest Period therefor, Continue as a Base Rate Advance (or if such Advance is then a Base Rate Advance, will Continue as a Base Rate Advance), and (iii) the obligations of the Lenders to make, or to Continue Advances as, Cdn. Dollar Eurodollar Rate Advances or U.S. Dollar Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e) If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that as a result of conditions in or generally affecting the relevant market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon: (i) (x) to the extent such Advances are Cdn. Dollar Eurodollar Rate Advances, each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Continue as a Prime Rate Advance and (y) to the extent such Advances are U.S. Dollar Eurodollar Rate Advances, each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Continue as a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Continue Advances as, Cdn. Dollar Eurodollar Rate Advances or U.S. Dollar Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (f) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "INTEREST PERIOD" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and (i) to the extent such Advances are Cdn. Dollar Eurodollar Rate Advances, such Advances will automatically, on the last day of the then existing Interest Period therefor, Continue as Cdn. Dollar Eurodollar Rate Advances with an Interest Period of one month and (ii) to the extent such Advances are U.S. Dollar Eurodollar Rate Advances, such Advances will automatically, on the last day of the then existing Interest Period therefor, Continue as U.S. Dollar Eurodollar Rate Advances with an Interest Period of one month. If the Borrower shall fail to select the duration of any Contract Period for any B/A Advances in accordance with the provisions contained in the definition of "CONTRACT PERIOD" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such B/A Advances will be automatically Continued as B/A Advances with a Contract Period of one month. (g) On the date on which the aggregate unpaid principal amount of Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than 26 Cdn.$5,000,000, such Advances shall, (i) if they are (x) Cdn. Dollar Eurodollar Rate Advances, automatically Continue as Prime Rate Advances and (y) U.S. Dollar Eurodollar Rate Advances, automatically Continue as Base Rate Advances, and on and after such date the right of the Borrower to Continue such Advances as Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such Advance shall be, or be elected to be Continued as, Cdn. Dollar Eurodollar Rate Advances or U.S. Dollar Eurodollar Rate Advances, as applicable, having the same Interest Period as Eurodollar Rate Advances of the same Type comprising another Borrowing or other Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances of the same Type shall, or upon such Continuation will, equal or exceed, with respect to Cdn. Dollar Eurodollar Rate Advances, Cdn. $10,000,000 or, with respect to U.S. Dollar Eurodollar Rate Advances, U.S.$10,000,000, the Borrower shall have the right to Continue all such Advances as Eurodollar Rate Advances of the same Type having such Interest Period, and (ii) if they are B/A Advances, automatically Continue as Prime Rate Advances, and on and after such date the right of the Borrower to Continue such Advances as B/A Advances shall terminate; provided, however, that if and so long as each such Advance shall be, or be elected to be Continued as, B/A Advances having the same Contract Period as B/A Advances comprising another Borrowing or other Borrowings, and the aggregate unpaid principal amount of all such B/A Advances shall, or upon Continuation will, equal or exceed Cdn.$10,000,000, the Borrower shall have the right to Continue all such B/A Advances as B/A Advances having such Contract Period. SECTION 2.09. VOLUNTARY CONTINUATION OF ADVANCES. The Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than the time specified in Section 2.02 for the making of an Advance of the same Type as that of the existing Advances being Continued if such Advance were being made on the date of the proposed Continuation, and subject to the provisions of Section 2.08, 2.12 and 2.14, Continue all Advances of one Type comprising the same Borrowing as Advances of another Type in the same currency; provided, however, that any Continuation of any Eurodollar Rate Advances as Prime Rate Advances or Base Rate Advances, as the case may be, made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 9.04(b), and any Continuation of any B/A Advances as Prime Rate Advances made on any day other than the last day of the Contract Period for such B/A Advance shall be subject to the provisions of Section 2.11. Each such notice of a Continuation (a "Notice of Continuation") shall, within the restrictions specified above, specify in substantially the form attached hereto as Exhibit B (i) the date of such Continuation, (ii) the Advances to be Continued, (iii) if such Continuation is as Eurodollar Rate Advances, the Type of Eurodollar Rate Advance and the duration of the Interest Period for each such Eurodollar Rate Advance, and (iv) if such Continuation is as B/A Advances, the duration of the Contract Period for each such B/A Advance. SECTION 2.10. PREPAYMENTS. (a) The Borrower may prepay the Revolving Advances or the Term Advances, provided however that the Borrower may not prepay any Bankers' Acceptances or B/A Loans; provided, however, that the Borrower may defease any B/A or B/A Loan by depositing with the Administrative Agent an amount that, together with interest accruing thereon to the end of the Contract Period or Interest Period (as applicable) therefor, is sufficient to pay such maturing Bankers' Acceptances or B/A Loans when due. The Borrower may, upon (i) in the case of Eurodollar Rate Advances, at least three Business Days notice or (ii) in the case of Prime Rate Advances or Base Rate Advances, telephonic notice not 27 later than 8:00 a.m. (Calgary local time) on the date of prepayment followed as promptly as practicable by written notice, to the Administrative Agent which specifies the proposed date and aggregate principal amount of the prepayment and the Type of Advances to be prepaid, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the Advances comprising the same Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than Cdn.$5,000,000 or an integral multiple of Cdn.$1,000,000 in excess thereof in the case of Prime Rate Advances and Cdn. Dollar Eurodollar Rate Advances, and U.S.$5,000,000 or an integral multiple of U.S.$1,000,000 in excess thereof in the case of Base Rate Advances and U.S. Dollar Eurodollar Rate Advances, and (y) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 9.04(b); provided, further, however, that the Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. (b) If on any date, after giving effect to all Advances and all repayments and prepayments to occur on such date, and based on the Exchange Rate then in effect, the Administrative Agent determines that the aggregate Cdn. Dollar Equivalent of the outstanding Advances hereunder shall have exceeded for more than three consecutive Business Days an amount equal to 105% of the total Commitments of the Lenders under the Agreement, the Administrative Agent shall notify the Borrower of such occurrence and the Borrower shall on the next succeeding Business Day prepay Advances in an aggregate amount sufficient to eliminate such excess. SECTION 2.11. BANKERS' ACCEPTANCES. (a) Subject to the terms and conditions of this Agreement, the Borrower may request a Borrowing by presenting drafts for acceptance and, if applicable, purchase, as B/As by the Lenders. (b) No Contract Period with respect to a B/A to be accepted and, if applicable, purchased, as a Revolving Advance shall extend beyond the Revolving Commitment Termination Date and no Contract Period with respect to a B/A to be accepted and, if applicable, purchased, as a Term Advance shall extend beyond the Final Maturity Date. (c) To facilitate availment of B/A Advances, the Borrower hereby appoints each Lender as its attorney to sign and endorse on its behalf (in accordance with a Notice of Borrowing or Notice of Continuation relating to a B/A Advance), in handwriting or by facsimile or mechanical signature as and when deemed necessary by such Lender, blank forms of B/As in the form requested by such Lender. In this respect, it is each Lender's responsibility to maintain an adequate supply of blank forms of B/As for acceptance under this Agreement. The Borrower recognizes and agrees that all B/As signed and/or endorsed by a Lender on behalf of the Borrower shall bind the Borrower as fully and effectually as if signed in the handwriting of and duly issued by the proper signing officers of the Borrower. Each Lender is hereby authorized (in accordance with a Notice of Borrowing or Notice of Continuation relating to a B/A Advance) to issue such B/As endorsed in blank in such face amounts as may be determined by such Lender; provided that the aggregate amount thereof is equal to the aggregate amount of B/As required to 28 be accepted and purchased by such Lender. No Lender shall be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except the gross negligence or wilful misconduct of the Lender or its officers, employees, agents or representatives. Each Lender shall maintain a record with respect to B/As (i) received by it in blank hereunder, (ii) voided by it for any reason, (iii) accepted and purchased by it hereunder, and (iv) canceled at their respective maturities. On request by or on behalf of the Borrower, a Lender shall cancel all forms of B/As which have been pre-signed or pre-endorsed on behalf of the Borrower and that are held by such Lender and are not required to be issued in accordance with the Borrower's irrevocable notice. Alternatively, the Borrower agrees that, at the request of the Administrative Agent, the Borrower shall deliver to the Administrative Agent a "depository note" which complies with the requirements of the Depository Bills and Notes Act (Canada), and consents to the deposit of any such depository note in the book-based debt clearance system maintained by the Canadian Depository for Securities. (d) Drafts of the Borrower to be accepted as B/As hereunder shall be signed as set forth in this Section 2.11. Notwithstanding that any Person whose signature appears on any B/A may no longer be an authorized signatory for any Lender or the Borrower at the date of issuance of a B/A, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such B/A so signed shall be binding on the Borrower. (e) Promptly following the receipt of a Notice of Borrowing or Notice of Continuation specifying a Borrowing or Continuation of a Borrowing by way of B/As, the Administrative Agent shall so advise the Lenders and shall advise each Lender of the aggregate face amount of the B/As to be accepted by it and the applicable Contract Period (which shall be identical for all Lenders). In the case of Advances comprised of B/A Advances, the aggregate face amount of the B/As to be accepted by a Lender shall be in a minimum aggregate amount of Cdn.$100,000 and shall be a whole multiple of Cdn.$100,000, and such face amount shall be in the Lenders' pro rata portions of such Borrowing, provided that the Administrative Agent may in its sole discretion increase or reduce any Lender's portion of such B/A Advance to the nearest Cdn.$100,000 without reducing the overall Commitments. (f) The Borrower may specify in a Notice of Borrowing or Notice of Continuation that it desires that any B/As requested by such Notice of Borrowing or Notice of Continuation be purchased by the Lenders, in which case the Lenders shall, upon acceptance of a B/A by a Lender, purchase, or arrange for the purchase of, each B/A from the Borrower at the Discount Rate for such Lender applicable to such B/A accepted by it and provide to the Administrative Agent the Discount Proceeds for the account of the Borrower. The Acceptance Fee payable by the Borrower to a Lender under Section 2.06(iv) in respect of each B/A accepted by such Lender shall be set off against the Discount Proceeds payable by such Lender under this Section 2.11. (g) Where the Borrower so specifies in its Notice of Borrowing or Notice of Continuation, it shall make its own arrangements for the marketing of B/As, in which case, by subsequent notice to the Administrative Agent, it shall provide the Administrative Agent, who shall in turn notify each Lender, with information as to the discount proceeds payable by the purchasers of the B/As and the party to whom delivery of the B/As by each Lender is to be made 29 against delivery to each Lender of the applicable discount proceeds, but if it does not do so, the Borrower shall initiate a telephone call to the Administrative Agent by 9:00 a.m. (Calgary local time) on the date of advance, and provide such information to the Administrative Agent. Any such telephonic advice shall be confirmed by a written notice by the Borrower to the Administrative Agent prior to 2:00 p.m. (Calgary local time) on the same day. (h) Each Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all B/As accepted and purchased by it. (i) If a Lender is not a bank listed on Schedule I, II or III of the Bank Act (Canada) or if a Lender notifies the Administrative Agent in writing that it is otherwise unable to accept bankers' acceptances, such Lender shall give notice to such effect to the Administrative Agent prior to 10:00 a.m., (Calgary local time), on the date of the requested credit extension (which notice may, if so stated therein, remain in effect with respect to subsequent requests for extension of credit by way of Bankers' Acceptance until revoked by notice to the Administrative Agent) and shall make available to the Administrative Agent, in accordance with Section 2.01 hereof prior to 11:00 a.m. (Calgary local time), on the date of such requested credit extension, a Canadian Dollar Eurodollar Rate Advance (a "BA LOAN") in the principal amount equal to such Lender's Commitment Percentage of the total amount of credit requested to be extended by way of Bankers' Acceptances. Such BA Loan shall have an Interest Period equal to the Contract Period of the Bankers' Acceptances for which it is a substitute and shall bear interest throughout the Interest Period applicable to such BA Loan at a rate per annum equal to the Canadian Dollar Eurodollar Rate plus the Eurodollar Rate Margin. Subject to repayment requirements, on the last day of the relevant Interest Period for such B/A Loan, the Borrower shall be entitled to Continue each such B/A Loan as another Type of Advance, or to roll over each such B/A Loan into another B/A Loan, all in accordance with the applicable provisions of this Agreement. (j) With respect to each B/A Advance, at or before 9:00 a.m. (Calgary local time) two Business Days before the last day of the Contract Period of such B/As, the Borrower shall notify the Administrative Agent by irrevocable telephone notice, followed by a notice of rollover in substantially the form set forth in Exhibit B hereto on the same day, if the Borrower intends to issue B/As on such last day of the Contract Period to provide for the payment of such maturing B/As. If the Borrower fails to notify the Administrative Agent of its intention to issue B/As on such last day of the Contract Period, the Borrower shall provide payment to the Administrative Agent on behalf of the Lenders of an amount equal to the aggregate face amount of such B/As on the last day of the Contract Period of such B/As. If the Borrower fails to make such payment, such maturing B/As shall be deemed to have been Continued on the last day of such Contract Period as a Prime Rate Advance in an amount equal to the face amount of such B/As. (k) The Borrower waives presentment for payment and any other defense to payment of any amounts due to a Lender in respect of a B/A accepted and purchased by it pursuant to this Agreement which might exist solely by reason of such B/A being held, at the maturity thereof, by such Lender in its own right, and the Borrower agrees not to claim any days of grace if such Lender, as holder, sues the Borrower on the B/A for payment of the amount payable by the Borrower thereunder. On the last day of the Contract Period of a B/A, or such earlier date as may be required or permitted pursuant to the provisions of this Agreement, the 30 Borrower shall pay the Lender that has accepted and purchased such B/A the full face amount of such B/A and, after such payment, the Borrower shall have no further liability in respect of such B/A and such Lender shall be entitled to all benefits of, and be responsible for all payments due to third parties under, such B/A. (l) Except as required by any Lender upon the occurrence of an Event of Default, no B/A Advance may be repaid by the Borrower prior to the expiry date of the Contract Period applicable to such B/A Advance. SECTION 2.12. INCREASED COSTS. (a) If, due to either (i) the introduction after the Effective Date of, or any change after the Effective Date (including any change by way of imposition or increase of reserve requirements or assessments) in or in the interpretation of, any law or regulation or (ii) the compliance with any guideline or request issued or made after the Effective Date from or by any governmental authority (whether or not having the force of law), (the occurrence of any of the foregoing events being herein referred to as a "change in law") in each case above other than with respect to matters covered by Section 2.13 or 2.16, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.12(a) (except as otherwise expressly provided above in this Section 2.12(a)). A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Borrower of any increased costs pursuant to this Section 2.12, the Borrower may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of a Eurodollar Rate Advance by the Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to the Advances of such Lender or Lenders during such Interest Period or portion thereof, and such Advances shall during such Interest Period or portion thereof be (x) Prime Rate Advances in lieu of Cdn. Dollar Eurodollar Rate Advances and (y) Base Rate Advances in lieu of U.S. Dollar Eurodollar Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected Advances to an Affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrower under this Section 2.12, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (b) In the event that any Lender shall have determined (which determination shall be reasonably exercised and shall, absent manifest error, be final, conclusive and binding upon all parties) at any time that the making of or continuance of any Advance denominated in a currency other than Cdn. Dollars has become unlawful as a result of compliance by such Lender 31 in good faith with any applicable law, or by any applicable guideline or order (whether or not having the force of law), or impossible as a result of the market unavailability of such currency, then, in any such event, such Lender shall give prompt notice (by telephone and confirmed in writing) to the Borrower and the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to the other Lenders). Upon the giving of the notice to the Borrower and the Administrative Agent, the Borrower's right to request (by Continuation or otherwise), and such Lender's obligation to make, Advances denominated in a currency other than Cdn. Dollars shall be immediately suspended, and thereafter, any requested Borrowings of Advances denominated in a currency other than Cdn. Dollars shall, as to such Lender only, be deemed to be a request for a Prime Rate Advance, and if the affected Advance or Advances are still outstanding, the Borrower shall immediately, or if permitted by applicable law, no later than the latest date permitted thereby, upon at least one Business Days' prior written notice to the Administrative Agent and the affected Lender, Continue each such Advance denominated in a currency other than Cdn. Dollars as a Prime Rate Advance, provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 2.12(b). SECTION 2.13. INCREASED CAPITAL. If either (i) the introduction of, or any change in or in the interpretation of, any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender (including any determination after the Effective Date by any such central bank, governmental authority or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less) and such Lender determines that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Borrower of the certificate referred to in the last sentence of this Section 2.13 by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.13 (except as otherwise expressly provided above in this Section 2.13). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Borrower and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. SECTION 2.14. ILLEGALITY. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make 32 it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for any Lender or its Applicable Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances of a particular Type or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Borrower and the Administrative Agent, suspend the right of the Borrower to elect Eurodollar Rate Advances of such Type from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Continue all such Eurodollar Rate Advances of such Lender as Prime Rate Advances or Base Rate Advances, as applicable, at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Continuation shall continue until such Lender notifies the Borrower and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances of such Type has been suspended under this Section 2.14, all Notices of Borrowing specifying Advances of such Type shall be deemed, as to such Lender, to be requests for Prime Rate Advances or Base Rate Advances, as applicable. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected Advances to an Affiliate) to avoid any such illegality, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. SECTION 2.15. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make each payment hereunder (including under Section 2.03, 2.05, or 2.06) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 2:00 p.m. (Calgary local time) without set-off, counterclaim, or any other deduction whatsoever, on the day when due in (i) Cdn. Dollars, in the case of all fees required to be paid under Section 2.03, and all amounts payable (whether principal or interest) in respect of Prime Rate Advances and Cdn. Dollar Eurodollar Rate Advances and all amounts payable (including the Acceptance Fee) in respect of B/A Advances, and (ii) in U.S. Dollars, in the case of amounts payable (whether principal or interest) in respect of Base Rate Advances and U.S. Dollar Eurodollar Rate Advances, to the Administrative Agent in care of its Payment Office, or at such other location designated by notice to the Borrower from the Administrative Agent and agreed to by the Borrower, in same day funds. Each such payment made by the Borrower for the account of any Lender hereunder, when so made to the Administrative Agent, shall be deemed duly made for all purposes of this Agreement and the Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the bankruptcy, insolvency or reorganization of the Borrower or otherwise, such payment shall be deemed not to have been so made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to Section 2.12, 2.13, 2.14, 2.16, 9.04(b) or 9.04(c)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 9.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make 33 all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) All computations of interest based on the Prime Rate and under clause (i) of the definition of "Base Rate" and all computations of Acceptance Fees (in the case of Bankers' Acceptances) and facility fees and utilization fees (or amounts in lieu thereof) shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate or the Effective Federal Funds Rate shall be made by the Administrative Agent, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.12, 2.13, 2.14, 2.16, 9.04(b) or 9.04(c), by each Lender with respect to its own Advances) of an interest rate or an increased cost, loss or expense or increased capital or of illegality or taxes hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fees, as the case may be; provided, however, that except with respect to the Final Maturity Date, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Prime Rate for such day. SECTION 2.16. TAXES. (a) Any and all payments by the Borrower or the Parent hereunder or under the Notes shall be made in accordance with Section 2.15, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, imposed or levied by or on behalf of the Government of Canada or of any province or territory thereof or by any authority or agency therein or thereof having power to tax (hereinafter "CANADIAN TAXES"), unless the Borrower is required to withhold or deduct Canadian Taxes by law or by the interpretation or administration thereof. If the Borrower is so required to withhold or deduct any amount for or on account of Canadian Taxes from any payment made under or with respect to this Agreement or the Notes, the Borrower will pay to each Indemnified Party as additional interest such additional amounts as may be necessary so that the net amount received by each Indemnified Party after such 34 withholding or deduction (and after deducting any Canadian Taxes on such additional amounts) will not be less than the amount the Indemnified Party would have received if such Canadian Taxes had not been withheld or deducted. No additional amounts will be payable with respect to a payment made to an Indemnified Party under this Section 2.16(a) where such Indemnified Party (i) is subject to Canadian Taxes by reason of the Indemnified Party being a resident, domicile or national of, or engaging in business or maintaining a permanent establishment or other physical presence in or otherwise having some connection with Canada or any province or territory thereof otherwise than by the mere making or holding of the Notes or by the receipt of payments thereunder, or (ii) is subject to Canadian Taxes by reason of its failure to comply with Section 2.16(g), provided, that should an Indemnified Party become subject to Canadian Taxes because of its failure to deliver a form required hereunder, the Borrower or the Parent shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Canadian Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Borrower and the Parent from any Canadian Taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrower or the Parent as a result of the failure of the Borrower or the Parent to comply with its obligations under this Section 2.16(a) in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.16. The Borrower will also make such withholdings or deductions and remit the full amount deducted or withheld to the relevant authority in accordance with applicable law. (b) Any and all payments by the Parent (or by the Borrower to the extent the Borrower causes a payment to be made from any jurisdiction other than Canada) hereunder or under the Notes shall be made in accordance with Section 2.15, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto imposed or levied by or on behalf of any jurisdiction outside Canada, excluding in the case of each Indemnified Party all taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, imposed on or determined by reference to its income or profits, and all franchise taxes and all other taxes, levies, imposts, deductions, charges or withholdings in effect at the time that such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, and liabilities with respect thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "NON-CANADIAN TAXES" and, together with Canadian Taxes, "TAXES"). If the Parent (or the Borrower, as applicable) shall be required by law to deduct any Non-Canadian Taxes from or in respect of any sum payable by it hereunder or under any Note to any Indemnified Party, (i) the sum payable by it shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Parent (in the case of payments by it) (or Borrower (in the case of payments by it) or the Administrative Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Parent (in the case of payments by it) (or the Borrower (in the case of payments by it) or the Administrative Agent, as applicable) 35 shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Parent shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this subsection (b) (or pursuant to Section 2.16(e), except to the extent Section 2.16(e) relates to Other Taxes) to any Indemnified Party that has failed to submit any form or certificate that it was required to file or provide pursuant to Section 2.16(f) and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Non-Canadian Taxes because of its failure to deliver a form required hereunder, the Parent shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Non-Canadian Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Parent from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Parent as a result of the failure of the Parent to comply with its obligations under clauses (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.16. (c) If any Indemnified Party receives a net credit or refund in respect of Taxes or amounts paid pursuant to this Section 2.16 by the Borrower or the Parent, it shall promptly notify the Borrower or the Parent of such net credit or refund and shall promptly pay such net credit or refund to the Borrower or the Parent, provided that the Borrower and the Parent agree to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable is required to repay it. (d) In addition, the Parent and the Borrower agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (e) The Borrower or the Parent will indemnify each Indemnified Party for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16 but excluding Canadian Taxes to the extent that such Indemnified Party is described in either Section 2.16(a)(i) or (ii) hereof) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to provide any form or certificate that it was required to provide either to the Borrower pursuant to subsection (g) below or to the Parent pursuant to either subsection (f) or (g) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (f) On or prior to the date on which each Indemnified Party that is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) executes this Agreement or otherwise becomes an "Indemnified Party" hereunder, such Indemnified Party shall provide the Parent and the Administrative Agent with U.S. Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by 36 the U.S. Internal Revenue Service, certifying, if it is entitled to so certify, that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Parent indicating that all payments to be made to such Indemnified Party hereunder are fully exempt from such taxes, if such is the case. Thereafter and from time to time, each such Indemnified Party shall submit to the Parent and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by the Parent to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party hereunder or under the Notes, including fees, if the particular Indemnified Party is eligible for such exemption. Upon the request of the Parent from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Parent a certificate to the effect that it is such a United States person. If any Indemnified Party determines that it is not fully exempt from United States withholding taxes with respect to all payments to be received hereunder and is therefore unable to submit to the Parent any form or certificate that such Indemnified Party would otherwise be obligated to submit pursuant to this subsection (f), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted because it is no longer entitled to such an exemption, such Indemnified Party shall promptly notify the Parent and the Administrative Agent of such fact. (g) In the event that, as a result of a Change in Law, Canada or any political subdivision thereof introduces certification, identification, information, documentation or other reporting requirements which require compliance by an Indemnified Party as a pre-condition to an exemption from withholding on Canadian Taxes for any payment made from Canada by the Borrower or the Parent, hereunder or under the Notes (the "CANADIAN CERTIFICATION REQUIREMENTS"), then such Indemnified Party shall provide the Parent, the Borrower and the Administrative Agent with any applicable forms, certificates or other documentation, as appropriate and as prescribed by the appropriate Canadian governmental authority, certifying, if it is entitled to so certify, that such Indemnified Party is so exempt from Canadian withholding taxes with respect to payments to be made to such Indemnified Party, if such is the case. Thereafter and from time to time, each such Indemnified Party shall submit to the Parent, the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms, certificates or other documentation as may be notified by the Parent or by the Borrower to such Indemnified Party and required under then-current Canadian law or regulations (or the law or regulations of any political subdivision of Canada, if applicable) to avoid Canadian withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes, including fees, if the particular Indemnified Party is eligible for such exemption. If any Indemnified Party determines that it is not exempt from Canadian withholding taxes with respect to all payments to be received hereunder and is therefore unable to submit to the Parent, the Borrower or the Administrative Agent any form, certificate or other documentation that such Indemnified Party would otherwise be obligated to submit pursuant to this subsection (g), or that such Indemnified Party is required to withdraw or cancel any such form, certificate or documentation previously submitted because it is no longer entitled to such an exemption, then such Indemnified Party shall promptly notify the Parent, the Borrower and the Administrative Agent of such fact. The Borrower and the Parent 37 acknowledge that no such Canadian Certification Requirements currently exist under Canadian law. The obligations of each Indemnified Party under this Section 2.16(g) shall not be effective with respect to such Indemnified Party unless and until either the Parent, the Borrower or the Administrative Agent provides written notice to such Indemnified Party of any such Canadian Certification Requirements and extends to such Indemnified Party a reasonable amount of time, not to exceed 30 days, to comply with any such requirements. (h) Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.16 shall use its best reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (i) Without prejudice to the survival of any other agreement of the Borrower and the Parent hereunder, the agreements and obligations of the Borrower, the Parent and each Indemnified Party contained in this Section 2.16 shall survive the payment in full of principal and interest hereunder and under the Notes. SECTION 2.17. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances made by it (other than pursuant to Section 2.12, 2.13, 2.14, 2.16, 9.04(b) or 9.04(c)) in excess of its ratable share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the amount of the participation purchased from such Lender as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (A) the amount of such Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. SECTION 2.18. EVIDENCE OF DEBT. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Advance made by such Lender hereunder, including the amounts of principal and interest payable and paid to such lender from time to time hereunder. (b) The Administrative Agent shall maintain accounts and records in which it shall record (i) the amount of each Advance made hereunder, the type of Advance and, in the 38 cases of B/A Advances and Eurodollar Rate Advances, the relevant Contract Period or Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to Sections 2.18(a) and (b) shall be conclusive evidence (absent manifest error) of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Advances in accordance with the terms of this Agreement. In the event of a conflict between the records maintained by the Administrative Agent and any Lender, the records maintained by the Lender shall govern. Any Lender may request that Loans (other than B/As) made by it be evidenced by a Note. In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and substantially in the form attached as Exhibit A hereto. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.07) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if such Note is a registered Note, to such payee and its registered assigns). SECTION 2.19. USE OF PROCEEDS. Proceeds of the Advances may be used for general corporate purposes of the Borrower and its Subsidiaries and of Parent and any of its other Subsidiaries, including for acquisitions and for payment of commercial paper issued by the Borrower or any such other Person. SECTION 2.20. INCREASE OF COMMITMENTS. (a) At any time after the Effective Date, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an increase of the aggregate Commitments by notice to the Administrative Agent in writing of the amount (the "Offered Increase Amount") of such proposed increase (such notice, a "Commitment Increase Notice"). Any such Commitment Increase Notice must offer each Lender the opportunity to subscribe for its pro rata share of the increased Commitments. If any portion of the increased Commitments is not subscribed for by the Lenders, the Borrower may, in its sole discretion, but with the consent of the Administrative Agent as to any Person that is not at such time a Lender (which consent shall not be unreasonably withheld), offer to any existing Lender or to one or more additional banks or financial institutions the opportunity to participate in all or a portion of such unsubscribed portion of the increased Commitments pursuant to paragraph (b) or (c) below, as applicable. (b) Any additional bank or financial institution that the Borrower selects to offer participation in the increased Commitments, and that elects to become a party to this Agreement and obtain a Commitment, shall execute a New Lender Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit E (a "NEW LENDER AGREEMENT"), whereupon such bank or financial institution (a "NEW LENDER") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, and the signature pages and Schedule III hereof shall be deemed to be amended to add the name and Commitment of such New Lender, provided 39 that the Commitment of any such New Lender shall be in an amount not less than Cdn.$5,000,000. (c) Any Lender that accepts an offer to it by the Borrower to increase its Commitment pursuant to this Section 2.20 shall, in each case, execute a Commitment Increase Agreement with the Borrower and the Administrative Agent, substantially in the form of Exhibit F (a "COMMITMENT INCREASE AGREEMENT"), whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Commitment as so increased, and Schedule III hereof shall be deemed to be amended to so increase the Commitment of such Lender. (d) The effectiveness of any New Lender Agreement or Commitment Increase Agreement shall be contingent upon receipt by the Administrative Agent of such corporate resolutions of the Borrower and legal opinions of counsel to the Borrower as the Administrative Agent shall reasonably request with respect thereto, in each case, in form and substance satisfactory to the Administrative Agent. (e) If any bank or financial institution becomes a New Lender pursuant to Section 2.20(b) or any Lender's Commitment is increased pursuant to Section 2.20(c), additional Advances made on or after the effectiveness thereof (the "RE-ALLOCATION DATE") shall be made pro rata based on the Commitment Percentages in effect on and after such Re-Allocation Date (except to the extent that any such pro rata borrowings would result in any Lender making an aggregate principal amount of Advances in excess of its Commitment, in which case such excess amount will be allocated to, and made by, such New Lender and/or Lenders with such increased Commitments to the extent of, and pro rata based on, their respective Commitments), and continuations of Eurodollar Rate Advances outstanding on such Re-Allocation Date shall be effected by repayment of such Eurodollar Rate Advances on the last day of the Interest Period applicable thereto and the making of new Eurodollar Rate Advances pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Prime Rate Advances or Base Rate Advances, the existing Lenders shall be deemed to have made partial assignments thereof to the New Lenders and/or Lenders with such increased Commitments in such amounts that, after giving effect thereto, the Prime Rate Advances and Base Rate Advances outstanding are held pro rata based on such new Commitment Percentages. In the event that on any such Re-Allocation Date there is an unpaid principal amount of Eurodollar Rate Advances, such Eurodollar Rate Advances shall remain outstanding with the respective holders thereof until the expiration of their respective Interest Periods (unless the applicable Borrower elects to prepay any thereof in accordance with the applicable provisions of this Agreement), and interest on and repayments of such Eurodollar Rate Advances will be paid thereon to the respective Lenders holding such Eurodollar Rate Advances pro rata based on the respective principal amounts thereof outstanding. In the event that on any such Re-Allocation Date there is an unpaid principal amount of B/A Advances, such B/A Advances shall remain outstanding with the respective holders thereof until the expiration of their respective Contract Periods, and repayments of such B/A Advances will be paid thereon to the respective Lenders holding such B/As based on the respective face amounts thereof. (f) Notwithstanding anything to the contrary in this Section 2.20, (i) no increase pursuant to this Section 2.20 shall be effective without the consent of the Required 40 Lenders, (ii) no Lender shall have any obligation to increase its Commitment unless it agrees to do so in its sole discretion and (iii) the aggregate amount by which the Commitments hereunder are increased pursuant to this Section 2.20 shall not exceed Cdn.$141,426,000. (g) The Borrower shall execute and deliver a Note to each new bank or other financial institution becoming a Lender that requests one. SECTION 2.21. EXTENSION OF REVOLVING COMMITMENT TERMINATION DATE. (a) Not earlier than 65 days prior to and not later than 45 days prior to the Revolving Commitment Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an extension of such Revolving Commitment Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit G, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, by the later of (i) the date 30 days after its receipt from the Administrative Agent of the applicable Extension Request and (ii) the date 30 days prior to the Revolving Commitment Termination Date, notify the Borrower and the Administrative Agent of its consent to extend or its refusal to extend the Revolving Commitment Termination Date as requested in such Extension Request. Any such Extension Request shall be approved if the Required Lenders shall approve in writing the extension of the Revolving Commitment Termination Date requested in such Extension Request. The Borrower may request no more than ten extensions pursuant to this Section 2.21, so that the Revolving Commitment Termination Date shall not in any event extend beyond the tenth anniversary of the initial Revolving Commitment Termination Date hereunder. The Administrative Agent shall promptly notify the Lenders and the Borrower of any extension of the Revolving Commitment Termination Date pursuant to this Section 2.21 and shall promptly notify the Borrower of any Lender that has notified the Administrative Agent of its consent to extend or its refusal to extend the Revolving Commitment Termination Date. (b) If any such Extension Request is approved but there are one or more Lenders that do not consent to the Extension Request in writing within the period specified in paragraph (a) above (an "Objecting Lender"), the Borrower shall be entitled to choose any of the following options prior to the Revolving Commitment Termination Date, provided that if the Borrower does not make an election prior to such date, the Borrower shall be deemed to have irrevocably elected to exercise the option in clause (iii)(y) below: (i) the Borrower may elect to cause the Commitments and Advances of any Objecting Lender to be transferred or assigned pursuant to Section 2.21(c); and/or (ii) the Borrower may elect to voluntarily prepay the Advances, if any, of Objecting Lenders together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.12, 2.13, 2.16 and 9.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable with respect to such Objecting Lenders, and the Commitments of such Objecting Lenders shall be terminated; or (iii) the Borrower may elect to revoke and cancel the Extension Request by giving notice of such revocation and cancellation to the Administrative Agent (which shall promptly notify the Lenders thereof) and concurrently therewith shall have the 41 option to (x) voluntarily prepay the Advances, if any, of all Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.12, 2.13, 2.16 and 9.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable with respect to the Lenders, and the Commitments of all Lenders shall be terminated or (y) have the outstanding Advances continue as term loans repayable in accordance with paragraphs (a), (b), (c) and (d) of Section 2.05 of this Agreement. (c) If any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in its sole discretion and prior to the then Revolving Commitment Termination Date, require such Lender to transfer or assign, without recourse (in accordance with Section 8.07), all of its interests, rights and obligations under this Agreement and, if the Borrower shall so determine in its sole discretion, all or part of its interest, rights and obligations under the U.S. Long-Term Revolving Credit Agreement and/or the U.S. Short-Term Revolving Credit Agreement, as the case may be) to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and the "Advances" made by it under, and as defined in, the U.S. Long-Term Revolving Credit Agreement or the U.S. Short-Term Revolving Credit Agreement, as the case may be, and all other amounts owed to it hereunder and thereunder, including any amounts owing pursuant to Section 9.04(b) (or the comparable provision of the U.S. Long-Term Revolving Credit Agreement or the U.S. Short-Term Revolving Credit Agreement, as the case may be) and any amounts that would be owing under such Section (or comparable provision) if such Advances and "Advances" (as so defined) were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee that becomes a Lender as a result of such an assignment made pursuant to this paragraph (b) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. SECTION 2.22. REPLACEMENT OF LENDERS. If any Lender requests compensation under Sections 2.11 or 2.13 or if the Borrower is required to pay any additional amount to any Lender or any taxing authority or other authority for the account of any Lender pursuant to Section 2.16, or if any Lender suspends the right of the Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.14, or if any Lender defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.07), all its interests, rights and obligations under this Agreement and, if the Borrower shall so determine in its sole discretion, the U.S. Long-Term Revolving Credit Agreement and/or the U.S. Short-Term Revolving Credit Agreement, as the Borrower may determine in its sole discretion and specify by notice to such Lender, (other than "B Advances" under, and as defined in, the U.S. Long-Term Revolving Credit Agreement and/or the U.S. Short-Term Revolving Credit Agreement, as the case may be) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which 42 consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances hereunder and, if the Borrower shall have so determined as specified above, its "Advances" (other than "B Advances") (each under and as defined in the U.S. Long-Term Revolving Credit Agreement and/or the U.S. Short-Term Revolving Credit Agreement, as the case may be), and all accrued interest thereon, accrued fees, accrued costs in connection with compensation under Sections 2.12 or 2.13 or payments required to be made pursuant to Section 2.16, if any, and all other amounts (other than "B Advances") payable to it hereunder and, if the Borrower shall have so determined as specified above, under the U.S. Long-Term Revolving Credit Agreement and/or the U.S. Short-Term Revolving Credit Agreement, as the case may be, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.12 or 2.13 or payments required to be made pursuant to Section 2.16, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.23. CURRENCY INDEMNITY. If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Agreement or any other Financing Document, it becomes necessary to convert into the currency of such jurisdiction (the "Judgment Currency") any amount due under this Agreement or under any other Financing Document in any currency other than the Judgment Currency (the "Currency Due"), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which the judgment is given. For this purpose, "rate of exchange" means the rate at which the Administrative Agent is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice at its head office in Toronto, Ontario. In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given and the date of receipt by the Administrative Agent of the amount due, the Borrower will, on the date of receipt by the Administrative Agent, pay such additional amounts, if any, or be entitled to obtain reimbursement of such amount, if any, as may be necessary to ensure that the amount received by the Administrative Agent on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of receipt by the Administrative Agent is the amount then due under this Agreement or under such other Financing Document in the Currency Due. If the amount of the Currency Due which the Administrative Agent is so able to purchase is less than the amount of the Currency Due originally due to it, the Borrower shall indemnify and save the Administrative Agent and the Lenders harmless from and against all loss or damage arising as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Agreement and the other Financing Documents, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Administrative Agent from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Agreement or any other Financing Document or under any judgment or order. SECTION 2.24. EXCHANGE RATE CALCULATIONS. (a) Not later than 12:00 noon, Calgary local time, on each Calculation Date, the Administrative Agent shall (i) determine the 43 Exchange Rate as of such Calculation Date and (ii) give notice thereof to the Borrower and to each Lender that shall have requested such information. The Exchange Rates so determined shall become effective on the first Business Day immediately following the relevant Calculation Date (each, a "Reset Date") and shall remain effective until the next succeeding Reset Date. (b) Not later than 12:00 noon, Calgary local time, on each Reset Date, the Administrative Agent shall (i) determine the Cdn.$ Equivalent of the Advances outstanding on such date, or to be outstanding after giving effect to any Borrowing to occur on such date, and (ii) notify the Borrower and each Lender that shall have requested such information of the aggregate outstanding Advances, based on information provided by the Borrower after giving effect to all Advances and all repayments and prepayments to occur on such date. ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING SECTION 3.01. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. This Agreement shall become effective when (i) it shall have been executed by the Borrower, Parent and the Administrative Agent, (ii) the Administrative Agent and the Borrower either shall have been notified by each Initial Lender that such Initial Lender has executed it or shall have received a counterpart of this Agreement executed by such Initial Lender, and (iii) the Administrative Agent shall have received the following, each dated the date of delivery thereof unless otherwise specified below (which date shall be selected by the Borrower and be the same for all documents and all Lenders), in form and substance satisfactory to the Administrative Agent and (except for the Notes, if any) in sufficient copies for each Lender: (a) the Notes, to the order of the Lenders requesting Notes, respectively; (b) certified copies of the resolutions of the directors of the Borrower and the Board of Directors of Parent, approving (as appropriate) the Borrowings contemplated hereby and authorizing the execution of this Agreement and the other Financing Documents, including the Notes, if any, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and any other Financing Documents; (c) a certificate of the Secretary or an Assistant Secretary of the Borrower and Parent (i) certifying names and true signatures of officers of such Person authorized to sign this Agreement, the Notes, if any, and any other Financing Documents to which it is a party and (ii) if the Effective Date is other than the date of this amendment and restatement, certifying that the representations and warranties contained in Section 4.01 are true and correct as of the Effective Date; (d) Evidence of the effectiveness of the amendment and restatement of each of the U.S. Short-Term Revolving Credit Agreement and the U.S. Long-Term Revolving Credit Agreement; 44 (e) A favorable opinion of Parent's Vice President and General Counsel in substantially the form of Exhibit H-1 hereto; (f) A favorable opinion of Joanne Alexander, counsel for the Borrower, in substantially the form of Exhibit H-2 hereto; (g) A favorable opinion of Bennett Jones LLP, Alberta counsel to the Borrower, in substantially the form of Exhibit I hereto; and (h) The Administrative Agent, the Lenders and the Arranger shall have received all fees and other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all legal fees and other out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. The Borrower and the Initial Lenders agree that upon the Effective Date the "Commitments" of the Initial Lenders shall be as set forth on Schedule III hereof under the caption "Commitments". SECTION 3.02. CONDITIONS PRECEDENT TO EACH BORROWING. The obligation of each Lender to make an Advance (including the initial Advance) on the occasion of any Borrowing shall be subject to the further conditions precedent that on or before the date of such Borrowing this Agreement shall have become effective pursuant to Section 3.01 and that on the date of such Borrowing, before and immediately after giving effect to such Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute its representation and warranty that on and as of the date of such Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date (to the extent any such limit on aggregate borrowings exists from time to time) by the sole shareholder of the Borrower and the Board of Directors of Parent. 45 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. Each of the Borrower and Parent represents and warrants as follows: (a) The Borrower is a corporation duly amalgamated, validly existing and in good standing under the laws of the Province of Alberta. The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. Parent and each Material Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. Each Subsidiary of Parent that is, on and as of the Effective Date, a Material Subsidiary is listed on Schedule I hereto. (b) The Transactions are within the corporate powers of the Borrower and Parent (as applicable), have been duly authorized by all necessary corporate action, and do not contravene (i) the charter or certificate of incorporation (as applicable) or by-laws of the Borrower or the Parent (as applicable) or (ii) law or any contractual restriction binding on or affecting the Borrower or the Parent. This Agreement, the Notes, if any, and the other Financing Documents, if any, have been duly executed and delivered by the Borrower and the Parent (as applicable). (c) The Transactions do not require any authorization or approval or other action by, nor any notice to or filing with, any governmental authority or regulatory body for the due execution, delivery and performance by the Borrower and the Parent (as applicable) of this Agreement, the Notes, if any, or the other Financing Documents, if any, as applicable, that has not been duly made or obtained, except those (i) required in the ordinary course to comply with ongoing covenant obligations of the Borrower and Parent hereunder the performance of which is not yet due and (ii) that will, in the ordinary course of business in accordance with this Agreement, be duly made or obtained on or prior to the time or times the performance of such obligations shall be due. (d) This Agreement constitutes, and the Notes (if and when delivered hereunder) and the other Financing Documents, if any, when delivered hereunder shall constitute, legal, valid and binding obligations of the Borrower or the Parent (as applicable) enforceable against each such Person in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally or by general principles of equity. (e) The consolidated balance sheet of the Parent and its consolidated Subsidiaries as at December 31, 2000 and the related consolidated statements of income and cash flow for the fiscal year then ended, reported on by PricewaterhouseCoopers LLC, independent public accountants, and the consolidated balance sheet of the Parent and its consolidated subsidiaries as at September 30, 2001 and the related consolidated statements of income and cash 46 flow for the nine-month period then ended, certified by the chief financial officer of the Parent, copies of each of which have been furnished to the Administrative Agent and the Initial Lenders, fairly present the consolidated financial condition of the Parent and such Subsidiaries as at December 31, 2000, and September 30, 2001, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 2001, statements to normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied. From September 30, 2001 to and including the Effective Date there has been no material adverse change in such condition or results of operations. (f) As at the Effective Date, there is no action, suit or proceeding pending, or to the knowledge of the Borrower and Parent threatened, against or involving Parent or any Material Subsidiary in any court, or before any arbitrator of any kind, or before or by any governmental body, which in the reasonable judgment of the Borrower and Parent (taking into account the exhaustion of all appeals) would have a material adverse effect on the consolidated financial condition of Parent and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of this Agreement, the Notes, if any, or the other Financing Documents, if any. (g) Parent and each of its consolidated Subsidiaries has duly filed all tax returns required to be filed, and duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to file or pay which, as applicable, would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Borrower or the appropriate Subsidiary. (h) Except to the extent permitted pursuant to Section 5.02(e), neither Parent nor any Material Subsidiary is subject to any contractual restrictions which limit the amount of dividends payable by any Subsidiary. (i) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 6.01(g). (j) Neither Parent nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan that, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), exceeds 5% of the Consolidated Tangible Net Worth of Parent. (k) Neither Parent nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization or termination would be the occurrence of an Event of Default under Section 6.01(i). 47 (l) Neither Parent nor the Borrower is an "investment company" or a "company" controlled by an "investment company" within the meaning of the United States Investment Company Act of 1940, as amended. (m) Neither Parent nor the Borrower is a "holding company" or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the United States Public Utility Holding Company Act of 1935, as amended. All representations and warranties made by the Borrower and/or Parent herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes. ARTICLE 5 COVENANTS SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, Parent will, unless the Majority Lenders shall otherwise consent in writing: (a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each Material Subsidiary to preserve and maintain, its existence, rights (organizational and statutory) and material franchises, except as otherwise contemplated or permitted by Section 5.02(c) or 5.02(d); provided, that any Material Subsidiary may change its form of organization to a partnership or other form of Business Entity, provided further that in the case of any such change by the Borrower, its jurisdiction of organization remains in Canada, and in connection with any such change by the Borrower, the Borrower shall cause to be delivered to the Administrative Agent a legal opinion of counsel acceptable to the Administrative Agent to the effect that the successor entity to the Borrower continues to be bound by, or has assumed by instrument or by operation of law, all of the Borrower's obligations under this Agreement and the Notes. (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (including all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) VISITATION RIGHTS. At such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, permit the Administrative Agent or any of the Lenders to visit the Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of Parent and any of its Subsidiaries with officers of the Borrower and Parent and independent certified public accountants of Parent and any of its Subsidiaries, provided that if an Event of Default, or an event which with the giving of notice or the passage of 48 time, or both, would become an Event of Default, has occurred and is continuing, the Administrative Agent or any Lender may, in addition to the other provisions of this subsection (c) and at such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, visit and inspect, under guidance of officers of Parent (or, in the case of properties of the Borrower or its Subsidiaries, of the Borrower), as the case may be, any properties significant to the consolidated operations of Parent and its Subsidiaries, and to examine the books and records of account (other than with respect to any mineral reserve information that Parent determines to be confidential, except, during the continuation of an Event of Default, if such Lenders shall have entered into a confidentiality agreement with respect to such information satisfactory in form and substance to Parent) Parent and any of its Subsidiaries and to discuss the affairs, finances and accounts of any of the Subsidiaries of Parent with any of the officers of such Subsidiary. (d) BOOKS AND RECORDS. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Parent and each Subsidiary of Parent in accordance with GAAP either (i) consistently applied or (ii) applied in a changed manner that does not, under GAAP or public reporting requirements applicable to Parent either require disclosure in the consolidated financial statements of Parent and its consolidated Subsidiaries or require the consent of the accountants which (as required by Section 5.03(b)) report on such financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.03(b)) report on the consolidated financial statements of Parent and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred, provided further that if any change referred to in clause (ii) or (iii) above would not meet the standard set forth in clause (i) or (ii) of Section 1.03, the Administrative Agent, the Lenders, the Borrower and Parent agree to amend the covenants contained in Section 5.01 and 5.02 so that the relative protection afforded thereby to the Lenders and the relative flexibility afforded thereby to the Borrower will in substance be retained after such amendment, provided further, however, that until such amendment becomes effective hereunder, the covenants as set forth herein shall remain in full force and effect and those accounting principles applicable to Parent and its consolidated Subsidiaries which do meet the standards set forth in clause (i) or (ii) of Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants. (e) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause each Material Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) MAINTENANCE OF INSURANCE. Maintain, and cause each Material Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which Parent or such Subsidiary operates. 49 SECTION 5.02. NEGATIVE COVENANTS. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, Parent will not, unless the Majority Lenders shall otherwise consent in writing: (a) LIENS, ETC. (i) Create, assume or suffer to exist, or permit any Material Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the Equity Interests in any Material Subsidiary, whether now owned or hereafter acquired, or (ii) create or assume, or permit any Material Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of Parent and its consolidated Subsidiaries taken as a whole securing the payment of Debt and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) exceeding the greater of (x) U.S.$250,000,000 and (y) 10% of Consolidated Tangible Net Worth as at the date of such creation or assumption; provided, however, that this subsection (a) shall not apply to: (A) Liens on assets acquired by Parent or any of its Subsidiaries after the Original Effective Date to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of Parent in contemplation of such acquisition; (B) Liens on Equity Interests acquired after the Original Effective Date in a Business Entity which has become or becomes a Subsidiary of Parent, or on assets of any such Business Entity, to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of Parent in contemplation of such acquisition; (C) Liens on Margin Stock; (D) Liens on the Equity Interests in, or Debt or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, Debt or other obligations of any Business Entity which are owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Debt or Guaranty secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Debt or Guaranty is not increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) and such Debt or Guaranty is not secured by any additional assets that would not have been permitted by this Section to secure the Debt or Guaranty refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and property evidencing or embodying, or constituting rights or 50 other general intangibles relating to, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.02. (b) DEBT, ETC. Create, assume or suffer to exist, or permit any of its consolidated Subsidiaries to create, assume or suffer to exist, any Debt or any Guaranty unless, immediately after giving effect to such Debt or Guaranty and the receipt and application of any proceeds thereof or value received in connection therewith, (1) the sum (without duplication) of (i) consolidated Debt of Parent and its consolidated Subsidiaries plus (ii) the aggregate amount (determined on a consolidated basis) of Guaranties by Parent and its consolidated Subsidiaries is less than 60% of Capitalization, provided that Debt for borrowed money either maturing within one year and evidenced by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement, the U.S. Short-Term Revolving Credit Agreement or the U.S. Long-Term Revolving Credit Agreement or any replacement therefor), shall not exceed the sum of unused commitments under this Agreement, the U.S. Short-Term Revolving Credit Agreement and the U.S. Long-Term Revolving Credit Agreement and the aggregate of Parent's unused bank lines of credit and unused credit available to Parent under financing arrangements with banks or other financial institutions; and (2) with respect to any such Debt created or assumed by a consolidated Subsidiary that is either a Subsidiary of Parent as of the Original Effective Date or a Subsidiary of Parent acquired or created after the Original Effective Date and owning a material portion of the consolidated operating assets existing at the Original Effective Date of Parent and its Subsidiaries, the aggregate amount of Debt of the consolidated Subsidiaries of Parent referred to above in this paragraph (2) owing to Persons other than Parent and its consolidated Subsidiaries is less than the greater of (i) U.S.$500,000,000 (exclusive of public Debt of LL&E existing at the time LL&E became a Subsidiary, the principal amount of which at such time was approximately U.S.$400,000,000, and any refinancing of such Debt, in a principal amount not to exceed the principal amount refinanced) and (ii) 30% of Consolidated Tangible Net Worth as at the date of incurrence or creation of such Debt. (c) SALE, ETC. OF ASSETS. Sell, lease or otherwise transfer, or permit any Material Subsidiary to sell, lease or otherwise transfer (in either case, whether in one transaction or in a series of transactions, and except, in either case, to the Borrower or Parent or an entity which after giving effect to such transfer will be or become a Material Subsidiary in which Parent's direct or indirect Equity Interests will be at least as great as its direct or indirect Equity Interests in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting all or substantially all of the consolidated assets of Parent and its Material Subsidiaries, provided that, notwithstanding the foregoing, Parent or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting all or substantially all of the consolidated assets of Parent and its Material Subsidiaries, so long as (A) such Permitted Assets are sold, leased or otherwise transferred in exchange for other Permitted Assets and/or (B) the proceeds from such sale, lease or other transfer, or an amount equal to the proceeds 51 thereof, are (x) reinvested within one year from the date of receipt thereof in Permitted Assets and/or the development of Permitted Assets and/or (y) used to repay Debt the proceeds of which were or are being used for investment in, and/or the development of, Permitted Assets; provided further that, no such sale, lease or other transfer shall be permitted by the foregoing proviso unless either (1) after giving effect to such sale, lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) Parent or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. (d) MERGERS, ETC. Merge, amalgamate or consolidate with any Person, or in the case of Parent permit any Material Subsidiary to merge, amalgamate or consolidate with any Person, except that: (i) any Subsidiary may merge, amalgamate or consolidate with (or liquidate into) any other Subsidiary or may merge, amalgamate or consolidate with (or liquidate into) the Borrower or Parent, provided that (A) if such Subsidiary merges, amalgamates or consolidates with (or liquidates into) the Borrower or Parent, either (i) the survivor or successor is the Borrower or Parent, as applicable, or (ii) in the case of an amalgamation involving the Borrower under the laws of Canada or any province thereof, the continuing corporation resulting from such amalgamation is organized and existing under the laws of Canada or a province thereof and continues by operation of law to be liable for all obligations of the Borrower under this Agreement and under the Notes, provided that notice thereof and a copy of the amalgamation documents are provided to the Administrative Agent, or (iii) each successor or surviving Business Entity is organized and existing under the laws of Canada or a province thereof or the United States or a state thereof, respectively, and expressly assumes the obligations of the Borrower or Parent, as applicable, hereunder and under the Notes, (B) if any such Subsidiary merges, amalgamates or consolidates with (or liquidates into) any other Subsidiary of Parent, one or more Business Entities that are Subsidiaries of Parent are the surviving or successor Business Entity(ies) and, if either such Subsidiary is not directly or indirectly wholly-owned by the Borrower or Parent, such merger, amalgamation or consolidation is on an arm's length basis and (C) as a result of such merger, amalgamation or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower, Parent or any Material Subsidiary may merge, amalgamate or consolidate with any other Business Entity (that is, in addition to the Borrower, Parent or any other Subsidiary of Parent), provided that (A) if the Borrower or Parent merges, amalgamates or consolidates with any such other Business Entity(ies), either the survivor or successor Business Entity is the Borrower or Parent, as applicable, (B) if any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, each surviving or successor Business Entity is a directly or indirectly wholly-owned Subsidiary, and (C) if either the Borrower, Parent or any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, after giving effect to such merger, amalgamation or consolidation no Event of Default, and no event which 52 with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. (e) DIVIDEND RESTRICTIONS. Create, or consent or agree to, or permit any of its Material Subsidiaries existing on the Original Effective Date or any of its Subsidiaries thereafter created or acquired and owning a material portion of the consolidated operating assets existing at the Original Effective Date of Parent and its Subsidiaries, to create, or consent or agree to, any restrictions, contained in any agreement or instrument relating to or evidencing Debt, on any such Subsidiary's ability to pay dividends or to make advances to Parent or any Subsidiary of Parent; provided, however, that this subsection (e) shall not apply to any such restrictions (including any extensions of the term of any thereof (by amendment, or continuation thereof in any refinancing of the Debt to which such restriction relates, or otherwise)) applicable to the Equity Interests in any Subsidiary of Parent, the Equity Interests in which are acquired by Parent after the Original Effective Date and which restrictions are existing at the time such Subsidiary first becomes a Subsidiary of Parent and are not placed thereon by or with the consent of Parent in contemplation of such acquisition by Parent. SECTION 5.03. REPORTING REQUIREMENTS. So long as any Note shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: (a) within 60 days after the end of each of the first three quarters of each fiscal year of Parent, a consolidated balance sheet of Parent and its consolidated Subsidiaries as of the end of such quarter, and consolidated statements of income and cash flow of Parent and its consolidated Subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as to fairness and utilization of GAAP by the chief financial officer of Parent and accompanied by a certificate of such officer stating (i) that such statements of income and cash flow and such balance sheet have been prepared in accordance with GAAP, (ii) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (iii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not Parent is in compliance with the requirements set forth in subsection (b) of Section 5.02, and (iv) a listing of all Material Subsidiaries and consolidated Subsidiaries of Parent showing the extent of its direct and indirect holdings of their Equity Interests; (b) within 120 days after the end of each fiscal year of Parent, a copy of the annual report for such year for Parent and its consolidated Subsidiaries containing financial statements for such year reported on by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with GAAP and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; 53 (c) within 120 days after the close of Parent's fiscal years, a certificate of the chief financial officer of Parent stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not Parent is in compliance with the requirements set forth in subsection (b) of Section 5.02 and (iii) a listing of all Material Subsidiaries and consolidated Subsidiaries of Parent showing the extent of its direct and indirect holdings of their Equity Interests; (d) promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Parent or any Material Subsidiary shall have sent to its public Equity Interest holders; (e) promptly upon their becoming publicly available, all regular and periodic financial reports and registration statements which the Borrower or any Material Subsidiary shall file with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registration statements of securities for selling security holders; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving Parent or any Material Subsidiary, except any litigation or proceeding which in the reasonable judgment of Parent (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of Parent and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Borrower or Parent obtains knowledge of the occurrence of any Event of Default which is continuing or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of the Borrower or Parent of the steps being taken by the Borrower, Parent or the appropriate Subsidiary to cure the effect of such event; (h) as soon as practicable and in any event (i) within 30 days after Parent or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after Parent or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of Parent describing such Termination Event and the action, if any, which Parent or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by Parent or any ERISA Affiliate, copies of each notice received by Parent or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; 54 (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by Parent or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by Parent or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by Parent or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of Parent or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to subsections (a) and (b) of this Section 5.03 shall contain comparative information which conforms to the presentation required in Form 10-Q and Form 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. ARTICLE 6 EVENTS OF DEFAULT SECTION 6.01. EVENTS OF DEFAULT. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance within two Business Days after the same shall be due, or any interest on any Advance or any other amount payable hereunder within five Business Days after the same shall be due; or (b) Any representation or warranty made or deemed made by the Borrower or Parent herein or by the Borrower or Parent (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower or Parent shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower or Parent by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or (d) Parent or any Material Subsidiary of Parent shall fail to pay any Debt or Guaranty (excluding any Advances) of the Borrower, Parent or such Subsidiary (as the case may 55 be) in an aggregate principal amount in excess of the greater of (i) U.S.$100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate the maturity of such Debt; provided that, notwithstanding any provision contained in this subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt referred to in this subsection (d), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds thereof would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt extended pursuant thereto and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration, or the provisions hereof relating thereto, this Agreement or any Advance hereunder would otherwise be subject to margin requirements or any other restriction under Regulation U issued by the Board of Governors of the United States Federal Reserve System, then such breach, default, event of default or acceleration shall not constitute a default or Event of Default under this subsection (d); or (e) (i) Parent or any Material Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by Parent or any such Material Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Borrower, Parent or any such Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions referred to above sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Borrower, Parent or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or (f) Any judgment or order for the payment of money in excess the greater of (i) U.S.$100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time shall be rendered against Parent or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or 56 (g) Any Termination Event with respect to a Material Plan shall have occurred and, 30 days after notice thereof shall have been given to Parent by the Lender, (i) such Termination Event shall still exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto), in each case in respect of which Parent or any ERISA Affiliate has liability, is equal to or greater than U.S.$50,000,000; or (h) Parent or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds U.S.$50,000,000; or (i) Parent or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the Original Effective Date by an amount exceeding U.S.$50,000,000; or (j) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of Parent in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than Parent, a Subsidiary of Parent or any employee benefit plan maintained for employees of Parent and/or any of its respective Subsidiaries or the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess of 50% of the outstanding capital stock of Parent entitled to vote in elections for directors of Parent and (ii) at any time before the later of (x) six months after the completion of such tender offer and (y) the next annual meeting of the shareholders of Parent following the completion of such tender offer more than half of the directors of Parent consists of individuals who (a) were not directors before the completion of such tender offer and (b) were not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) The Borrower ceases to be a direct or indirect wholly-owned Subsidiary of the Parent; or (l) The Guaranty of Parent hereunder shall not be (or shall be claimed by Parent, Borrower or any Subsidiary of Parent not to be) valid or in full force and effect; provided that if within one Business Day after the Borrower or Parent receives notice from the Administrative Agent or otherwise becomes aware that such Guaranty is not valid or in full force and effect, Parent delivers written notice to the Administrative Agent that it intends to deliver a 57 valid and effective Guaranty, or to reinstate such Guaranty, as soon as possible, then an Event of Default shall not exist pursuant this Section 6.01(l) unless Parent shall fail to deliver or reinstate a Guaranty having substantially the same effect as the Guaranty set forth in Article 8 within four Business Days after the delivery of such written notice of intent. (m) Any "Event of Default" as defined in the U.S. Short-Term Revolving Credit Agreement or the U.S. Long-Term Revolving Credit Agreement shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower and Parent, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and Parent; provided, however, that if an Event of Default under subsection (e) of this Section 6.01 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower and Parent. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. AUTHORIZATION AND ACTION. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including enforcement of this Agreement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Nothing in this Agreement shall impose upon any Co-Syndication Agent or Co-Documentation Agent, in its capacity as such, any duty or liability whatsoever. SECTION 7.02. ADMINISTRATIVE AGENT'S RELIANCE, ETC. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the 58 generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for the Borrower and Parent), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower and Parent or to inspect the property (including the books and records) of the Borrower or Parent; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by facsimile, electronic mail, telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. SECTION 7.03. ADMINISTRATIVE AGENT AND AFFILIATES. With respect to its Commitments, the Advances made by it and the Notes issued to it, the Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Administrative Agent in its individual capacity. The Administrative Agent and its Affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, Parent, the Borrower, any of their Subsidiaries, and any Person who may do business with or own securities of Parent, the Borrower or any of their Subsidiaries, all as if the Administrative Agent were not the Administrative Agent and without any duty to account therefor to the other Lenders. SECTION 7.04. LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. SECTION 7.05. INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER OR PARENT), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE ADVANCES THEN HELD BY EACH OF THEM (OR IF NO ADVANCES ARE AT THE TIME OUTSTANDING OR IF ANY ADVANCES ARE HELD BY PERSONS WHICH ARE NOT LENDERS, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS OR THE RESPECTIVE AMOUNTS 59 OF THEIR COMMITMENTS IMMEDIATELY PRIOR TO TERMINATION IF THE COMMITMENTS HAVE BEEN TERMINATED), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER FINANCING DOCUMENT OR OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, OR ANY OF THE NOTES OR ANY OTHER FINANCING DOCUMENT OR OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILFUL MISCONDUCT. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any of the Notes or any other instrument or document furnished pursuant hereto or in connection herewith to the extent that the Administrative Agent acts in its capacity as Administrative Agent and is not reimbursed for such expenses by the Borrower or Parent. SECTION 7.06. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders, the Borrower and Parent and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then such retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a bank organized, or authorized to conduct a banking business, under the federal laws of Canada and having a combined capital and surplus of at least U.S.$500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 60 ARTICLE 8 GUARANTY In order to induce the Lenders to extend credit hereunder, Parent hereby irrevocably and unconditionally guarantees the Obligations. Parent agrees that the Guaranteed Parties may make a claim under Parent's guarantee immediately upon the occurrence of an Event of Default or at any time thereafter, but (other than in the case of an Event of Default in respect of the Borrower under Section 6.01(e) (except clause (i)(A) thereof)) following the making of a demand on the Borrower for payment or performance, as applicable, without any obligation to first seek any other remedy or take any other action against the Borrower. Parent further agrees that the due and punctual payment of the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon its Guaranty hereunder notwithstanding any such extension or renewal of any Obligation. Each and every default in payment of the principal of and premium, if any, or interest on any Obligation shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises. Parent waives presentment to, demand of payment from and protest to the Borrower of any of the Obligations, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of Parent hereunder shall not be affected by (a) the failure of any Guaranteed Party to assert any claim or demand or to enforce any right or remedy against the Borrower or Parent under the provisions of this Agreement, any other Financing Document or otherwise; (b) any extension or renewal of any of the Obligations; (c) any rescission, waiver, amendment or modification of, or release from, any of the terms or provisions of this Agreement or any other Financing Document or agreement; (d) the failure or delay of any Guaranteed Party to exercise any right or remedy against any other guarantor of the Obligations; (e) the failure of any Guaranteed Party to assert any claim or demand or to enforce any remedy under any Financing Document, any guaranty or any other agreement or instrument; (f) any default, failure or delay, wilful or otherwise, in the performance of the Obligations; or (h) any other act, omission or delay to do any other act which may or might in any manner or to any extent vary the risk of Parent or otherwise operate as a discharge of Parent as a matter of law or equity or which would impair or eliminate any right of Parent to subrogation. Parent further agrees that its agreement hereunder constitutes a promise of payment when due (whether or not any bankruptcy or similar proceeding shall have stayed the accrual or collection of any of the Obligations or operated as a discharge thereof) and not merely of collection, and waives any right to require that any resort be had by any Guaranteed Party to any balance of any deposit account or credit on the books of any Guaranteed Party in favor of any Borrower or any other Person. The obligations of Parent hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever, by reason of the invalidity, illegality or unenforceability of the Obligations, any impossibility in the performance of the Obligations or otherwise. 61 Parent further agrees that its obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by any Guaranteed Party upon the bankruptcy or reorganization of Borrower or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Guaranteed Party may have at law or in equity against Parent by virtue hereof, upon the failure of the Borrower to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, Parent hereby promises to and will, upon receipt of written demand by the Administrative Agent, forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the Guaranteed Parties in cash an amount equal to the sum of (i) the unpaid principal amount of such Obligations then due, (ii) accrued and unpaid interest and fees on such Obligations and (iii) all other monetary Obligations then due. Parent further agrees that if payment in respect of any Obligation shall be due in a currency other than Cdn. Dollars and/or at a place of payment other than Toronto, Ontario and if, by reason of any Change in Law, disruption of currency or foreign exchange markets, war or civil disturbance or similar event, payment of such Obligation in such currency or at such place of payment shall be impossible or, in the judgment of any Guaranteed Party, not consistent with the protection of its rights or interests, then, at the election of such Guaranteed Party, Parent shall make payment of such Obligation in Cdn. Dollars (based upon the applicable Exchange Rate in effect on the date of payment) and/or in Toronto, Ontario, and shall indemnify such Guaranteed Party against any losses or expenses that it shall sustain as a result of such alternative payment. Upon payment in full by Parent of any Obligation, each Lender shall, in a reasonable manner, assign the amount of such Obligation owed to it and so paid to Parent, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by Parent, or make such disposition thereof as Parent shall direct (all without recourse to any Guaranteed Party and without any representation or warranty by any Guaranteed Party). Upon payment by Parent of any sums as provided above, all rights of Parent against the Borrower arising as a result thereof by way of right of subrogation or otherwise shall in all respects be subordinated and junior in right of payment to the prior indefeasible payment in full of all the Obligations owed by the Borrower to the Guaranteed Parties. Nothing shall discharge or satisfy the liability of Parent hereunder except the full performance and payment of the Obligations. Each reference herein to any Guaranteed Party shall be deemed to include their or its successors and assigns, in whose favor the provisions of this Guaranty shall also inure. ARTICLE 9 MISCELLANEOUS SECTION 9.01. AMENDMENTS, ETC. An amendment or waiver of any provision of this Agreement, the Notes or any other Financing Document, or a consent to any departure by the Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but 62 only if, it shall be in writing and signed or consented to in writing by the Majority Lenders or, where so specified, the Required Lenders (except any amendment to give effect to increased Commitments and New Lenders, as contemplated by Section 2.20), and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders, be effective to: (a) waive any of the conditions specified in Article 3, (b) except as contemplated by Section 2.20, increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (d) except as contemplated by Section 2.21, postpone any date fixed for any payment of principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, which shall be required for the Lenders or any of them to take any action under this Agreement, (f) amend Article VIII or this Section 9.01, or (g) waive any Event of Default pursuant to Section 6.01(l); and, provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required herein above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note. SECTION 9.02. NOTICES, ETC. Except as otherwise provided in Section 2.02(a) or 2.10(ii), all notices and other communications provided for hereunder shall be in writing and mailed by registered mail, return receipt requested and postage prepaid, or telecopied, sent by facsimile or otherwise teletransmitted, or delivered, if to the Borrower, c/o Burlington Resources Inc. at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Facsimile: (713) 624-9627 with a copy to Burlington Resources Canada Ltd. 3700, 250 6th Avenue S.W., Calgary, Alberta, Canada T2P3H7, Attention: Dave Belcher, Facsimile: (403) 263-2708 ; if to Parent, Burlington Resources Inc. at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Facsimile: (713) 624-9627; if to any Initial Lender, at its Applicable Lending Office set forth in such Initial Lender's Administrative Questionnaire; if to any other Lender at its Applicable Lending Office specified in the Assignment and Acceptance or Commitment Increase Agreement pursuant to which it became a Lender; if to the Administrative Agent, in care of J.P. Morgan Bank Canada, 200 Bay Street, Suite 1800, Royal Bank Plaza, South Tower, Toronto, Ontario, M5J 2J2, Attention: Amanda Staff, Telefax: (416) 981-9128, with a copy to JPMorgan Chase Bank, at 600 Travis Street, 20th Floor, Houston, TX 77002, Attention: Russell Johnson, Telefax: (713) 216-8870; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective, (a) in the case of any notice or communication given by certified mail, when receipted for, (b) in the case of any notice or communication given by telecopy, facsimile or other teletransmission, when confirmed by appropriate answerback, in each case addressed as aforesaid, and (c) in the case of any notice or communication delivered by hand or courier, when so delivered, except that notices and communications to the Administrative Agent pursuant to Article 2 or 7 shall not be effective until received by the Administrative Agent. A notice received by the Administrative Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the Borrower or Parent and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. 63 SECTION 9.03. NO WAIVER; REMEDIES. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.04. COSTS AND EXPENSES; INDEMNITY. (a) The Borrower agrees to pay on demand (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent and the Arranger in connection with the preparation, execution and delivery of this Agreement, the Notes and the other Financing Documents to be delivered hereunder and with respect to advising the Administrative Agent and the Arranger as to their respective rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates and the Arranger and their Affiliates in initially syndicating all or any portion of the Commitments hereunder, including the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its Affiliates and the Arranger and their Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate and (iii) all out-of-pocket costs and expenses, if any, of the Administrative Agent and the Arranger and the Lenders (including reasonable counsel fees and expenses and the allocated costs of in-house counsel), in connection with the enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other Financing Documents to be delivered hereunder and thereunder. (b) If any payment of principal of, or Continuation of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.10 or a Continuation pursuant to Section 2.08(f) or Section 2.09 or due to acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason attributable to the Borrower, or if the Borrower shall fail to borrow, Continue or prepay any Eurodollar Rate Advance on the date specified in any notice delivered pursuant hereto, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Continuation, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) If any payment of principal of any B/A Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, due to acceleration of the maturity of the Advances pursuant to Section 6.01, or if the Borrower shall fail to borrow, Continue or prepay any B/A Advance on the date specified in any notice delivered pursuant hereto, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or 64 reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. It is understood that a defeasance of B/A's under Section 2.10(a) shall not constitute a prepayment. (d) EACH OF THE BORROWER AND PARENT AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO ANY ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE EQUITY INTERESTS IN, OR SUBSTANTIALLY ALL THE ASSETS OF, ANY PERSON OR ANY USE OR PROPOSED USE OF THE ADVANCES BY THE BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS, OR BY REASON OF ANY USE OR DISCLOSURE OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR USE OR PROPOSED USE OF THE PROCEEDS BY THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS). SECTION 9.05. RIGHT OF SET-OFF. Upon the declaration of the Advances as due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 9.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. SECTION 9.06. BINDING EFFECT. This Agreement shall become effective in accordance with the provisions of Section 3.01, and thereafter shall be binding upon and inure to the benefit of the Borrower, Parent, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that neither Parent nor the Borrower shall have the right to assign its rights and obligations hereunder or any interest herein without the prior written consent of all of the Lenders; provided that notwithstanding the foregoing the Borrower shall be permitted to transfer its rights and obligations hereunder to a wholly-owned Subsidiary of Parent (i) if such Subsidiary is organized and existing under the laws of Canada or any 65 political subdivision thereof and (ii) Burlington Resources Canada Ltd. guarantees the obligations of the new Borrower on substantially the same terms as Parent, at which time Burlington Resources Canada Ltd. shall cease to be a Borrower hereunder and shall cease to have any liability under this Agreement, the Notes, if any, or any other Financing Document except such guarantee. Any merger, amalgamation or consolidation in compliance with Section 5.02(d) of (i) the Borrower with Parent or a wholly-owned Subsidiary of Parent organized under the laws of Canada or any political subdivision thereof, or (ii) Parent shall not constitute an assignment for purposes of this Section 9.06. SECTION 9.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, the Advances owing to it and the Note or Notes held by it); provided, however, that each such assignment shall be to an Eligible Assignee and the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except in the case of an assignment to a Lender Affiliate, a processing and recordation fee of Cdn.$3,500, and shall send to the Borrower an executed counterpart of such Assignment and Acceptance, and provided further, however, that (i) except in the case of an assignment to a Lender Affiliate, each such assignment shall be of a constant, and not a varying, percentage of all such Lender's rights and obligations under this Agreement, (ii) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment and Acceptance with respect to such assignment) must be equal to or greater than Cdn.$10,000,000, or if less, the entire amount of such assigning Lender's "Commitment" (unless the Borrower and the Administrative Agent shall otherwise consent, which consent may be withheld for any reason) and must be an integral multiple of Cdn.$1,000,000, and (iii) except in the case of an assignment by a Schedule II Lender to a Lender Affiliate thereof that is a Schedule III Bank, any assignment to a Lender Affiliate will not relieve the assigning Lender of its obligation to make Advances hereunder timely in accordance with the terms hereof in the event such Lender Affiliate shall fail to do so. Upon the execution, delivery, acceptance and recording of each Assignment and Acceptance by the parties thereto, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, subject to clause (iii) above, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) except in the circumstances contemplated in clause (iii) above, the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.12, 2.13, 2.16 or 9.04) (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this 66 Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or Parent or the performance or observance by the Borrower or Parent of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 9.02 a copy of each Assignment and Acceptance, each New Lender Agreement and each Commitment Increase Agreement delivered to and accepted by it and a register (which register may be in electronic form) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for any surrendered Note or Notes a new Note to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender. Any such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including all or a 67 portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such Lender's Advances or any facility fees or utilization fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Advances, or (D) consent to the assignment or the transfer by the Borrower or Parent of their respective rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.07, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee or participant or proposed assignee or participant shall agree in writing for the benefit of the Borrower to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender in a manner consistent with Section 9.08. (g) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it) and the Notes, if any, issued to it hereunder in favor of any United States Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System of the United States (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. SECTION 9.08. CONFIDENTIALITY. Each Lender and the Administrative Agent (each, a "PARTY") agrees that it will use its best reasonable efforts not to disclose, without the prior consent of the Borrower (other than to its, or its Affiliates, employees, auditors, accountants, counsel or other representatives, whether existing at the Effective Date or any subsequent time), any information with respect to the Borrower or Parent which is furnished pursuant to this Agreement, provided that any party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement or testimony submitted to any governmental authority having or claiming to have jurisdiction over such party, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee or 68 participant in connection with any contemplated assignment of any rights or obligations hereunder or any sale of any participation therein, by such party pursuant to Section 9.07, if such prospective assignee or participant, as the case may be, executes an agreement with the Borrower containing provisions substantially similar to those contained in this Section 9.08; provided, however, that the Borrower and Parent acknowledge that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. SECTION 9.09. CONSENT TO JURISDICTION. (a) Each of the Borrower and Parent hereby irrevocably and unconditionally submit itself and its property to the non-exclusive jurisdiction of the Courts of the Province of Alberta in any action or proceeding by the Administrative Agent, the Arranger, any Lender or the holder of any Note in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Agreement, the Notes or the other Financing Documents (such claims and causes of action, collectively, being "PERMITTED CLAIMS"), and each of the Borrower and Parent hereby irrevocably agrees that all Permitted Claims may be heard and determined in Alberta. Each of the Borrower and Parent hereby irrevocably and unconditionally waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Service of the statement of claim and any other process which may be served by the Administrative Agent, the Arranger, any Lender or the holder of any Note on the Borrower or Parent in any such action or proceeding in any aforementioned court in respect of Permitted Claims may be made by delivering separate copies of such process to each of the Borrower and Parent by courier and by registered mail (return receipt requested), fees and postage prepaid at the address of each of the Borrower and Parent specified pursuant to Section 9.02, to the attention of each of the Treasurer and the Vice President and General Counsel of Parent, or each of the General Counsel and Assistant Treasurer in the case of the Borrower. Each of the Borrower and Parent agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 9.09 (i) shall affect the right of the Arranger, the Borrower, Parent, any Lender, the holder of any Note or the Administrative Agent to serve legal process in any other manner permitted by law or affect any right otherwise existing of the Borrower, any Lender, the Arranger, the holder of any Note or the Administrative Agent to bring any action or proceeding in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. SECTION 9.10. GOVERNING LAW. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the Province of Alberta and the federal laws of Canada applicable therein. SECTION 9.11. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart 69 executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. Delivery of an executed counterpart by facsimile shall be as effective as delivery of a manually executed original counterpart. SECTION 9.12. WAIVER OF JURY TRIAL. THE BORROWER, PARENT, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER FINANCING DOCUMENT OR OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. 70 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES CANADA LTD. By: ------------------------------------ Name: Title: BURLINGTON RESOURCES INC. By: ------------------------------------ Name: Title: 71 SCHEDULE I MATERIAL SUBSIDIARIES OF PARENT Burlington Resources Canada Ltd. Burlington Resources Canada Corporation Burlington Acquisition Corporation* Canadian Hunter Exploration Ltd. The Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company LP BROG GP Inc. BROG LP Inc. * until such time as the company amalgamates with Canadian Hunter Exploration Ltd. SCHEDULE II PRICING GRID
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V Basis for Pricing If the Parent's If the Parent's If the Parent's If the Parent's If the Parent's senior unsecured senior unsecured senior unsecured senior unsecured senior unsecured long term debt is long term debt is long term debt is long term debt is long term debt is rated at least A by rated at least A- rated at least BBB+ rated at least rated at least BBB- S&P or A2 by Moody's by S&P or A3 by S&P or Baa1 by BBB by S&P or by S&P or Baa3 by by Moody's Moody's. Baa2 by Moody's. Moody's. Facility Fee Percentage .080% .100% .125% .150% .200% Applicable Margin .270% .300% .375% .450% .650% LEVEL VI Basis for Pricing If Levels I-V do not apply. Facility Fee Percentage .250% Applicable Margin .750%
The applicable pricing level shall change on the date of any relevant change in the rating by S&P or Moody's of any public long term senior unsecured debt securities of the Borrower. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable pricing level is the higher of the two (e.g., A-/Baa1 results in Level II pricing), provided that in the event the split is more than one full category, the average (or the higher of two intermediate ratings) shall be used (e.g., A-/Baa2 results in Level III pricing, as does A-/Baa3). For the avoidance of doubt, the amount to be paid with respect to any Acceptance Fee shall be determined on the date of the acceptance of the applicable B/A, and the Acceptance Fee paid on each date shall not be subject to adjustment based on a subsequent change in the pricing level. SCHEDULE III
Commitments The Initial Lenders - ----------- ------------------- - --------------------------- Cdn. $ Total
EX-10.33 6 h92808ex10-33.txt $350 MILLION BRIDGE REVOLVING CREDIT AGMT. EXHIBIT 10.33 - -------------------------------------------------------------------------------- BURLINGTON RESOURCES INC. ---------- $350,000,000 BRIDGE REVOLVING CREDIT AGREEMENT Dated as of January 2, 2002 ---------- JPMORGAN CHASE BANK, as Administrative Agent and Auction Administrative Agent J.P. MORGAN SECURITIES INC. as Advisor, Lead Arranger and Sole Bookrunner - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- ARTICLE 1 Definitions and Accounting Terms...........................................................1 Section 1.01 Certain Defined Terms.............................................................1 Section 1.02 Computation of Time Periods......................................................14 Section 1.03 Accounting and Other Terms.......................................................14 Section 1.04 References.......................................................................14 ARTICLE 2 Amounts and Terms of the Advances.........................................................14 Section 2.01 (a) Revolving A Advances........................................................14 Section 2.02 Making the A Advances............................................................15 Section 2.03 Fees.............................................................................16 Section 2.04 Reduction of the Commitments.....................................................17 Section 2.05 Repayment of A Advances..........................................................17 Section 2.06 Interest on A Advances...........................................................17 Section 2.07 Additional Interest on Eurodollar Rate Advances..................................18 Section 2.08 Interest Rate Determination......................................................18 Section 2.09 Voluntary Conversion of A Advances...............................................19 Section 2.10 Prepayments......................................................................20 Section 2.11 Increased Costs..................................................................20 Section 2.12 Increased Capital................................................................21 Section 2.13 Illegality.......................................................................21 Section 2.14 Payments and Computations........................................................22 Section 2.15 Taxes............................................................................23 Section 2.16 Sharing of Payments, Etc.........................................................25 Section 2.17 Evidence of Debt.................................................................26 Section 2.18 Use of Proceeds..................................................................26 Section 2.19 The B Advances...................................................................27 Section 2.20 [ Reserved ].....................................................................30 Section 2.21 Extension of Stated Termination Date.............................................30 Section 2.22 Replacement of Lenders...........................................................31 ARTICLE 3 Conditions of Effectiveness and Lending...................................................32 Section 3.01 Conditions Precedent to Effectiveness of this Agreement..........................32 Section 3.02 Conditions Precedent to Each A Borrowing.........................................32 Section 3.03 Conditions Precedent to Each B Borrowing.........................................33 ARTICLE 4 Representations and Warranties............................................................34 Section 4.01 Representations and Warranties of the Borrower...................................34 ARTICLE 5 Covenants of the Borrower.................................................................36 Section 5.01 Affirmative Covenants............................................................36 Section 5.02 Negative Covenants...............................................................37 Section 5.03 Reporting Requirements...........................................................41
-i- TABLE OF CONTENTS (continued)
PAGE ---- ARTICLE 6 Events of Default.........................................................................43 Section 6.01 Events of Default................................................................43 ARTICLE 7 The Administrative Agent..................................................................46 Section 7.01 Authorization and Action.........................................................46 Section 7.02 Administrative Agent's Reliance, Etc.............................................46 Section 7.03 JPMorgan and Affiliates..........................................................46 Section 7.04 Lender Credit Decision...........................................................47 Section 7.05 Indemnification..................................................................47 Section 7.06 Successor Administrative Agent...................................................48 Section 7.07 Auction Administrative Agent.....................................................48 ARTICLE 8 Miscellaneous.............................................................................48 Section 8.01 Amendments, Etc..................................................................48 Section 8.02 Notices, Etc.....................................................................49 Section 8.03 No Waiver; Remedies..............................................................49 Section 8.04 Costs and Expenses; Indemnity....................................................49 Section 8.05 Right of Set-off.................................................................50 Section 8.06 Binding Effect...................................................................51 Section 8.07 Assignments and Participations...................................................51 Section 8.08 Confidentiality..................................................................54 Section 8.09 Consent to Jurisdiction..........................................................55 Section 8.10 Governing Law....................................................................55 Section 8.11 Execution in Counterparts........................................................56 Section 8.12 Waiver of Jury Trial.............................................................56
-ii- Schedule I - Material Subsidiaries Schedule II - Pricing Grid Exhibit A - Form of Note Exhibit B - Form of Notice of A Borrowing Exhibit C - Form of Notice of B Borrowing Exhibit D - Form of Assignment and Acceptance Exhibit E - Form of Extension Request Exhibit F - Form of Opinion of Vice President and General Counsel for Borrower Exhibit G - Form of Opinion of Jones, Day, Reavis & Pogue, New York Counsel for Borrower Exhibit H - Form of Designation Agreement
-iii- BRIDGE REVOLVING CREDIT AGREEMENT Dated as of January 2, 2002 BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Initial Lenders") listed on the signature pages hereof, and JPMORGAN CHASE BANK, as administrative agent and auction administrative agent for the Lenders hereunder (in such capacities, the "Administrative Agent" and "Auction Administrative Agent," respectively), agree as follows: ARTICLE 1 Definitions and Accounting Terms Section 1.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Lender to the Borrower as part of an A Borrowing, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "TYPE" of A Advance). "A BORROWING" means a borrowing consisting of A Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, it being understood that there may be more than one A Borrowing on a particular day. "ACQUISITION" means the acquisition by the Acquisition Company pursuant to the Acquisition Agreement of the "Assets," as defined therein. "ACQUISITION AGREEMENT" means the Agreement of Purchase and Sale, dated December 22, 2000, between ATCO Gas and Pipelines Ltd., (as successor to Northwestern Utilities Limited), as vendor, and the Acquisition Company, as purchaser, as amended by agreements dated June 1,2001, June 28,2001, July 27, 2001, August 8, 2001, August 31, 2001, and September 5, 2001, and by a Purchase and Sale Amending Agreement dated as of September 11, 2001, providing for the purchase and sale of the "Assets," as defined therein. "ACQUISITION COMPANY" means Burlington Resources Canada Ltd., as successor by amalgamation to Burlington Resources Canada Energy Ltd. "ACQUISITION CONDITIONS" shall include and be limited to the following: (i) the Administrative Agent shall have received, with a copy for each Lender, a copy of the Acquisition Agreement and each other Acquisition Document, if any; and (ii) the Administrative Agent shall have received, with a copy for each Lender, a certificate of the Borrower's Vice President, General Counsel and Assistant Secretary stating that, as of the Effective Date (A) the Acquisition, and any Advances in respect thereof, if consummated on the Effective Date, would be in compliance with all applicable legal requirements, including without limitation Regulations T, U and X of the Board of Governors of the Federal Reserve System; (B) all applicable appeal periods with respect to the Acquisition have expired; (C) all necessary governmental and third party approvals and consents in connection with such Advances and the Acquisition have been obtained and remain in effect (other than approvals or consents the failure to obtain or maintain which would not reasonably be expected to prevent the consummation of the Acquisition or to have a material adverse effect on the consolidated financial condition or consolidated results of operations of the Borrower or any material adverse effect on the rights of or benefits available to the Lenders under this Agreement); and (D) there does not exist any actual or overtly threatened governmental or judicial action that has had or would reasonably be expected to have a reasonable likelihood of restraining or preventing the Acquisition or imposing materially burdensome conditions on the Acquisition. "ACQUISITION DOCUMENTS" means the collective reference to the Acquisition Agreement and any other agreement providing for the acquisition by the Acquisition Company of the "Assets," as defined in the Acquisition Agreement. "ADMINISTRATIVE AGENT" has the meaning specified in the introduction hereto. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Lender. "ADVANCE" means an A Advance or a B Advance. "AFFILIATE" means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. The term "CONTROL" (including the terms "CONTROLS," "CONTROLLED BY" or "UNDER COMMON CONTROL WITH") means, with respect to any Person, the possession, direct or indirect, of the power to vote 10% or more (or in the case of an "AFFILIATE" of any Lender, 5% or more) of the securities having ordinary voting power for the election of directors of such Person or to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or by contract or otherwise. Neither a director nor an officer of the Borrower, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. "AGREEMENT" means this Bridge Revolving Credit Agreement, together with all exhibits and schedules hereto, as amended or otherwise modified from time to time pursuant to the terms hereof. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) in the case of an A Advance, such Lender's Domestic Lending Office in respect of Base Rate Advances and such Lender's Eurodollar Lending Office in respect of Eurodollar Rate Advances and (ii) in the case of a B Advance, the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to such B Advance. "ARRANGER" means J.P. Morgan Securities Inc. 2 "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by a Lender (other than a Designated Bidder) and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit D hereto. "AUCTION ADMINISTRATIVE AGENT" has the meaning specified in the introduction hereto. "AVERAGE AGGREGATE FACILITY ADVANCES" means, for any Utilization Fee Period, the average daily outstanding amount of all Advances hereunder. "AVERAGE AGGREGATE FACILITY COMMITMENTS" means, for any Utilization Fee Period, the average daily amount of all Commitments hereunder. "B ADVANCE" means an advance by a Lender to the Borrower as part of a B Borrowing resulting from the auction bidding procedure described in Section 2.19. "B BORROWING" means a borrowing consisting of simultaneous B Advances to the Borrower from each of the Lenders whose offer to make one or more B Advances as part of such borrowing has been accepted by the Borrower under the auction bidding procedure described in Section 2.19, it being understood that there may be more than one B Borrowing on a particular day. "B REDUCTION" has the meaning specified in Section 2.01(a). "BASE RATE" means, for each day in any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times for such day be equal to the higher of: (i) The rate of interest announced publicly by the Administrative Agent in the United States with respect to loans made in the United States, from time to time, as the Administrative Agent's base or prime rate as in effect for such day; and (ii) 0.50% per annum above the Effective Federal Funds Rate for such day. "BASE RATE ADVANCE" means an A Advance which bears interest as provided in Section 2.06(a)(i). "BORROWER" has the meaning specified in the introduction hereto. "BORROWING" means an A Borrowing or a B Borrowing. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in New York, New York and, if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the London interbank market. "BUSINESS ENTITY" means a partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity. 3 "CANADIAN CREDIT AGREEMENT" means the Credit Agreement dated as of March 31, 2000, as amended and restated as of December 7, 2001, among Burlington Resources Canada Ltd., as the borrower, Burlington Resources Inc., as parent, the financial institutions party thereto, JPMorgan, as administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "CAPITALIZATION" means the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries, plus (ii) the aggregate amount of Guaranties by the Borrower or its consolidated Subsidiaries, plus (iii) the sum of the preferred stock and common stockholders' equity of the Borrower, plus (iv) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997 (but excluding any such amount with respect to assets of Project Finance Subsidiaries), minus (v) to the extent otherwise included in determining the amounts computed under clause (iii) above, the aggregate investment (net of any Project Financing) of the Borrower and its consolidated Subsidiaries in Project Finance Subsidiaries. "CLAM" means CLAM Petroleum B.V., a Netherlands company, and CLAM's successors. "CLAM CREDIT AGREEMENT" means the Amended and Restated Credit Agreement dated as of July 25, 1985, among MaraLou Netherlands Partnership, CLAM, the banks parties thereto and Morgan, as agent for such banks, as amended and restated as of August 15, 1997, or any successor credit agreement entered into for the purpose of refinancing such Amended and Restated Credit Agreement, in each case, as amended, restated, extended or otherwise modified from time to time. "COMMITMENT" has the meaning specified in Section 2.01(a). "COMMITMENT EXPIRATION DATE" has the meaning specified in Section 2.21(a). "COMMITMENT PERCENTAGE" means as to any Lender at any time, the percentage that such Lender's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage that the aggregate principal amount of such Lender's Advances then outstanding constitutes of the aggregate principal amount of the Advances then outstanding). "CONSOLIDATED TANGIBLE NET WORTH" means, on a consolidated basis, the excess of (i) the sum of (x) the preferred stock and common stockholders' equity of the Borrower and (y) the cumulative amount by which Consolidated Tangible Net Worth shall have been reduced by reason of non-cash write-downs of long-term assets subsequent to December 31, 1997, over (ii) the intangible assets of the Borrower and its consolidated Subsidiaries. "CONTINGENT GUARANTY" has the meaning specified in the definition of the term "Guaranty" contained in this Section 1.01. "CONVERT," "CONVERSION" and "CONVERTED" each refers to a conversion of A Advances of one Type into A Advances of another Type pursuant to Section 2.08, 2.09 or 2.13. 4 "DEBT" of any Person means, without duplication (i) indebtedness of such Person for borrowed money or in respect of bankers' acceptances, (ii) obligations of such Person (other than any portion of any trade payable obligation of such Person which shall not have remained unpaid for 91 days or more from the later of (A) the original due date of such portion and (B) the customary payment date in the industry and relevant market for such portion) to pay the deferred purchase price of property or services, (iii) obligations of such Person as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (iv) Overdue Reimbursement Obligations; provided, however, that where any such indebtedness or obligation of such Person is made jointly, or jointly and severally, with any third party or parties, which are not the Borrower or any of its consolidated Subsidiaries, the amount thereof for the purposes of this definition only shall be the pro rata portion thereof payable by such Person, so long as such third party or parties have not defaulted on its or their joint and several portions thereof, and provided, further, that the following shall not at any time constitute Debt: (1) obligations of such Person to reimburse a bank or other Person in respect of amounts paid under a letter of credit or similar instrument that are not Overdue Reimbursement Obligations, (2) Project Financing, (3) the Morgan Gold Loans unless, at such time, for any reason whatsoever, (A) no royalty income shall have accrued under the Royalty Agreement dated as of December 5, 1984 between Copper Range Company, a Michigan corporation, and LL&E during the three consecutive fiscal quarters of LL&E most recently ended prior to such time or (B) any payment required to have been made to LL&E under such agreement prior to such time shall not have been paid on, or within 30 days after, the date such payment is due and (4) amounts borrowed by the Borrower and its Subsidiaries under life insurance policies issued to one or more of the foregoing and covering employees or former employees of one or more of the foregoing not in excess of the cash surrender value of such policies. "DESIGNATED BIDDER" means (i) an Affiliate of a Lender or (ii) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" by Moody's or "A-1" by S&P or a comparable rating from the successor of either of them, that, in the case of either clause (i) or (ii) above, (1) is organized under the laws of the United States or any state thereof, (2) shall have become a party hereto pursuant to Subsections (e), (f) and (g) of Section 8.07, and (3) is not otherwise a Lender. Notwithstanding the foregoing, each Designated Bidder shall be subject to the written consent of the Borrower and the Administrative Agent, such consent not to be unreasonably withheld. "DESIGNATION AGREEMENT" means a designation agreement entered into by the Borrower, a Lender (other than a Designated Bidder) and a Designated Bidder, and accepted by the Administrative Agent, in substantially the form of Exhibit H hereto. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" in its Administrative Questionnaire, or in the Assignment and Acceptance pursuant to which it became a Lender, or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. 5 "EFFECTIVE DATE" means the date on which the conditions precedent set forth in Section 3.01 have been satisfied (or compliance therewith shall have been waived by the Lenders), which date the Administrative Agent will promptly confirm to the Borrower and the Lenders in writing. "EFFECTIVE FEDERAL FUNDS RATE" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 8.07, any bank or other entity approved in writing by the Borrower expressly with respect to such assignment and, except as to such an assignment by JPMorgan so long as JPMorgan is the Administrative Agent hereunder, the Administrative Agent shall be an Eligible Assignee for purposes of this Agreement, provided that neither the Administrative Agent's nor the Borrower's approval shall be unreasonably withheld, and provided further that no such approval shall be necessary if (i) the assignee is a Lender Affiliate, (ii) the assignee was a Lender immediately prior to such assignment, or (iii) if an Event of Default shall then be continuing. "EQUITY INTERESTS" means any capital stock, partnership, joint venture, member or limited liability or unlimited liability company interest, beneficial interest in a trust or similar entity or other equity interest or investment of whatever nature. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued from time to time thereunder. "ERISA AFFILIATE" means any Person who is a member of the Borrower's controlled group within the meaning of Section 4001(a)(14)(A) of ERISA. "EUROCURRENCY LIABILITIES" has the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "EURODOLLAR LENDING OFFICE" means, with respect to each Lender, the office of such Lender specified as its "Eurodollar Lending Office" in its Administrative Questionnaire or in the Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office) or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, the interest rate per annum equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rate per annum at which deposits in U.S. dollars are offered by the principal office of the Reference Bank in London, England, to prime banks in the London interbank market at 11:00 A.M. (London, England time) two Business Days before the first day of such Interest Period in an amount comparable to the amount of such A Borrowing and for a 6 period equal to such Interest Period. The Eurodollar Rate for the Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing shall be determined by the Administrative Agent on the basis of applicable rates furnished to and received by the Administrative Agent from the Reference Bank two Business Days before the first day of such Interest Period, subject, however, to the provisions of Section 2.08. "EURODOLLAR RATE ADVANCE" means an A Advance which bears interest determined by reference to the Eurodollar Rate, as provided in Section 2.06(a)(ii). "EURODOLLAR RATE MARGIN" means for any date the percentage per annum applicable on such date as set forth in the row labeled "LIBOR Applicable Margin" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "EURODOLLAR RESERVE PERCENTAGE" of any Lender for any Interest Period for any Eurodollar Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) for such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXTENSION REQUEST" means each request by the Borrower made pursuant to Section 2.21 for the Lenders to extend the Stated Termination Date, which shall contain the information in respect of such extension specified in Exhibit E and shall be delivered to the Administrative Agent in writing. "FACILITY FEE PERCENTAGE" means for any date the percentage per annum applicable on such date as set forth in the row labeled "Facility Fee Percentage" on Schedule II hereto, which is based on the ratings (or lack thereof) by Moody's or S&P or both of the public long-term senior unsecured debt securities of the Borrower. "GUARANTY," "GUARANTEED" and "GUARANTEEING" each means any act by which a Person assumes, guarantees, endorses or otherwise incurs direct or contingent liability in connection with, or agrees to purchase or otherwise acquire or otherwise assures a creditor against loss in respect of, any Debt or Project Financing of any Person other than the Borrower or any of its consolidated Subsidiaries (excluding (i) any liability by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (ii) any liability in connection with obligations of the Borrower or any of its consolidated Subsidiaries, including obligations under any conditional sales agreement, equipment trust financing or equipment lease, (iii) any liability or other act of the Borrower or any of its Subsidiaries under arrangements entered into in connection with the CLAM Credit Agreement, and (iv) any such act in connection with a Project Financing that either (A) guarantees to the provider of such Project 7 Financing or any other Person performance of the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise affects any such act in respect of, all or any portion of the project that is financed by such Project Financing or performance by a Project Financing Subsidiary of certain obligations to Persons other than the provider of such Project Financing, except during any period, and then only to the extent, that such guaranty is a direct guaranty of payment of such Project Financing (other than a guaranty of payment of the type referred to in subclause (B) below) or (B) is contingent upon, or the obligation to pay or perform under which is contingent upon, the occurrence or existence of any event or condition other than or in addition to (1) the passage of time, (2) any Project Financing becoming due, (3) the commencement of bankruptcy, insolvency or similar proceedings by the obligor on any Project Financing or (4) the failure of the obligor on any Project Financing to satisfy a financial ratio, covenant or other similar financial measurement test, but only during such period as such act is not by its terms presently enforceable, or if so enforceable, there is not a reasonable probability that the guarantor will be called upon to perform thereunder (or to make capital contributions in lieu of performance thereunder) (any such act referred to in this clause (iv) being a "CONTINGENT GUARANTY")); provided, however, that for the purposes of this definition the liability of the Borrower or any of its Subsidiaries with respect to any obligation as to which a third party or parties are jointly, or jointly and severally, liable as a guarantor or otherwise as contemplated hereby and have not defaulted on its or their portions thereof, shall be only its pro rata portion of such obligation. "INDEMNIFIED PARTY" means any or all of the Lenders, the Arranger and the Administrative Agent. "INITIAL LENDERS" has the meaning specified in the introduction hereto. "INSUFFICIENCY" means, with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA. "INTEREST PERIOD" means, for each Eurodollar Rate Advance comprising part of the same A Borrowing, the period beginning on the date of such Advance or the date of the Conversion of any Advance into such Advance and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period for a Eurodollar Rate Advance shall be one, two, three or six months upon notice received by the Administrative Agent not later than 12:00 noon (New York City time) on the third Business Day prior to the first day of such Interest Period, in each case as the Borrower may select; provided, however, that: (A) the duration of any Interest Period which commences before the Termination Date and would otherwise end after the Termination Date shall end on the Termination Date; (B) if the last day of such Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except if such extension would cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day; 8 (C) Interest Periods commencing on the same date for A Advances comprising the same A Borrowing shall be of the same duration; and (D) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (A) above, end on the last Business Day of a calendar month. "JPMORGAN" means JPMorgan Chase Bank, and its successors. "LENDER AFFILIATE" means, with respect to any Lender, (a) an Affiliate of such Lender or (b) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender (with such Lender or Affiliate having the sole right and responsibility with respect to the approval of amendments and waivers to this Agreement, the Notes and all related agreements and instruments entered into from time to time). "LENDERS" means the Initial Lenders, each Eligible Assignee that shall become a party hereto pursuant to Section 8.07(a), (b) and (d) and, except when used in reference to an A Advance, an A Borrowing, a Commitment or a term related to any of the foregoing, each Designated Bidder. "LIEN" means any lien, security interest or other charge or encumbrance, or any assignment of the right to receive income, or any other type of preferential arrangement, in each case to secure any Debt or any Guaranty of any Person; provided that (i) the creation of interests in property of the character commonly referred to as a "royalty interest" or "overriding royalty interest," farmouts, joint operating or unitization agreements, or other similar transactions in the ordinary course of business and (ii) borrowings under life insurance policies as described in clause (4) of the proviso to the definition of "Debt" shall not be deemed to create a Lien. "LL&E" means The Louisiana Land and Exploration Company, a Maryland corporation and a wholly-owned Subsidiary of the Borrower. "LONG-TERM REVOLVING CREDIT AGREEMENT" means the Long-Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 among the Borrower, the financial institutions party thereto, JPMorgan, as administrative agent and auction administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "MAJORITY LENDERS" means at any time Lenders holding at least 51% of the then aggregate unpaid principal amount of the Advances held by Lenders, or, if no such principal amount is then outstanding, Lenders having at least 51% of the Commitments. "MARGIN STOCK" means "margin stock" as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. 9 "MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial condition or operations of the Borrower and its consolidated Subsidiaries on a consolidated basis. "MATERIAL PLAN" means any Plan the assets of which exceed $50,000,000 or the liabilities of which for unfunded vested benefits determined on a plan termination basis (in accordance with Title IV of ERISA) exceed $10,000,000. "MATERIAL SUBSIDIARY" means, from time to time, any Subsidiary of the Borrower (other than a Project Financing Subsidiary) then owning assets (determined on a consolidated basis) that equal or exceed 10% of the book value of the consolidated assets of the Borrower and its consolidated Subsidiaries at such time. "MOODY'S" means Moody's Investors Service. "MORGAN" means Morgan Guaranty Trust Company of New York, and its successors. "MORGAN GOLD LOANS" means the obligations of LL&E under the respective Credit Agreements dated as of December 23, 1994 and March 31, 1995 between LL&E and Morgan, or under any additional credit agreements on substantially similar terms, in each case, as amended, restated, extended or otherwise modified from time to time, provided that the aggregate outstanding amount borrowed thereunder shall at no time exceed 35,000 ounces of gold. "MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions, such plan being maintained pursuant to one or more collective bargaining agreements. "MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the Borrower or an ERISA Affiliate and at least one Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated. "NOTE" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of the Borrower to such Lender resulting from the Advances made by such Lender. "NOTICE OF A BORROWING" has the meaning specified in Section 2.02(a). "NOTICE OF B BORROWING" has the meaning specified in Section 2.19(a). "OBJECTING LENDERS" has the meaning specified in Section 2.21(a). "ORIGINAL EFFECTIVE DATE" means February 25, 1998. "OVERDUE REIMBURSEMENT OBLIGATIONS" means with respect to any Person non-contingent obligations of such Person to reimburse a bank or other Person in respect of amounts 10 paid under a letter of credit or similar instrument that are not paid on or prior to the fifth Business Day after the due date therefor. "PBGC" means the Pension Benefit Guaranty Corporation (or any successor). "PERMITTED ASSETS" means (i) hydrocarbon or other reserves (including proved, probable, possible or speculative reserves), (ii) properties, assets, rights or business related to reserves (including real property, gathering systems, plants, pipelines, equipment and processing and treatment facilities), (iii) other fixed or operating assets and (iv) Equity Interests in any and all Business Entities that are or become Subsidiaries of the Borrower owning assets referred to in any of the foregoing clauses. "PERMITTED LIENS" means (i) inchoate Liens and charges imposed by law and incidental to construction, maintenance, development or operation of properties, or the operation of business, in the ordinary course of business if payment of the obligation secured thereby is not yet overdue or if the validity or amount of which is being contested in good faith by the Borrower or any Subsidiary of the Borrower; (ii) Liens for taxes, assessments, obligations under workers' compensation or other social security legislation or other governmental requirements, charges or levies, in each case not yet overdue; (iii) Liens reserved in any oil, gas or other mineral lease entered into in the ordinary course of business for rent, royalty or delay rental under such lease and for compliance with the terms of such lease; (iv) easements, servitudes, rights-of-way and other rights, exceptions, reservations, conditions, limitations, covenants and other restrictions which do not materially interfere with the operation, value or use of the properties affected thereby; (v) conventional provisions contained in any contracts or agreements affecting properties under which the Borrower or a Subsidiary of the Borrower is required immediately before the expiration, termination or abandonment of a particular property to reassign to the Borrower's or a Subsidiary's predecessor in title all or a portion of the Borrower's or such Subsidiary's rights, titles and interests in and to all or a portion of such property; (vi) any Lien reserved in a grant or conveyance in the nature of a farm-out or conditional assignment to the Borrower or any of its Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of the Borrower or such Subsidiary in such grant or conveyance; (vii) any Lien consisting of (A) statutory landlord's liens under leases to which the Borrower or any Subsidiary of the Borrower is a party or other Liens on leased property reserved in leases thereof for rent or for compliance with the terms of such leases, (B) rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any property of the Borrower or any of its Subsidiaries or to use such property in any manner 11 which does not materially impair the use of such property for the purposes for which it is held by the Borrower or any such Subsidiary, (C) obligations or duties to any municipality or public authority with respect to any franchise, grant, license, lease or permit and the rights reserved or vested in any governmental authority or public utility to terminate any such franchise, grant, license, lease or permit or to condemn or expropriate any property, and (D) zoning laws and ordinances and municipal regulations; (viii) Liens on Equity Interests in, or Debt or other obligations of, CLAM owned by the Borrower or any of its Subsidiaries, which Liens secure Debt of CLAM; and (ix) any Lien on any assets (including Equity Interests and other obligations) securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring, improving, installing, designing, engineering, developing (including drilling), or constructing such assets, provided that such Lien attaches to such assets concurrently with or within 360 days after the acquisition or completion of development, construction or installation thereof or improvement thereto. "PERSON" means an individual, a Business Entity, or a country or any political subdivision thereof or any agency or instrumentality of such country or subdivision. "PLAN" means a Single Employer Plan or a Multiple Employer Plan. "PROJECT FINANCING" means any Debt incurred to finance or refinance the acquisition, improvement, installation, design, engineering, construction, development, completion, maintenance or operation of, or otherwise in respect of, all or any portion of any project, or any asset related thereto, and any Guaranty with respect thereto, other than any portion of such Debt or Guaranty permitting or providing for recourse against the Borrower or any of its Subsidiaries other than (i) recourse to the Equity Interests in, Debt or other obligations of, or assets of, one or more Project Financing Subsidiaries, and (ii) such recourse as exists under any Contingent Guaranty. "PROJECT FINANCING SUBSIDIARY" means any Subsidiary of the Borrower whose principal purpose is to incur Project Financing, or to become a direct or indirect partner, member or other equity participant or owner in a Business Entity so created, and substantially all the assets of which Subsidiary or Business Entity are limited to those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by a Project Financing or to Equity Interests in, or Debt or other obligations of, one or more other such Subsidiaries or Business Entities. "REFERENCE BANK" means JPMorgan Chase Bank. "REGISTER" has the meaning specified in Section 8.07(c). "REQUIRED LENDERS" means Lenders (i) that are not Objecting Lenders with respect to any previous Extension Request and (ii) that have Commitment Percentages aggregating at least 51% of the aggregate Commitment Percentages of such non-Objecting Lenders. 12 "REVOLVING A ADVANCE" means an A Advance made or to be made by a Lender pursuant to Section 2.01(a). "S&P" means Standard and Poor's, a division of The McGraw-Hill Companies, Inc. "SHORT-TERM REVOLVING CREDIT AGREEMENT" means the Short-Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 among the Borrower, the financial institutions party thereto, JPMorgan, as administrative agent and auction administrative agent for such financial institutions, Citibank, N.A. and Fleet National Bank, as co-syndication agents, and Bank of America, N.A. and Toronto Dominion (Texas), Inc., as co-documentation agents. "SINGLE EMPLOYER PLAN" means a single employer plan, as defined in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of the Borrower or an ERISA Affiliate and no Person other than the Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which the Borrower or an ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated. "STATED TERMINATION DATE" means the date that is 180 days after the Effective Date, or such later date as shall be determined pursuant to the provisions of Section 2.21 with respect to non-Objecting Lenders, provided that if such date is not a Business Day, the Stated Termination Date shall be the next preceding Business Day. "SUBSIDIARY" means, as to any Person, any Business Entity of which shares of stock or other Equity Interests having ordinary voting power (other than stock or such other Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such Business Entity are at the time owned, directly or indirectly through one or more Subsidiaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. "TERMINATION DATE" means the earlier of (i) the Stated Termination Date and (ii) the date of termination in whole of the Commitments pursuant to Section 2.04 or 6.01. "TERMINATION EVENT" means (i) a "reportable event," as such term is described in Section 4043 of ERISA (other than a "reportable event" not subject to the provision for 30-day notice to the PBGC), or an event described in Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer," as such term is defined in Section 4001(a)(2) of ERISA, or the incurrence of liability by the Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) the conditions set forth in Section 302(f)(1)(A) and (B) of ERISA to the creation of a lien upon property or rights to property of the Borrower or any ERISA Affiliate for failure to make a required payment to a Plan are satisfied, or (vi) the adoption of an amendment to a Plan requiring the provision of security to such Plan, pursuant to Section 307 of ERISA, or 13 (vii) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "TYPE" has the meaning specified in the definition of "A Advance." "UTILIZATION FEE PERIOD" means any period during the term of this Agreement commencing on the Effective Date or on a subsequent January 1, April 1, July 1 or October 1 and ending in each case on the earliest to occur of the next succeeding March 31, June 30, September 30 or December 31 and the Termination Date. "WITHDRAWAL LIABILITY" shall have the meaning given such term under Part I of Subtitle E of Title IV of ERISA. Section 1.02 Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." Section 1.03 Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles either (i) consistent with those principles applied in the preparation of the annual financial statements referred to in Section 4.01(e), or (ii) not so materially inconsistent with such principles that a covenant contained in Section 5.01 or 5.02 would be calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with clause (i) of this Section 1.03. "INCLUDE," "INCLUDES" and "INCLUDING" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. References to any agreement or contract are to such agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. Section 1.04 References. The words "HEREOF," "HEREIN" and "HEREUNDER" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Article, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. ARTICLE 2 Amounts and Terms of the Advances Section 2.01 (a) Revolving A Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make A Advances to the Borrower from time to time on any Business Day during the period from the Effective Date to and including the Termination Date in an aggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender's name on the signature pages hereof under the caption "COMMITMENTS," or, if such Lender has entered into any Assignment and Acceptance, set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.04 (such Lender's "COMMITMENT"), provided that the aggregate amount of the Commitments of the Lenders shall be deemed used from time to time to 14 the extent of the aggregate amount of the B Advances then outstanding and such deemed use of the aggregate amount of such Commitments shall be applied to all the Lenders ratably according to their respective Commitments (such deemed use of the aggregate amount of the Commitments being a "B REDUCTION"). Each A Borrowing consisting of Revolving A Advances shall be in an aggregate amount of $10,000,000 in the case of an A Borrowing comprised of Base Rate Advances and $25,000,000 in the case of an A Borrowing comprised of Eurodollar Rate Advances, or, in either case an integral multiple of $1,000,000 in excess thereof (or, in the case of an A Borrowing of Base Rate Advances, the aggregate unused Commitments, if less) and shall consist of A Advances of the same Type made on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender's Commitment, the Borrower may make more than one Borrowing on any Business Day and may borrow, prepay pursuant to Section 2.10, and reborrow under this Section 2.01(a). (b) [ Reserved. ] Section 2.02 Making the A Advances. (a) Each A Borrowing shall be made on notice by the Borrower to the Administrative Agent (a "NOTICE OF A BORROWING") received by the Administrative Agent, (i) in the case of a proposed A Borrowing comprised of Base Rate Advances, not later than 10:00 A.M. (New York City time) on the Business Day of such proposed A Borrowing, and (ii) in the case of a proposed A Borrowing comprised of Eurodollar Rate Advances, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of such proposed A Borrowing. Each Notice of A Borrowing shall be by telecopy, telefax or other teletransmission or by telephone (and if by telephone, confirmed promptly by telecopier, telefax or other teletransmission), in substantially the form of Exhibit B hereto, specifying therein the requested (w) date of such A Borrowing, (x) Type of A Advances comprising such A Borrowing, (y) aggregate amount of such A Borrowing, and (z) in the case of an A Borrowing comprised of Eurodollar Rate Advances, the initial Interest Period for each such A Advance. Each Lender shall, before 1:00 p.m. (New York City time) on the date of such A Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice from the Administrative Agent to the Lenders pursuant to Section 8.02, in same day funds, such Lender's ratable portion of such A Borrowing. Immediately after the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at JPMorgan Chase Bank, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, or at any account of the Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. (b) Each Notice of A Borrowing shall be irrevocable and binding on the Borrower. In the case of any A Borrowing which the related Notice of A Borrowing specified is to be comprised of Eurodollar Rate Advances, if such A Advances are not made as a result of any failure to fulfill on or before the date specified for such A Borrowing the applicable conditions set forth in Article 3, the Borrower shall indemnify each Lender against any loss, cost or expense 15 incurred by such Lender as a result of such failure, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the A Advance to be made by such Lender as part of such A Borrowing. (c) [ Reserved. ] (d) Unless the Administrative Agent shall have received notice from a Lender prior to the date of any A Borrowing that such Lender will not make available to the Administrative Agent such Lender's ratable portion of such A Borrowing, the Administrative Agent may assume that such Lender has made such portion available to the Administrative Agent on the date of such A Borrowing in accordance with Subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent such Lender shall not have so made such ratable portion available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at the Effective Federal Funds Rate for such day. If such Lender shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender's A Advance to the Borrower as part of such A Borrowing for purposes of this Agreement. (e) The failure of any Lender to make the A Advance to be made by it as part of any A Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its A Advance on the date of such A Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the A Advance to be made by such other Lender on the date of any A Borrowing. Section 2.03 Fees. (a) FACILITY FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Designated Bidder) a facility fee on the average daily amount of such Lender's Commitment, whether or not used or deemed used, from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender, in each case until the Termination Date, payable quarterly in arrears on the last day of each March, June, September and December during the term of such Lender's Commitment and on the Termination Date, at a rate per annum equal to the Facility Fee Percentage in effect from time to time. (b) UTILIZATION FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender (i) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 25% and less than or equal to 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.125% per annum on the average daily amount of such Lender's Advances during such Utilization Fee Period; and (ii) for any Utilization Fee Period, if during such Utilization Fee Period the Average Aggregate Facility Advances were greater than 50% of the Average Aggregate Facility Commitments, a utilization fee of 0.25% per annum on the average daily amount of such Lender's Advances during such 16 Utilization Fee Period. If a utilization fee is owing in respect of any Utilization Fee Period, such fee shall be payable on the last day of such Utilization Fee Period. Section 2.04 Reduction of the Commitments. The Borrower shall have the right, upon at least three Business Days' notice to the Administrative Agent, to terminate in whole or reduce ratably in part the unused portions of the Commitments of the Lenders (being the amount by which such Commitments exceed the aggregate outstanding principal amount of all Advances), provided that each partial reduction shall be in the aggregate amount of $20,000,000 or any whole multiple of $1,000,000 in excess thereof. Section 2.05 Repayment of A Advances. (a) The Borrower shall repay to each Lender on the Termination Date the aggregate principal amount of the Revolving A Advances, together with accrued interest thereon, then owing to such Lender. (b) [ Reserved. ] Section 2.06 Interest on A Advances. (a) ORDINARY INTEREST. The Borrower shall pay interest on the unpaid principal amount of each A Advance owing to each Lender from the date of such A Advance until such principal amount is due (whether at stated maturity, by acceleration or otherwise), at the following rates: (i) BASE RATE ADVANCES. During such periods as such A Advance is a Base Rate Advance, a rate per annum equal at all times to the Base Rate in effect from time to time, payable quarterly in arrears on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or due (whether at stated maturity, by acceleration or otherwise). (ii) EURODOLLAR RATE ADVANCES. During such periods as such A Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such A Advance to the sum of the Eurodollar Rate for such Interest Period plus the Eurodollar Rate Margin in effect from time to time, payable on the last day of each such Interest Period and, if any such Interest Period has a duration of more than three months, on each day which occurs during such Interest Period every three months from the first day of such Interest Period and, if such A Advance is Converted into a Base Rate Advance on any date other than the last day of any Interest Period for such A Advance, on the date of such Conversion or, if later, the Business Day on which the Borrower shall have received at least one Business Day's prior notice from the Administrative Agent or the applicable Lender of the amount of unpaid interest accrued on such A Advance to the date of such Conversion. (b) DEFAULT INTEREST. The Borrower shall pay interest on the unpaid principal amount of each Advance that is not paid when due (whether at stated maturity, by acceleration or otherwise) from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times (i) from such due date to the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, to 1% per annum above the interest rate per annum required to be paid on such A Advance immediately 17 prior to the date on which such amount became due and (ii) from and after the last day of the then existing Interest Period therefor, in the case of each Eurodollar Rate Advance, and at all times in the case of each Base Rate Advance or B Advance, to 1% per annum above the Base Rate in effect from time to time. Section 2.07 Additional Interest on Eurodollar Rate Advances. If any Lender shall determine in good faith that reserves under regulations of the Board of Governors of the Federal Reserve System are required to be maintained by it in respect of, or a portion of its costs of maintaining reserves under such regulations is properly attributable to, one or more of its Eurodollar Rate Advances, the Borrower shall pay to such Lender additional interest on the unpaid principal amount of each such Eurodollar Rate Advance payable on the same day or days on which interest is payable on such A Advance, at an interest rate per annum up to but not exceeding at all times during each Interest Period for such A Advance the excess of (i) the rate obtained by dividing the Eurodollar Rate for such Interest Period by a percentage equal to 100% minus the Eurodollar Reserve Percentage, if any, for such Lender for such Interest Period over (ii) the Eurodollar Rate for such Interest Period. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Eurodollar Rate Advances of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least five Business Days after the giving of such notice and (y) shall furnish to the Borrower at least five Business Days prior to each date on which interest is payable on the Eurodollar Rate Advances an officer's certificate setting forth the amount to which such Lender is then entitled under this Section, which certificate shall be conclusive and binding for all purposes, absent manifest error. Section 2.08 Interest Rate Determination. (a) The Reference Bank agrees to furnish to the Administrative Agent timely information for the purpose of determining each Eurodollar Rate. (b) The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i) or (ii), and the applicable rate, if any, furnished by the Reference Bank for the purpose of determining the applicable interest rate under Section 2.06(a)(ii). (c) If the Reference Bank is unable to furnish timely information to the Administrative Agent for determining the Eurodollar Rate for any applicable A Advances, (i) the Administrative Agent shall give the Borrower and each Lender prompt notice by telephone (confirmed in writing) that the interest rate cannot be determined for such applicable A Advances, (ii) each such A Advance that is a Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such A Advance is then a Base Rate Advance, will continue as a Base Rate Advance), and 18 (iii) the obligations of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances, as the case may be, shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (d) If, with respect to any Eurodollar Rate Advances, the Majority Lenders determine and give notice to the Administrative Agent that as a result of conditions in or generally affecting the relevant market, the rates of interest determined on the basis of the Eurodollar Rate for any Interest Period for such A Advances will not adequately reflect the cost to such Majority Lenders of making, funding or maintaining their respective Eurodollar Rate Advances for such Interest Period, the Administrative Agent shall forthwith so notify the Borrower and the Lenders, whereupon: (i) each such Eurodollar Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or to Convert A Advances into, Eurodollar Rate Advances shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. (e) If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of "Interest Period" in Section 1.01, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Eurodollar Rate Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances. (f) On the date on which the aggregate unpaid principal amount of A Advances comprising any A Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $10,000,000, such A Advances shall, if they are Eurodollar Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such A Advances into Eurodollar Rate Advances shall terminate; provided, however, that if and so long as each such A Advance shall be, or be elected to be Converted to, Eurodollar Rate Advances having the same Interest Period as Eurodollar Rate Advances comprising another A Borrowing or other A Borrowings, and the aggregate unpaid principal amount of all such Eurodollar Rate Advances shall, or upon such Conversion will, equal or exceed $20,000,000, the Borrower shall have the right to continue all such Eurodollar Rate Advances as, or to Convert all such A Advances into, Eurodollar Rate Advances having such Interest Period. Section 2.09 Voluntary Conversion of A Advances. The Borrower may on any Business Day, upon notice given to the Administrative Agent, not later than 12:00 noon (New York City time) on the third Business Day prior to the date of the proposed Conversion, and subject to the provisions of Section 2.08, 2.11 and 2.13, Convert all A Advances of one Type comprising the same A Borrowing into A Advances of the other Type; provided, however, that any Conversion of any Eurodollar Rate Advances into Base Rate Advances made on any day other than the last day of an Interest Period for such Eurodollar Rate Advances shall be subject to the provisions of Section 8.04(b). Each such notice of a Conversion shall, within the restrictions specified above, 19 specify (i) the date of such Conversion, (ii) the A Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the Interest Period for each such Eurodollar Rate Advance. Section 2.10 Prepayments. The Borrower may, upon (i) in the case of Eurodollar Rate Advances, at least three Business Days notice or (ii) in the case of Base Rate Advances, telephonic notice not later than 12:00 noon (New York City time) on the date of prepayment, to the Administrative Agent which specifies the proposed date and aggregate principal amount of the prepayment and the Type of A Advances to be prepaid, and if such notice is given the Borrower shall, prepay the outstanding principal amounts of the A Advances comprising the same A Borrowing in whole or ratably in part, together with accrued interest to the date of such prepayment on the amount prepaid; provided, however, that (x) each partial prepayment shall be in an aggregate principal amount not less than $10,000,000 or an integral multiple of $1,000,000 in excess thereof and (y) in the event of any such prepayment of Eurodollar Rate Advances on any day other than the last day of an Interest Period for such Eurodollar Rate Advances, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to, and to the extent required by, Section 8.04(b); provided, further, however, that the Borrower will use its best efforts to give notice to the Administrative Agent of the proposed prepayment of Base Rate Advances on the Business Day prior to the date of such proposed prepayment. Section 2.11 Increased Costs. (a) If, due to either (i) the introduction after the Effective Date of or any change after the Effective Date (including any change by way of imposition or increase of reserve requirements or assessments other than those referred to in the definition of "Eurodollar Reserve Percentage" contained in Section 1.01) in or in the interpretation of any law or regulation or (ii) the compliance with any guideline or request issued or made after the Effective Date from or by any central bank or other governmental authority (whether or not having the force of law), in each case above other than those referred to in Section 2.12, there shall be any increase in the cost to any Lender of agreeing to make, fund or maintain, or of making, funding or maintaining, Eurodollar Rate Advances funded in the interbank Eurodollar market, then the Borrower shall from time to time, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender additional amounts sufficient to reimburse such Lender for all such increased costs (except those incurred more than 60 days prior to the date of such demand; for the purposes hereof any cost or expense allocable to a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.11(a) (except as otherwise expressly provided above in this Section 2.11(a)). A certificate as to the amount of such increased cost, submitted to the Borrower and the Administrative Agent by such Lender, shall be conclusive and binding for all purposes, absent manifest error. After one or more Lenders have notified the Borrower of any increased costs pursuant to this Section 2.11, the Borrower may specify by notice to the Administrative Agent and the affected Lenders that, after the date of such notice whenever the election of a Eurodollar Rate Advance by the Borrower for an Interest Period or portion thereof would give rise to such increased costs, such election shall not apply to 20 the A Advances of such Lender or Lenders during such Interest Period or portion thereof, and, in lieu thereof, such A Advances shall during such Interest Period or portion thereof be Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an Affiliate of such Lender) to avoid, or minimize the amount of, any demand for payment from the Borrower under this Section 2.11, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (b) In the event that any Lender shall change its Eurodollar Lending Office and such change results (at the time of such change) in increased costs to such Lender, the Borrower shall not be liable to such Lender for such increased costs incurred by such Lender to the extent, but only to the extent, that such increased costs shall exceed the increased costs which such Lender would have incurred if the Eurodollar Lending Office of such Lender had not been so changed, but, subject to Subsection (a) of this Section 2.11 and to Section 2.13, nothing herein shall require any Lender to change its Eurodollar Lending Office for any reason. Section 2.12 Increased Capital. If either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance by any Lender with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender (including any determination after the Effective Date by any such central bank, governmental authority or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less) and such Lender determines that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend hereunder and other commitments of this type, then, within ten days after demand, and delivery to the Borrower of the certificate referred to in the last sentence of this Section 2.12 by such Lender (with a copy of such demand to the Administrative Agent), the Borrower shall pay to the Administrative Agent for the account of such Lender, from time to time as specified by such Lender, additional amounts sufficient to compensate such Lender or such corporation in the light of such circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend hereunder (except any such increase in capital incurred more than, or compensation attributable to the period before, 90 days prior to the date of such demand; for the purposes hereof any increase in capital allocable to, or compensation attributable to, a period prior to the publication or effective date of such an introduction, change, guideline or request shall be deemed to be incurred on the later of such publication or effective date). Each Lender agrees to use its best reasonable efforts promptly to notify the Borrower of any event referred to in clause (i) or (ii) above, provided that the failure to give such notice shall not affect the rights of any Lender under this Section 2.12 (except as otherwise expressly provided above in this Section 2.12). A certificate in reasonable detail as to the basis for, and the amount of, such compensation submitted to the Borrower and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. Section 2.13 Illegality. Notwithstanding any other provision of this Agreement, if the introduction of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert that it is unlawful, for 21 any Lender or its Applicable Lending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to continue to fund or maintain such Advances hereunder, such Lender may, by notice to the Borrower and the Administrative Agent, suspend the right of the Borrower to elect Eurodollar Rate Advances from such Lender and, if necessary in the reasonable opinion of such Lender to comply with such law or regulation, Convert all such Eurodollar Rate Advances of such Lender to Base Rate Advances at the latest time permitted by the applicable law or regulation, and such suspension and, if applicable, such Conversion shall continue until such Lender notifies the Borrower and the Administrative Agent that the circumstances making it unlawful for such Lender to perform such obligations no longer exist (which such Lender shall promptly do when such circumstances no longer exist). So long as the obligation of any Lender to make Eurodollar Rate Advances has been suspended under this Section 2.13, all Notices of A Borrowing specifying A Advances of such Type shall be deemed, as to such Lender, to be requests for Base Rate Advances. Each Lender agrees to use its best reasonable efforts (including a reasonable effort to change its Applicable Lending Office or to transfer its affected A Advances to an affiliate) to avoid any such illegality, provided that such avoidance would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. Section 2.14 Payments and Computations. (a) The Borrower shall make each payment hereunder (including under Section 2.03, 2.05, 2.06 or 2.19) and under the Notes, whether the amount so paid is owing to any or all of the Lenders or to the Administrative Agent, not later than 1:00 P.M. (New York City time) without setoff, counterclaim, or any other deduction whatsoever, on the day when due in U.S. dollars to the Administrative Agent in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Reference: Burlington Resources Inc., or at such other location designated by notice to the Borrower from the Administrative Agent and agreed to by the Borrower, in same day funds. Each such payment made by the Borrower for the account of any Lender hereunder, when so made to the Administrative Agent, shall be deemed duly made for all purposes of this Agreement and the Notes, except that if at any time any such payment is rescinded or must otherwise be returned by the Administrative Agent or any Lender upon the bankruptcy, insolvency or reorganization of the Borrower or otherwise, such payment shall be deemed not to have been so made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest or fees ratably (other than amounts payable pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 8.07(d), from and after the effective date specified in such Assignment and Acceptance, the Administrative Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. 22 (b) All computations of interest based on the Base Rate and of facility fees and utilization fees shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, or the Effective Federal Funds Rate shall be made by the Administrative Agent, and all computations of interest pursuant to Section 2.07 shall be made by each Lender with respect to its own Eurodollar Rate Advances, on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent (or, in the case of Section 2.07, 2.11, 2.12, 2.13, 2.15, 2.19 or 8.04(b), by each Lender with respect to its own Advances) of an interest rate or an increased cost, loss or expense or increased capital or of illegality or taxes hereunder shall be conclusive and binding for all purposes if made reasonably and in good faith. (c) Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or facility fees, as the case may be; provided, however, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at a rate equal to the Effective Federal Funds Rate for such day. Section 2.15 Taxes. (a) Any and all payments by the Borrower hereunder or under the Notes shall be made in accordance with Section 2.14, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding in the case of each Indemnified Party, (i) all taxes, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, imposed on or determined by reference to its income or profits, and all franchise taxes, and (ii) all other taxes, levies, imposts, deductions, charges, or withholdings in effect at the time that such Indemnified Party executed this Agreement or otherwise became an "Indemnified Party" hereunder, and liabilities with respect thereto, imposed on it by reason of the jurisdiction in which such Indemnified Party is organized, domiciled, resident or doing business, or any political subdivision thereof, or by reason of the jurisdiction of its Applicable Lending Office or any other office from which it makes or maintains any extension of credit hereunder or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, 23 withholdings and liabilities in respect of payments under this Agreement or under the Notes being herein referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Indemnified Party, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) such Indemnified Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower (or the Administrative Agent, as applicable) shall make such deductions at the applicable statutory rate and (iii) the Borrower (or the Administrative Agent, as applicable) shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, provided that the Borrower shall not be required to pay any additional amount (and shall be relieved of any liability with respect thereto) pursuant to this Subsection (a) (or pursuant to Section 2.15(c), except to the extent Section 2.15(c) relates to Other Taxes) to any Indemnified Party that either (x) on the date such Indemnified Party executed this Agreement or otherwise became an "INDEMNIFIED PARTY" hereunder, both (A) was not entitled to submit a U.S. Internal Revenue Service form W-8BEN (relating to such Indemnified Party, and entitling it to a complete exemption from withholding on all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement or the Advances) or a U.S. Internal Revenue Service form W-8ECI (relating to all amounts to be received by such Indemnified Party, including fees, pursuant to this Agreement and the Advances) and (B) is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code), or (y) has failed to submit any form or certificate that it was required to file or provide pursuant to Subsection (d) of this Section 2.15 and is entitled to file or give, as applicable, under applicable law, provided, further, that should an Indemnified Party become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such administrative steps as such Indemnified Party shall reasonably request to assist such Indemnified Party to recover such Taxes, and provided further, that each Indemnified Party, with respect to itself, agrees to indemnify and hold harmless the Borrower from any taxes, penalties, interest and other expenses, costs and losses incurred or payable by the Borrower as a result of the failure of the Borrower to comply with its obligations under clauses (ii) or (iii) above in reliance on any form or certificate provided to it by such Indemnified Party pursuant to this Section 2.15. If any Indemnified Party receives a net credit or refund in respect of such Taxes or amounts so paid by the Borrower, it shall promptly notify the Borrower of such net credit or refund and shall promptly pay such net credit or refund to the Borrower, provided that the Borrower agrees to return such net credit or refund if the Indemnified Party to which such net credit or refund is applicable, is required to repay it. (b) In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes (hereinafter referred to as "OTHER TAXES"). (c) The Borrower will indemnify each Indemnified Party for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.15) paid by such Indemnified Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto except as a result of the gross negligence (which shall in any event include the failure of such Indemnified Party to 24 provide to the Borrower any form or certificate that it was required to provide pursuant to Subsection (d) below) or willful misconduct of such Indemnified Party, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Indemnified Party makes written demand therefor. (d) On or prior to the date on which each Indemnified Party that is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) executes this Agreement or otherwise becomes an "INDEMNIFIED PARTY" hereunder, such Indemnified Party shall provide the Borrower and the Administrative Agent with U.S. Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the U.S. Internal Revenue Service, certifying that such Indemnified Party is fully exempt from United States withholding taxes with respect to all payments to be made to such Indemnified Party hereunder, or other documents satisfactory to the Borrower indicating that all payments to be made to such Indemnified Party hereunder are fully exempt from such taxes. Thereafter and from time to time, each such Indemnified Party shall submit to the Borrower and the Administrative Agent such additional duly completed and signed copies of one or the other of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may be (i) notified by the Borrower to such Indemnified Party and (ii) required under then-current United States law or regulations to avoid United States withholding taxes on payments in respect of all amounts to be received by such Indemnified Party pursuant to this Agreement or the Notes, including fees. Upon the request of the Borrower from time to time, each Indemnified Party that is a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) shall submit to the Borrower a certificate to the effect that it is such a United States person. If any Indemnified Party determines, as a result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Borrower any form or certificate that such Indemnified Party is obligated to submit pursuant to this Subsection (d), or that such Indemnified Party is required to withdraw or cancel any such form or certificate previously submitted, such Indemnified Party shall promptly notify the Borrower and the Administrative Agent of such fact. (e) Any Indemnified Party claiming any additional amounts payable pursuant to this Section 2.15 shall use its best reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts which may thereafter accrue and would not, in the reasonable judgment of such Indemnified Party, be otherwise disadvantageous to such Indemnified Party. (f) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower and each Indemnified Party contained in this Section 2.15 shall survive the payment in full of principal and interest hereunder and under the Notes. Section 2.16 Sharing of Payments, Etc.. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the A Advances made by it (other than pursuant to Section 2.07, 2.11, 2.12, 2.13, 2.15 or 8.04(b)) in excess of its ratable share of payments on account of the A Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations 25 in the A Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and each Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (i) the amount of the participation purchased from such Lender as a result of such excess payment to (ii) the total amount of such excess payment) of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (A) the amount of such Lender's required repayment to (B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. Section 2.17 Evidence of Debt. (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of the Borrower to such Lender resulting from each Advance made by such Lender hereunder, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (b) The Administrative Agent shall maintain accounts and records in which it shall record (i) the amount of each Advance made hereunder, the type of Advance and, in the cases of Eurodollar Rate Advances, the relevant Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (c) The entries made in the accounts maintained pursuant to Sections 2.17(a) and (b) shall be conclusive evidence (absent manifest error) of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Advances in accordance with the terms of this Agreement. In the event of a conflict between the records maintained by the Administrative Agent and any Lender, the records maintained by the Lender shall govern. Any Lender may request that Loans made by it be evidenced by a Note. In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and substantially in the form attached as Exhibit A hereto. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 8.07) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if such Note is a registered Note, to such payee and its registered assigns). Section 2.18 Use of Proceeds. Proceeds of the Advances shall be used to finance the Acquisition and for payment of commercial paper issued by the Borrower to provide liquidity to the Borrower or the Acquisition Company to permit the financing of the Acquisition, and to pay 26 (or effect reimbursement for) fees and expenses relating to any of the foregoing, in each case directly or indirectly through debt or equity investments in Subsidiaries of the Borrower. Section 2.19 The B Advances. (a) Each Lender severally agrees that the Borrower may make B Borrowings under this Section 2.19 from time to time on any Business Day during the period from the Effective Date until the earlier of (I) the Termination Date or (II) the date falling 30 days prior to the Stated Termination Date, in the manner set forth below; provided that (x) each B Borrowing shall be in an aggregate amount of $25,000,000 or an integral multiple of $5,000,000 in excess thereof and (y) following the making of each B Borrowing, the aggregate number of outstanding B Borrowings shall not exceed seven and the aggregate amount of all Advances then outstanding shall not exceed the aggregate amount of the Commitments of the Lenders (computed without regard to any B Reduction). (i) The Borrower may request a B Borrowing under this Section 2.19 by delivering to the Administrative Agent, by telecopy, telefax or other teletransmission, a notice of a B Borrowing (a "NOTICE OF B BORROWING"), in substantially the form of Exhibit C hereto, specifying the date and aggregate amount of the proposed B Borrowing, the maturity date for repayment of each B Advance to be made as part of such B Borrowing (which maturity date may not be earlier than the date occurring 30 days after the date of such B Borrowing or later than the earlier of (x) 180 days after the date of such B Borrowing or (y) the Stated Termination Date), the interest payment date or dates relating thereto, and any other terms to be applicable to such B Borrowing, not later than 10:00 A.M. (New York City time) (A) at least one Business Day prior to the date of the proposed B Borrowing, if the Borrower shall specify in the Notice of B Borrowing that the rates of interest to be offered by the Lenders shall be fixed rates per annum and (B) at least four Business Days prior to the date of the proposed B Borrowing, if the Borrower shall instead specify in the Notice of B Borrowing the basis to be used by the Lenders in determining the rates of interest to be offered by them. The Administrative Agent shall in turn promptly notify each Lender of each request for a B Borrowing received by it from the Borrower by sending such Lender a copy of the related Notice of B Borrowing. (ii) Each Lender may, if in its sole and absolute discretion it elects to do so, irrevocably offer to make one or more B Advances to the Borrower as part of such proposed B Borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by notifying the Administrative Agent (which shall give prompt notice thereof to the Borrower), before 10:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above, and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, of the maximum amount of each B Advance which such Lender would be willing to make as part of such proposed B Borrowing (which amount may, subject to clause (y) of the proviso to the first sentence of this Section 2.19(a), exceed such Lender's Commitment), the rate or rates of interest therefor and such Lender's Applicable Lending Office with respect to such B Advance; provided that if the Administrative Agent or an Affiliate thereof in its capacity as a Lender shall, in its sole discretion, elect to make any such offer, it shall notify the Borrower of such offer 27 before 9:45 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. If any Lender shall elect not to make such an offer, such Lender shall so notify the Administrative Agent, before 10:00 A.M. (New York City time) on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders, and such Lender shall not be obligated to, and shall not, make any B Advance as part of such B Borrowing; provided that the failure by any Lender to give such notice shall not cause such Lender to be obligated to make any B Advance as part of such proposed B Borrowing. (iii) The Borrower shall, in turn, before 11:00 A.M. (New York City time) (x) on the date of such proposed B Borrowing, in the case of a Notice of B Borrowing delivered pursuant to clause (A) of paragraph (i) above and (y) three Business Days before the date of such proposed B Borrowing in the case of a Notice of B Borrowing delivered pursuant to clause (B) of paragraph (i) above, either (A) cancel such B Borrowing by giving the Administrative Agent notice to that effect, or (B) accept one or more of the offers made by any Lender or Lenders pursuant to paragraph (ii) above, in order of the lowest to highest rates of interest or margins (or, if two or more Lenders bid at the same rates of interest, and the amount of accepted offers is less than the aggregate amount of such offers, the amount to be borrowed from such Lenders as part of such B Borrowing shall be allocated among such Lenders pro rata on the basis of the maximum amount offered by such Lenders at such rates or margin in connection with such B Borrowing), in any aggregate amount up to the aggregate amount initially requested by the Borrower in the relevant Notice of B Borrowing, by giving notice to the Administrative Agent of the amount of each B Advance (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the Borrower by the Administrative Agent on behalf of such Lender for such B Advance pursuant to paragraph (ii) above) to be made by each Lender as part of such B Borrowing, and reject any remaining offers made by Lenders pursuant to paragraph (ii) above by giving the Administrative Agent notice to that effect. (iv) If the Borrower notifies the Administrative Agent that such B Borrowing is cancelled pursuant to paragraph (iii)(A) above, the Administrative Agent shall give prompt notice thereof to the Lenders and such B Borrowing shall not be made. (v) If the Borrower accepts one or more of the offers made by any Lender or Lenders pursuant to paragraph (iii)(B) above, the Administrative Agent shall in turn promptly notify (A) each Lender that has made an offer as described in paragraph (ii) above, of the date and aggregate amount of such B Borrowing and whether or not any offer or offers made by such Lender pursuant to paragraph (ii) above have been accepted by the Borrower, (B) each Lender that is to make a B Advance as part of such B Borrowing, of the amount of each B Advance to be made by such Lender as part of such B Borrowing, and (C) each Lender that is to make a B Advance as part of such 28 B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the applicable conditions set forth in Article 3. Each Lender that is to make a B Advance as part of such B Borrowing shall, before 12:00 noon (New York City time) on the date of such B Borrowing specified in the notice received from the Administrative Agent pursuant to clause (A) of the preceding sentence or any later time when such Lender shall have received notice from the Administrative Agent pursuant to clause (C) of the preceding sentence, make available for the account of its Applicable Lending Office to the Administrative Agent at its address referred to in Section 8.02 such Lender's portion of such B Borrowing, in same day funds. Upon fulfillment of the applicable conditions set forth in Article 3 and after receipt by the Administrative Agent of such funds, the Administrative Agent will make such funds available to the Borrower at the Administrative Agent's aforesaid address. Promptly after each B Borrowing the Administrative Agent will notify each Lender of the amount of the B Borrowing, the consequent B Reduction and the dates upon which such B Reduction commenced and will terminate. (b) Within the limits and on the conditions set forth in this Section 2.19, the Borrower may from time to time borrow under this Section 2.19, repay or prepay pursuant to Subsection (c) below, and reborrow under this Section 2.19. (c) The Borrower shall repay to the Administrative Agent for the account of each Lender which has made a B Advance, or each other holder of a Note, on the maturity date of each B Advance (such maturity date being that specified by the Borrower for repayment in the related Notice of B Borrowing and provided in the Note, if any, evidencing such B Advance), the then unpaid principal amount of such B Advance. The Borrower shall have no right to prepay any B Advance unless, and then only on the terms, specified by the Borrower for such B Advance in the related Notice of B Borrowing delivered pursuant to Section 2.19(a)(i) and set forth in the Note, if any, evidencing such B Advance or unless the holder of such B Advance otherwise consents in writing to such prepayment. (d) The Borrower shall pay interest on the unpaid principal amount of each B Advance from the date of such B Advance to the date the principal amount of such B Advance is repaid in full at the rate of interest for such B Advance specified by the Lender making such B Advance in its notice delivered pursuant to Subsection (a)(ii) above on the interest date or dates specified by the Borrower for such B Advance in the related Notice of B Borrowing and set forth in the Note, if any, evidencing such B Advance, subject to Section 2.06(b). (e) Each time that the Borrower gives a Notice of B Borrowing, the Borrower shall pay to the Administrative Agent for its own account such fee as may be agreed between the Borrower and the Administrative Agent from time to time, whether or not any B Borrowing is in fact made. (f) Following the making of each B Borrowing, the Borrower agrees that it will be in compliance with the limitations set forth in clause (y) of the proviso to the first sentence of Section 2.19(a). 29 (g) The failure of any Lender to make the B Advance to be made by it as part of any B Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its B Advance on the date of such B Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the B Advance to be made by such other Lender on the date of any B Borrowing. If any Designated Bidder fails to make the B Advance to be made by it as part of any B Borrowing, such Designated Bidder shall not thereafter have the right to offer to make any B Advance without the prior written consent of the Borrower and the Administrative Agent. Section 2.20 [ Reserved ]. Section 2.21 Extension of Stated Termination Date. (a) Not earlier than 65 days prior to and not later than 45 days prior to the Stated Termination Date then in effect, provided that no Event of Default shall have occurred and be continuing, the Borrower may request an extension of such Stated Termination Date by submitting to the Administrative Agent an Extension Request containing the information in respect of such extension specified in Exhibit E, which the Administrative Agent shall promptly furnish to each Lender. Each Lender shall, by the later of (i) the date 30 days after its receipt from the Administrative Agent of the applicable Extension Request and (ii) the date 30 days prior to the Stated Termination Date, notify the Borrower and the Administrative Agent of its election to extend or not extend the Stated Termination Date as requested in such Extension Request. If the Required Lenders shall approve in writing the extension of the Stated Termination Date requested in such Extension Request, the Stated Termination Date shall automatically and without any further action by any Person be extended to the requested new "Stated Termination Date" as set forth in the Extension Request provided that the Commitment of any Lender that does not consent in writing within the period specified above (an "OBJECTING LENDER") shall, unless earlier terminated in accordance with this Agreement, expire on the Stated Termination Date in effect on the date of such Extension Request (such Stated Termination Date, if any, referred to as the "COMMITMENT EXPIRATION DATE" with respect to such Objecting Lender). If, within the period specified above, the Required Lenders shall not approve in writing the extension of the Stated Termination Date requested in an Extension Request, the Stated Termination Date shall not be extended pursuant to such Extension Request. The Administrative Agent shall promptly notify (y) the Lenders and the Borrower of any extension of the Stated Termination Date pursuant to this Section 2.21 and (z) the Borrower of any Lender that becomes an Objecting Lender. (b) A Advances owing to any Objecting Lender on the Commitment Expiration Date, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable with respect to such Lender shall be repaid in full on or before such Commitment Expiration Date. (c) The Borrower shall have the right, so long as no Event of Default has occurred and is then continuing, upon giving notice to the Administrative Agent and the Objecting Lenders in accordance with Section 2.10, to prepay in full the A Advances of the Objecting Lenders, together with accrued interest thereon, any amounts payable pursuant to Sections 2.06, 2.07, 2.11, 2.12, 2.15 and 8.04(b) and any accrued and unpaid facility fee or utilization fee or other amounts payable to the Objecting Lenders hereunder and, upon giving not less than three 30 Business Days' notice to the Objecting Lenders and the Administrative Agent, to cancel the whole or part of the Commitments of the Objecting Lenders. (d) Notwithstanding the foregoing, if any Lender becomes an Objecting Lender, the Borrower may, at its own expense and in the sole discretion and prior to the then Stated Termination Date, require such Lender (and each related Designated Bidder (as defined herein)) to transfer or assign, in whole or in part, without recourse (in accordance with Section 8.07), all or part of its interests, rights and obligations under this Agreement, as the Borrower may determine in its sole discretion and specify by notice to such Lender, to an Eligible Assignee (provided that the Borrower, with the full cooperation of such Lender, can identify an Eligible Assignee that is ready, willing and able to be an assignee with respect thereto) which shall assume such assigned obligations (which assignee may be another Lender, if such assignee Lender accepts such assignment); provided that (A) the assignee or the Borrower, as the case may be, shall have paid to such Lender in immediately available funds the principal of and interest accrued to the date of such payment on the Advances made by it hereunder and all other amounts owed to it hereunder, including any amounts owing pursuant to Section 8.04(b) and any amounts that would be owing under such Section if such Advances were prepaid on the date of such assignment, and (B) such assignment does not conflict with any law, rule or regulation or order of any governmental authority. Any assignee that becomes a Lender as a result of such an assignment made pursuant to this paragraph (d) shall be deemed to have consented to the applicable Extension Request and, therefore, shall not be an Objecting Lender. Section 2.22 Replacement of Lenders. If any Lender requests compensation under Sections 2.07, 2.11 or 2.12 or if the Borrower is required to pay any additional amount to any Lender or any taxing authority or other authority for the account of any Lender pursuant to Section 2.15, or if any Lender suspends the right of the Borrower to elect Eurodollar Rate Advances from such Lender pursuant to Section 2.13, or if any Lender defaults in its obligation to fund Advances hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 8.07), all its interests, rights and obligations under this Agreement (other than any outstanding B Advances held by it) to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Advances (other than B Advances) hereunder, and all accrued interest thereon, accrued fees, accrued costs in connection with compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, if any, and all other amounts (other than B Advances) payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Sections 2.07, 2.11 or 2.12 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. 31 ARTICLE 3 CONDITIONS OF EFFECTIVENESS AND LENDING Section 3.01 Conditions Precedent to Effectiveness of this Agreement. This Agreement shall become effective as of the Effective Date. The Effective Date shall occur when: (a) this Agreement shall have been executed and delivered by the Borrower and the Administrative Agent; (b) the Administrative Agent and the Borrower either shall have been notified by each Initial Lender that such Initial Lender has executed this Agreement or shall have received a counterpart of this Agreement executed by such Initial Lender; (c) the Administrative Agent shall have received the following, each dated the date of delivery thereof unless otherwise specified below (which date shall be selected by the Borrower and be the same for all documents and all Lenders), in form and substance satisfactory to the Administrative Agent and (except for the Notes, if any) in sufficient copies for each Lender: (i) the Notes, to the order of the Lenders requesting Notes, respectively; (ii) certified copies of the resolutions of the Board of Directors of the Borrower approving the Acquisition and the borrowings contemplated hereby and authorizing the execution of this Agreement and the Notes, if any, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes, if any; (iii) a certificate of the Secretary or an Assistant Secretary of the Borrower (A) certifying names and true signatures of officers of the Borrower authorized to sign this Agreement and the Notes, if any, and the other documents to be delivered hereunder and (B) if the Effective Date is other than the date of this Agreement, certifying that the representations and warranties contained in Section 4.01 are true and correct as of the Effective Date; (iv) a favorable opinion of the Borrower's Vice President and General Counsel, in substantially the form of Exhibit F hereto; and (v) a favorable opinion of Jones, Day, Reavis & Pogue, New York counsel to the Borrower, in substantially the form of Exhibit G hereto; (d) the Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date; and (e) the Acquisition Conditions shall be, or shall have been, satisfied. Section 3.02 Conditions Precedent to Each A Borrowing. The obligation of each Lender to make an A Advance (including the initial A Advance) on the occasion of any A Borrowing shall be subject to the further conditions precedent that on or before the date of such A Borrowing this Agreement shall have become effective pursuant to Section 3.01 and that on 32 the date of such A Borrowing, before and immediately after giving effect to such A Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of A Borrowing and the acceptance by the Borrower of the proceeds of such A Borrowing shall constitute its representation and warranty that on and as of the date of such A Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower Section 3.03 Conditions Precedent to Each B Borrowing. The obligation of each Lender which is to make a B Advance on the occasion of any B Borrowing (including the initial B Borrowing) shall be subject to the further conditions precedent that (i) at or before the time required by paragraph (iii) of Section 2.19(a), the Administrative Agent shall have received the written confirmatory notice of such B Borrowing contemplated by such paragraph, (ii) on or before the date of such B Borrowing this Agreement shall have become effective pursuant to Section 3.01, and (iii) on the date of such B Borrowing, before and immediately after giving effect to such B Borrowing and to the application of the proceeds therefrom, the following statements shall be true and correct, and the giving by the Borrower of the applicable Notice of B Borrowing and the acceptance by the Borrower of the proceeds of such B Borrowing shall constitute its representation and warranty that on and as of the date of such B Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom, the following statements are true and correct: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such B Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under this Agreement (including such B Borrowing) and under other agreements or facilities or evidenced by other instruments or 33 documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. ARTICLE 4 REPRESENTATIONS AND WARRANTIES Section 4.01 Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly incorporated, validly existing and in good standing in the jurisdiction of its incorporation. The Borrower and each Material Subsidiary possess all corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. Each Subsidiary which is, on and as of the Effective Date, a Material Subsidiary is listed on Schedule I hereto. (b) The execution, delivery and performance by the Borrower of this Agreement and the Notes, if any, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Borrower's certificate of incorporation or by-laws or (ii) law or any contractual restriction binding on or affecting the Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes, if any, which has not been duly made or obtained, except those (i) required in the ordinary course to comply with ongoing covenant obligations of the Borrower hereunder the performance of which is not yet due and (ii) that will, in the ordinary course of business in accordance with this Agreement, be duly made or obtained on or prior to the time or times the performance of such obligations shall be due. (d) This Agreement constitutes, and the Notes (if and when delivered hereunder) shall constitute, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally or by general principles of equity. (e) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 2000 and the related consolidated statements of income and cash flow for the fiscal year then ended, reported on by PricewaterhouseCoopers LLC, independent public accountants, and the consolidated balance sheet of the Borrower and its consolidated subsidiaries as at September 30, 2001 and the related consolidated statements of income and cash flow for the nine-month period then ended, certified by the chief financial officer of the Borrower, copies of each of which have been furnished to the Administrative Agent and the Initial Lenders, fairly present the consolidated financial condition of the Borrower and such Subsidiaries as at December 31, 2000, and September 30, 2001, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 2001, statements to 34 normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied. (f) [reserved] (g) The Borrower and each consolidated Subsidiary have duly filed all tax returns required to be filed, and duly paid and discharged all taxes, assessments and governmental charges upon it or against its properties now due and payable, the failure to file or pay which, as applicable, would have a Material Adverse Effect, unless and to the extent only that the same are being contested in good faith and by appropriate proceedings by the Borrower or the appropriate Subsidiary. (h) Except to the extent permitted pursuant to Section 5.02(e), neither the Borrower nor any Material Subsidiary is subject to any contractual restrictions which limit the amount of dividends payable by any Subsidiary. (i) No Termination Event has occurred or is reasonably expected to occur with respect to any Plan which, with the giving of notice or lapse of time, or both, would constitute an Event of Default under Section 6.01(g). (j) Neither the Borrower nor any ERISA Affiliate has incurred, or is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan that, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liability (as of the date of determination), exceeds 5% of the Consolidated Tangible Net Worth of the Borrower. (k) Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization or has been terminated, within the meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected to be in reorganization or to be terminated within the meaning of Title IV of ERISA the effect of which reorganization or termination would be the occurrence of an Event of Default under Section 6.01(i). (l) The Borrower is not an "investment company" or a "company" controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (m) The Borrower is not a "holding company" or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. All representations and warranties made by the Borrower herein or made in any certificate delivered pursuant hereto shall survive the making of the Advances and the execution and delivery to the Lenders of this Agreement and the Notes, if any. 35 ARTICLE 5 COVENANTS OF THE BORROWER Section 5.01 Affirmative Covenants. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent in writing: (a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain, and cause each Material Subsidiary to preserve and maintain, its existence, rights (organizational and statutory) and material franchises, except as otherwise contemplated or permitted by Section 5.02(c) or 5.02(d); provided, that any Material Subsidiary may change its form of organization to a partnership or other form of Business Entity. (b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary to comply, in all material respects, with all applicable laws, rules, regulations and orders (including all environmental laws and laws requiring payment of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith by appropriate proceedings) the failure to comply with which would have a Material Adverse Effect. (c) VISITATION RIGHTS. At such reasonable times and intervals as the Administrative Agent or any of the Lenders (other than Designated Bidders) may desire, permit the Administrative Agent or any of the Lenders (other than Designated Bidders) to visit the Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of the Borrower and any of its Subsidiaries with officers of the Borrower and independent certified public accountants of the Borrower and any of its Subsidiaries, provided that if an Event of Default, or an event which with the giving of notice or the passage of time, or both, would become an Event of Default, has occurred and is continuing, the Administrative Agent or any Lender may, in addition to the other provisions of this Subsection (c) and at such reasonable times and intervals as the Administrative Agent or any of the Lenders may desire, visit and inspect, under guidance of officers of the Borrower, any properties significant to the consolidated operations of the Borrower and its Subsidiaries, and to examine the books and records of account (other than with respect to any mineral reserve information that the Borrower determines to be confidential, except, during the continuation of an Event of Default, if such Lenders shall have entered into a confidentiality agreement with respect to such information satisfactory in form and substance to the Borrower) of the Borrower and any of its Subsidiaries and to discuss the affairs, finances and accounts of any of the Borrower's Subsidiaries with any of the officers of such Subsidiary. (d) BOOKS AND RECORDS. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each Subsidiary in accordance with generally accepted accounting principles either (i) consistently applied or (ii) applied in a changed manner that does not, under generally accepted accounting principles or public reporting requirements applicable to the Borrower, either require disclosure in the consolidated financial statements of the Borrower and its consolidated Subsidiaries or require the consent of 36 the accountants which (as required by Section 5.03(b)) report on such financial statements for the fiscal year in which such change shall have occurred, or (iii) applied in a changed manner not covered by clause (ii) above provided such change shall have been disclosed to the Administrative Agent and shall have been consented to by the accountants which (as required by Section 5.03(b)) report on the consolidated financial statements of the Borrower and its consolidated Subsidiaries for the fiscal year in which such change shall have occurred, provided that if any change referred to in clause (ii) or (iii) above would not meet the standard set forth in clause (i) or (ii) of Section 1.03, the Administrative Agent, the Lenders and the Borrower agree to amend the covenants contained in Section 5.01 and 5.02 so that the relative protection afforded thereby to the Lenders and the relative flexibility afforded thereby to the Borrower will in substance be retained after such amendment, provided, however, that until such amendment becomes effective hereunder, the covenants as set forth herein shall remain in full force and effect and those accounting principles applicable to the Borrower and its consolidated Subsidiaries which do meet the standards set forth in clause (i) or (ii) of Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants. (e) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and cause each Material Subsidiary to maintain and preserve, all of its properties which are used in the conduct of its business in good working order and condition, ordinary wear and tear excepted, to the extent that any failure to do so would have a Material Adverse Effect. (f) MAINTENANCE OF INSURANCE. Maintain, and cause each Material Subsidiary to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates. (g) USE OF PROCEEDS OF ADVANCES. Use, and cause the Acquisition Company to use, the proceeds of the Advances solely for the purposes specified in Section 2.18. (h) ACQUISITION; REPLACEMENT OF THIS AGREEMENT. Use its best commercially reasonable efforts to (i) complete the Acquisition as soon as practicable and (ii) terminate the Commitments and repay all outstanding Advances as soon as practicable. Section 5.02 Negative Covenants. So long as any Advance, Note or other amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will not, unless the Majority Lenders shall otherwise consent in writing: (a) Liens, Etc. (i) Create, assume or suffer to exist, or permit any Material Subsidiary to create, assume or suffer to exist, any Liens upon or with respect to any of the Equity Interests in any Material Subsidiary, whether now owned or hereafter acquired, or (ii) create or assume, or permit any Material Subsidiary to create or assume, any Liens upon or with respect to any other assets material to the consolidated operations of the Borrower and its consolidated Subsidiaries taken as a whole securing the payment of Debt and Guaranties in an aggregate amount (determined without duplication of amount (so that the amount of a Guaranty will be excluded to the extent the Debt Guaranteed thereby is included in computing such aggregate amount)) 37 exceeding the greater of (x) $250,000,000 and (y) 10% of Consolidated Tangible Net Worth as at the date of such creation or assumption; provided, however, that this Subsection (a) shall not apply to: (A) Liens on assets acquired by the Borrower or any of its Subsidiaries after the Original Effective Date to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (B) Liens on Equity Interests acquired after the Original Effective Date in a Business Entity which has become or becomes a Subsidiary of the Borrower, or on assets of any such Business Entity, to the extent that such Liens existed at the time of such acquisition and were not placed thereon by or with the consent of the Borrower in contemplation of such acquisition; (C) Liens on Margin Stock; (D) Liens on the Equity Interests in, or Debt or other obligations of, or assets of, any Project Financing Subsidiary (or any Equity Interests in, Debt or other obligations of any Business Entity which are owned by any Project Financing Subsidiary) securing the payment of a Project Financing and related obligations; (E) Permitted Liens; (F) Liens arising out of the refinancing, extension, renewal or refunding of any Debt or Guaranty secured by any Lien permitted by any of the foregoing clauses of this Section, provided that the principal amount of such Debt or Guaranty is not increased (except by the amount of costs reasonably incurred in connection with the issuance thereof) and such Debt or Guaranty is not secured by any additional assets that would not have been permitted by this Section to secure the Debt or Guaranty refinanced, extended, renewed or refunded; and (G) Liens on products and proceeds (including dividend, interest and like payments on, and insurance and condemnation proceeds and rental, lease, licensing and similar proceeds) of, and property evidencing or embodying, or constituting rights or other general intangibles relating to, and accessions and improvements to, collateral subject to Liens permitted by this Section 5.02. (b) DEBT, ETC. Create, assume or suffer to exist, or permit any of its consolidated Subsidiaries to create, assume or suffer to exist, any Debt or any Guaranty unless, immediately after giving effect to such Debt or Guaranty and the receipt and application of any proceeds thereof or value received in connection therewith, (1) the sum (without duplication) of (i) consolidated Debt of the Borrower and its consolidated Subsidiaries plus (ii) the aggregate amount (determined on a consolidated basis) of Guaranties by the Borrower and its consolidated Subsidiaries is less than 60% of Capitalization, provided that Debt 38 for borrowed money either maturing within one year and evidenced by instruments commonly known as commercial paper, or evidenced by variable demand notes or other similar short-term financing instruments issued to commercial banks and trust companies (other than Debt incurred pursuant to this Agreement, the Short-Term Revolving Credit Agreement, the Long-Term Revolving Credit Agreement or the Canadian Credit Agreement or any replacement therefor), shall not exceed the sum of the unused commitments under the Canadian Credit Agreement and the aggregate of the Borrower's unused bank lines of credit and unused credit available to the Borrower under financing arrangements with banks or other financial institutions; and (2) with respect to any such Debt created or assumed by a consolidated Subsidiary that is either a Subsidiary of the Borrower as of the Original Effective Date or a Subsidiary of the Borrower acquired or created after the Original Effective Date and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, the aggregate amount of Debt of the consolidated Subsidiaries of the Borrower referred to above in this paragraph (2) owing to Persons other than the Borrower and its consolidated Subsidiaries is less than the greater of (i) $500,000,000 (exclusive of public Debt of LL&E existing at the time LL&E became a Subsidiary, the principal amount of which at such time was approximately $400,000,000, and any refinancing of such Debt, in a principal amount not to exceed the principal amount refinanced) and (ii) 30% of Consolidated Tangible Net Worth as at the date of incurrence or creation of such Debt. (c) SALE, ETC., OF ASSETS. Sell, lease or otherwise transfer, or permit any Material Subsidiary to sell, lease or otherwise transfer (in either case, whether in one transaction or in a series of transactions, and except, in either case, to the Borrower or an entity which after giving effect to such transfer will be or become a Material Subsidiary in which the Borrower's direct or indirect Equity Interests will be at least as great as its direct or indirect Equity Interests in the transferor immediately prior thereto, and except as permitted by Section 5.02(d)), assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, provided that, notwithstanding the foregoing, the Borrower or any Material Subsidiary may sell, lease or otherwise transfer any Permitted Assets constituting all or substantially all of the consolidated assets of the Borrower and its Material Subsidiaries, so long as (A) such Permitted Assets are sold, leased or otherwise transferred in exchange for other Permitted Assets and/or (B) the proceeds from such sale, lease or other transfer, or an amount equal to the proceeds thereof, are (x) reinvested within one year from the date of receipt thereof in Permitted Assets and/or the development of Permitted Assets and/or (y) used to repay Debt the proceeds of which were or are being used for investment in, and/or the development of, Permitted Assets; provided further that, no such sale, lease or other transfer shall be permitted by the foregoing proviso unless either (1) after giving effect to such sale, lease or other transfer, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing or (2) the Borrower or the relevant Material Subsidiary, as the case may be, was contractually obligated, prior to the occurrence of such Event of Default or event, to consummate such sale, lease or other transfer. 39 (d) MERGERS, ETC. Merge, amalgamate or consolidate with any Person, or permit any Material Subsidiary to merge, amalgamate or consolidate with any Person, except that: (i) any Subsidiary may merge, amalgamate or consolidate with (or liquidate into) any other Subsidiary or may merge, amalgamate or consolidate with (or liquidate into) the Borrower, provided that (A) if such Subsidiary merges, amalgamates or consolidates with (or liquidates into) the Borrower, either the survivor or successor is the Borrower or such successor or surviving Business Entity is organized and existing under the laws of the United States and expressly assumes the obligations of the Borrower hereunder and under the Notes, (B) if any such Subsidiary merges, amalgamates or consolidates with (or liquidates into) any other Subsidiary of the Borrower, one or more Business Entities that are Subsidiaries of the Borrower are the surviving or successor Business Entity(ies) and, if any such Subsidiary is not directly or indirectly wholly-owned by the Borrower, such merger, amalgamation or consolidation is on an arm's length basis and (C) as a result of such merger, amalgamation or consolidation, no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing, and (ii) the Borrower or any Material Subsidiary may merge, amalgamate or consolidate with any other Business Entity (that is, in addition to the Borrower or any other Subsidiary), provided that (A) if the Borrower merges, amalgamates or consolidates with any such other Business Entity(ies), the survivor or successor Business Entity is the Borrower, (B) if any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, each surviving or successor Business Entity is a directly or indirectly wholly-owned Subsidiary, and (C) if either the Borrower or any Material Subsidiary merges, amalgamates or consolidates with any such other Business Entity, after giving effect to such merger, amalgamation or consolidation no Event of Default, and no event which with lapse of time or the giving of notice, or both, would constitute an Event of Default, shall have occurred and be continuing. (e) DIVIDEND RESTRICTIONS. Create, or consent or agree to, or permit any of its Material Subsidiaries existing on the Original Effective Date or any of its Subsidiaries thereafter created or acquired and owning a material portion of the consolidated operating assets existing at the Original Effective Date of the Borrower and its Subsidiaries, to create, or consent or agree to, any restrictions, contained in any agreement or instrument relating to or evidencing Debt, on any such Subsidiary's ability to pay dividends or to make advances to the Borrower or any Subsidiary of the Borrower; provided, however, that this Subsection (e) shall not apply to any such restrictions (including any extensions of the term of any thereof (by amendment, or continuation thereof in any refinancing of the Debt to which such restriction relates, or otherwise)) applicable to the Equity Interests in any Subsidiary of the Borrower the Equity Interests in which are acquired by the Borrower after the Original Effective Date and which restrictions are existing at the time such Subsidiary first becomes a Subsidiary of the Borrower and are not placed thereon by or with the consent of the Borrower in contemplation of such acquisition by the Borrower. 40 Section 5.03 Reporting Requirements. So long as any Advance shall remain unpaid or any Lender shall have any Commitment hereunder, the Borrower will furnish to each Lender in such reasonable quantities as shall from time to time be requested by such Lender: (a) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of such quarter, and consolidated statements of income and cash flow of the Borrower and its consolidated Subsidiaries each for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified (subject to normal year-end adjustments) as to fairness and utilization of generally accepted accounting principles by the chief financial officer of the Borrower and accompanied by a certificate of such officer stating (i) that such statements of income and cash flow and such balance sheet have been prepared in accordance with generally accepted accounting principles, (ii) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (iii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in Subsection (b) of Section 5.02, and (iv) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (b) within 120 days after the end of each fiscal year of the Borrower, a copy of the annual report for such year for the Borrower and its consolidated Subsidiaries containing financial statements for such year reported on by nationally recognized independent public accountants acceptable to the Lenders, accompanied by (i) a report signed by said accountants stating that such financial statements have been prepared in accordance with generally accepted accounting principles and (ii) a letter from such accountants stating that in making the investigations necessary for such report they obtained no knowledge, except as specifically stated therein, of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default; (c) within 120 days after the close of each of the Borrower's fiscal years, a certificate of the chief financial officer of the Borrower stating (i) whether or not such officer has knowledge of the occurrence of any Event of Default which is continuing hereunder or of any event not theretofore remedied which with notice or lapse of time or both would constitute such an Event of Default and, if so, stating in reasonable detail the facts with respect thereto, (ii) all relevant facts in reasonable detail to evidence, and the computations as to, whether or not the Borrower is in compliance with the requirements set forth in Subsection (b) of Section 5.02 and (iii) a listing of all Material Subsidiaries and consolidated Subsidiaries of the Borrower showing the extent of its direct and indirect holdings of their Equity Interests; (d) promptly upon their distribution, copies of all financial statements, reports and proxy statements which the Borrower or any Material Subsidiary shall have sent to its public Equity Interest holders; 41 (e) promptly upon their becoming publicly available, all regular and periodic financial reports and registration statements which the Borrower or any Material Subsidiary shall file with the Securities and Exchange Commission or any national securities exchange other than registration statements relating to employee benefit plans and to registration statements of securities for selling security holders; (f) promptly in writing, notice of all litigation and of all proceedings before any governmental or regulatory agencies against or involving the Borrower or any Material Subsidiary, except any litigation or proceeding which in the reasonable judgment of the Borrower (taking into account the exhaustion of all appeals) is not likely to have a material adverse effect on the consolidated financial condition of the Borrower and its consolidated Subsidiaries taken as a whole; (g) within three Business Days after an executive officer of the Borrower obtains knowledge of the occurrence of any Event of Default which is continuing or of any event not theretofore remedied which with notice or lapse of time, or both, would constitute an Event of Default, notice of such occurrence together with a detailed statement by a responsible officer of the Borrower of the steps being taken by the Borrower or the appropriate Subsidiary to cure the effect of such event; (h) as soon as practicable and in any event (i) within 30 days after the Borrower or any ERISA Affiliate knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Plan has occurred and (ii) within 10 days after the Borrower or any ERISA Affiliate knows or has reason to know that any other Termination Event with respect to any Plan has occurred, a statement of the chief financial officer of the Borrower describing such Termination Event and the action, if any, which the Borrower or such ERISA Affiliate proposes to take with respect thereto; (i) promptly and in any event within two Business Days after receipt thereof by the Borrower or any ERISA Affiliate, copies of each notice received by the Borrower or any ERISA Affiliate from the PBGC stating its intention to terminate any Plan or to have a trustee appointed to administer any Plan; (j) promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Plan; (k) promptly and in any event within five Business Days after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice received by the Borrower or any ERISA Affiliate concerning (i) the imposition of Withdrawal Liability by a Multiemployer Plan, (ii) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (iii) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (iv) the amount of liability incurred, or expected to be incurred, by the Borrower or any ERISA Affiliate in connection with any event described in clause (i), (ii) or (iii) above; and 42 (l) as soon as practicable but in any event within 60 days of any notice of request therefor, such other information respecting the financial condition and results of operations of the Borrower or any Subsidiary as any Lender through the Administrative Agent may from time to time reasonably request. Each balance sheet and other financial statement furnished pursuant to Subsections (a) and (b) of this Section 5.03 shall contain comparative information which conforms to the presentation required in Form 10-Q and Form 10-K, as appropriate, under the Securities Exchange Act of 1934, as amended. ARTICLE 6 EVENTS OF DEFAULT Section 6.01 Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Advance within two Business Days after the same shall be due, or any interest on any Advance or any other amount payable hereunder within five Business Days after the same shall be due; or (b) Any representation or warranty made or deemed made by the Borrower herein or by the Borrower (or any of its officers) in connection with this Agreement shall prove to have been incorrect in any material respect when made or deemed made; or (c) The Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be performed or observed and any such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Administrative Agent or by any Lender with a copy to the Administrative Agent; or (d) The Borrower or any Material Subsidiary shall fail to pay any Debt or Guaranty (excluding any Advances) of the Borrower or such Subsidiary (as the case may be) in an aggregate principal amount in excess of the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time, or any installment of principal thereof or interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or Guaranty; or any other default under any agreement or instrument relating to any such Debt, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate the maturity of such Debt; provided that, notwithstanding any provision contained in this Subsection (d) to the contrary, to the extent that pursuant to the terms of any agreement or instrument relating to any Debt referred to in this Subsection (d), any sale, pledge or disposal of Margin Stock, or utilization of the proceeds thereof would result in a breach of any covenant contained therein or otherwise give rise to a default or event of default thereunder and/or acceleration of the maturity of the Debt extended pursuant thereto and as a result of such terms or of such sale, pledge, disposal, utilization, breach, default, event of default or acceleration, or the provisions hereof 43 relating thereto, this Agreement or any Advance hereunder would otherwise be subject to the margin requirements or any other restriction under Regulation U issued by the Board of Governors of the Federal Reserve System, then such breach, default, event of default or acceleration shall not constitute a default or Event of Default under this Subsection (d); or (e) (i) The Borrower or any Material Subsidiary shall (A) generally not pay its debts as such debts become due; or (B) admit in writing its inability to pay its debts generally; or (C) make a general assignment for the benefit of creditors; or (ii) any proceeding shall be instituted or consented to by the Borrower or any such Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or (iii) any such proceeding shall have been instituted against the Borrower or any such Subsidiary and either such proceeding shall not be stayed or dismissed for 60 consecutive days or any of the actions referred to above sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or any substantial part of its property) shall occur; or (iv) the Borrower or any such Subsidiary shall take any corporate action to authorize any of the actions set forth above in this Subsection (e); or (f) Any judgment or order for the payment of money in excess the greater of (i) $100,000,000 and (ii) 3% of Consolidated Tangible Net Worth at such time shall be rendered against the Borrower or any Material Subsidiary and either (i) enforcement proceedings shall have been commenced and are continuing or have been completed by any creditor upon such judgment or order (other than any enforcement proceedings consisting of the mere obtaining and filing of a judgment lien or obtaining of a garnishment or similar order so long as no foreclosure, levy or similar process in respect of such lien, or payment over in respect of such garnishment or similar order, has commenced and is continuing or has been completed) or (ii) there shall be any period of 30 consecutive days during which a stay of execution or enforcement proceedings (other than those referred to in the parenthesis in clause (i) above) in respect of such judgment or order, by reason of a pending appeal, bonding or otherwise, shall not be in effect; or (g) Any Termination Event with respect to a Material Plan shall have occurred and, 30 days after notice thereof shall have been given to the Borrower by the Lender, (i) such Termination Event shall still exist and (ii) the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which a Termination Event shall have occurred and then exist (or in the case of a Plan with respect to which a Termination Event described in clause (ii) of the definition of Termination Event shall have occurred and then exist, the liability related thereto), in each case in respect of which the Borrower or any ERISA Affiliate has liability, is equal to or greater than $50,000,000; or (h) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer 44 Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $50,000,000; or (i) The Borrower or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and its ERISA Affiliates to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years which include the Original Effective Date by an amount exceeding $50,000,000; or (j) Upon completion of, and pursuant to, a transaction, or a series of transactions (which may include prior acquisitions of capital stock of the Borrower in the open market or otherwise), involving a tender offer (i) a "person" (within the meaning of Section 13(d) of the Securities Exchange Act of 1934) other than the Borrower, a Subsidiary of the Borrower or any employee benefit plan maintained for employees of the Borrower and/or any of its Subsidiaries or the trustee therefor, shall have acquired direct or indirect ownership of and paid for in excess of 50% of the outstanding capital stock of the Borrower entitled to vote in elections for directors of the Borrower and (ii) at any time before the later of (x) six months after the completion of such tender offer and (y) the next annual meeting of the shareholders of the Borrower following the completion of such tender offer more than half of the directors of the Borrower consists of individuals who (a) were not directors before the completion of such tender offer and (b) were not appointed, elected or nominated by the Board of Directors in office prior to the completion of such tender offer (other than any such appointment, election or nomination required or agreed to in connection with, or as a result of, the completion of such tender offer); or (k) Any "Event of Default" as defined in the Short-Term Revolving Credit Agreement, the Long-Term Revolving Credit Agreement or the Canadian Credit Agreement shall occur and be continuing; then, and in any such event, the Administrative Agent shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances to be terminated, whereupon the same shall forthwith terminate, and (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that if an Event of Default under Subsection (e) of this Section 6.01 (except under clause (i)(A) thereof) shall occur, (A) the obligation of each Lender to make Advances shall automatically be terminated and (B) the Advances, all interest thereon and all other amounts payable under this Agreement shall automatically become and be forthwith due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 45 ARTICLE 7 THE ADMINISTRATIVE AGENT Section 7.01 Authorization and Action. Each Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including enforcement of this Agreement or collection of the Notes), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Administrative Agent shall not be required to take any action which exposes the Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. The Administrative Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement. Section 7.02 Administrative Agent's Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may treat the payee of any Note as the holder thereof until the Administrative Agent receives and accepts an Assignment and Acceptance entered into by the Lender which is the payee of such Note, as assignor, and an Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult with legal counsel (including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations (whether written or oral) made in or in connection with this Agreement; (iv) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borrower or to inspect the property (including the books and records) of the Borrower; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (vi) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. Section 7.03 JPMorgan and Affiliates. With respect to its Commitments, the Advances made by it and the Notes issued to it, JPMorgan shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include JPMorgan in its individual capacity. JPMorgan and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Borrower, any of its Subsidiaries and any Person who may do business 46 with or own securities of the Borrower or any Subsidiary, all as if JPMorgan were not the Administrative Agent and without any duty to account therefor to the other Lenders. Section 7.04 Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. Section 7.05 Indemnification. THE LENDERS (OTHER THAN THE DESIGNATED BIDDERS) AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE ADVANCES THEN HELD BY EACH OF THEM (OR IF NO ADVANCES ARE AT THE TIME OUTSTANDING OR IF ANY ADVANCES ARE HELD BY PERSONS WHICH ARE NOT LENDERS, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS OR THE RESPECTIVE AMOUNTS OF THEIR COMMITMENTS IMMEDIATELY PRIOR TO TERMINATION IF THE COMMITMENTS HAVE BEEN TERMINATED), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT, OR ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Without limitation of the foregoing, each Lender (other than the Designated Bidders) agrees to reimburse the Administrative Agent promptly upon demand for such Lender's ratable share of any reasonable out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any of the Notes or any other instrument or document furnished pursuant hereto or in connection herewith to the extent that the Administrative Agent acts in its capacity as Administrative Agent and is not reimbursed for such expenses by the Borrower. 47 Section 7.06 Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Administrative Agent, then such retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized, or authorized to conduct a banking business, under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. Section 7.07 Auction Administrative Agent. The Administrative Agent shall until such time as it so notifies the Borrower and the Lenders discharge its duties under Section 2.19 through the Auction Administrative Agent and all references to the "Administrative Agent" or to JPMorgan relating to such duties or made in this Article 7 shall be deemed to also refer to the Auction Administrative Agent and any Affiliate of JPMorgan serving in such capacity. All payments to be made to or by the Auction Administrative Agent shall be made through the Administrative Agent. ARTICLE 8 MISCELLANEOUS Section 8.01 Amendments, Etc. An amendment or waiver of any provision of this Agreement or the Notes, or a consent to any departure by the Borrower therefrom, shall be effective against the Lenders and all holders of the Notes if, but only if, it shall be in writing and signed by the Majority Lenders or, where so specified, the Required Lenders, and then such a waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall, unless in writing and signed by all the Lenders (other than the Designated Bidders), be effective to: (a) waive any of the conditions specified in Article 3, (b) except as contemplated by Section 2.20, increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (c) reduce the principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (d) except as contemplated by Section 2.21, postpone any date fixed for any payment of principal of, or interest on, the Advances or any facility fees or utilization fees hereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, which shall be required for the Lenders or any of them to take any action under this Agreement, or (f) amend this Section 8.01; and, provided further that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the 48 Lenders required hereinabove to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any Note. Section 8.02 Notices, Etc. Except as otherwise provided in Section 2.02(a) or 2.10(ii), all notices and other communications provided for hereunder shall be in writing and mailed by certified mail, return receipt requested and postage prepaid, or telecopied, telefaxed or otherwise teletransmitted, or delivered, if to the Borrower, at 5051 Westheimer, Suite 1400, Houston, Texas 77056, Attention: Treasurer, Telefax: (713) 624-9627; if to any Initial Lender, at its Domestic Lending Office set forth in such Initial Lender's Administrative Questionnaire; if to any other Lender at its Domestic Lending Office specified in the Assignment and Acceptance pursuant to which it became a Lender or at the address for notices specified in the Designation Agreement pursuant to which it became a party hereto; if to the Administrative Agent, in care of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Muniram Appanna, Telefax: (212) 552-3295, with a copy to JPMorgan Chase Bank, at 600 Travis Street, 20th Floor, Houston, TX 77002, Attention: Russell Johnson, Telefax: (713) 216-8870; and if to the Auction Administrative Agent, at JPMorgan Chase Bank, Agency Services, at One Chase Manhattan Plaza, 8th Floor, New York, NY 10081, Attention: Christopher Consomer, Telefax: (212) 552-5627; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective, (a) in the case of any notice or communication given by certified mail, when receipted for, (b) in the case of any notice or communication given by telecopy, telefax or other teletransmission, when confirmed by appropriate answerback, in each case addressed as aforesaid, and (c) in the case of any notice or communication delivered by hand or courier, when so delivered, except that notices and communications to the Administrative Agent pursuant to Article 2 or 7 shall not be effective until received by the Administrative Agent. A notice received by the Administrative Agent or a Lender by telephone pursuant to Section 2.02(a) or 2.10(ii) shall be effective if the Administrative Agent or Lender believes in good faith that it was given by an authorized representative of the Borrower and acts pursuant thereto, notwithstanding the absence of written confirmation or any contradictory provision thereof. Section 8.03 No Waiver; Remedies. No failure on the part of any Lender or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder or under any Note preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 8.04 Costs and Expenses; Indemnity. (a) The Borrower agrees to pay on demand (i) all reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent in connection with the preparation, execution and delivery of this Agreement, the Notes and the other documents to be delivered hereunder and with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, (ii) all reasonable costs and expenses incurred by the Administrative Agent and its Affiliates in initially syndicating all or any portion of the Commitments hereunder, including the related reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent or its 49 Affiliates, travel expenses, duplication and printing costs and courier and postage fees, and excluding any syndication fees paid to other parties joining the syndicate, if any, and (iii) all out-of-pocket costs and expenses, if any, of the Administrative Agent and the Lenders (including reasonable counsel fees and expenses and the allocated costs of in-house counsel), in connection with the enforcement (whether through negotiations, legal proceedings, in bankruptcy or insolvency proceedings, or otherwise) of this Agreement, the Notes and the other documents to be delivered hereunder and thereunder. (b) If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender on any day other than the last day of the Interest Period for such Advance, as a result of a prepayment pursuant to Section 2.10 or a Conversion pursuant to Section 2.08(f) or Section 2.09 or due to acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason attributable to the Borrower, or if the Borrower shall fail to borrow, convert, continue or prepay any Eurodollar Rate Advance on the date specified in any notice delivered pursuant hereto, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. (c) THE BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ARRANGER AND EACH LENDER FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LIABILITIES AND EXPENSES (INCLUDING FEES AND DISBURSEMENTS OF COUNSEL) WHICH MAY BE INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT, THE ARRANGER OR SUCH LENDER IS PARTY THERETO) RELATED TO THE ACQUISITION OR ANY OTHER ACQUISITION OR PROPOSED ACQUISITION BY THE BORROWER, OR BY ANY SUBSIDIARY OF THE BORROWER, OF ALL OR ANY PORTION OF THE EQUITY INTERESTS IN, OR SUBSTANTIALLY ALL THE ASSETS OF, ANY PERSON OR ANY USE OR PROPOSED USE OF THE ADVANCES BY THE BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS, OR BY REASON OF ANY USE OR DISCLOSURE OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR USE OR PROPOSED USE OF THE PROCEEDS BY THE PARTY TO BE INDEMNIFIED OR ITS EMPLOYEES OR ADMINISTRATIVE AGENTS). Section 8.05 Right of Set-off. Upon the declaration of the Advances as due and payable pursuant to the provisions of Section 6.01, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness 50 at any time owing by such Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement and any Note held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 8.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender may have. Section 8.06 Binding Effect. This Agreement shall become effective in accordance with the provisions of Section 3.01, and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of all of the Lenders. Section 8.07 Assignments and Participations. (a) Each Lender (other than a Designated Bidder) may assign to one or more banks or other entities all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, the A Advances owing to it and the Note or Notes held by it); provided, however, that each such assignment shall be to an Eligible Assignee, and the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with any Note or Notes subject to such assignment and, except in the case of an assignment to a Lender Affiliate, a processing and recordation fee of $3,000, and shall send to the Borrower an executed counterpart of such Assignment and Acceptance, and provided further, however, that (i) the amount of the Commitment of the assigning Lender being assigned to the assignee pursuant to each such assignment (determined as of the date of the Assignment) must be equal to or greater than $25,000,000, or if less, the entire amount of such assigning Lender's "Commitment" (unless the Borrower and the Administrative Agent shall otherwise consent, which consent may be withheld for any reason) and must be an integral multiple of $1,000,000, (ii) any assignment to a Lender Affiliate will not relieve the assigning Lender of its obligation to make Advances hereunder timely in accordance with the terms hereof in the event such Lender Affiliate shall fail to do so and (iii) except in the case of an assignment to a Lender Affiliate or as required by the Borrower pursuant to Section 2.21(d) or 2.22, each such assignment shall be of a constant, and not a varying, percentage of all such Lender's rights and obligations under this Agreement (other than any right to make B Advances, any B Advances or any Notes). Upon the execution, delivery, acceptance and recording of each Assignment and Acceptance by the parties thereto, from and after the effective date specified in such Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (y) except as otherwise provided in clause (ii) above, the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement (and, except in the circumstances contemplated by clause (ii) above, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a 51 party hereto, provided, however, that such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04). (b) By executing and delivering an Assignment and Acceptance, each Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 8.02 a copy of each Assignment and Acceptance and each Designation Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and, with respect to Lenders other than Designated Bidders, the Commitment of, and principal amount of the A Advances owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with any Note or Notes subject to such assignment, the Administrative Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit D hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt 52 of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for any surrendered Note or Notes a new Note to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, a new Note to the order of the assigning Lender. Any such new Note or Notes shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit A hereto. (e) Each Lender (other than a Designated Bidder) may designate one or more banks or other entities to have a right to make B Advances as a Lender pursuant to Section 2.19; provided that (i) such Lender shall have obtained the written consent of the Administrative Agent and the Borrower, such consent not to be unreasonably withheld, (ii) no such Lender shall be entitled to make more than two such designations, (iii) each such Lender making one or more of such designations shall retain the right to make B Advances as a Lender pursuant to Section 2.19, (iv) each such designation shall be to a Designated Bidder and (v) the parties to each such designation shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Designation Agreement. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Designation Agreement, the designee thereunder shall be a party hereto with a right to make B Advances as a Lender pursuant to Section 2.19 and the obligations related thereto. (f) By executing and delivering a Designation Agreement, the Lender making the designation thereunder and its designee thereunder confirm and agree with each other and the other parties hereto as follows: (i) such Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto, (ii) such Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under this Agreement or any other instrument or document furnished pursuant hereto; (iii) such designee confirms that it has received a copy of this Agreement, together with copies of the financial statements referred to in Section 4.01 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into the Designation Agreement; (iv) such designee will, independently and without reliance upon the Administrative Agent, such designating Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such designee confirms that it is a Designated Bidder; (vi) such designee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto, and (vii) such designee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (g) Upon its receipt of a Designation Agreement executed by a designating Lender and a designee representing that it is a Designated Bidder, the Administrative Agent shall, if such Designation Agreement has been completed and is substantially in the form of Exhibit H hereto, 53 (i) accept such Designation Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrower. (h) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment, and the Advances owing to it and the Note or Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Note for all purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) such Lender shall continue to be able to agree to any modification or amendment of this Agreement or any waiver hereunder without the consent, approval or vote of any such participant or group of participants, other than modifications, amendments and waivers which (A) postpone any date fixed for any payment of, or reduce any payment of, principal of or interest on such Lender's Advances or any facility fees or utilization fees payable under this Agreement, or (B) increase the amount of such Lender's Commitment in a manner which would have the effect of increasing the amount of a participant's participation, or (C) reduce the interest rate payable under this Agreement and such Lender's Advances, or (D) consent to the assignment or the transfer by the Borrower of any of its rights and obligations under the Agreement, and (vi) except as contemplated by the immediately preceding clause (v), no participant shall be deemed to be or to have any of the rights or obligations of a "Lender" hereunder. (i) Any Lender may, in connection with any assignment, designation or participation or proposed assignment, designation or participation pursuant to this Section 8.07, disclose to the assignee, designee or participant or proposed assignee, designee or participant, any information relating to the Borrower furnished to such Lender by or on behalf of the Borrower; provided that, prior to any such disclosure, the assignee, designee or participant or proposed assignee, designee or participant shall agree in writing for the benefit of the Borrower to preserve the confidentiality of any confidential information relating to the Borrower received by it from such Lender in a manner consistent with Section 8.08. (j) Anything in this Agreement to the contrary notwithstanding, any Lender may at any time create a security interest in all or any portion of its rights under this Agreement (including the Advances owing to it) and the Notes, if any, issued to it hereunder in favor of any Federal Reserve Bank in accordance with Regulation A of the Board of Governors of the Federal Reserve System (or any successor regulation) and the applicable operating circular of such Federal Reserve Bank. Section 8.08 Confidentiality. Each Lender and the Administrative Agent (each, a "PARTY") agrees that it will use its best reasonable efforts not to disclose, without the prior consent of the Borrower (other than to its, or its Affiliates, employees, auditors, accountants, counsel or other representatives, whether existing at the Original Effective Date or any subsequent time), any information with respect to the Borrower which is furnished pursuant to this Agreement, provided that any party may disclose any such information (i) as has become generally available to the public, (ii) as may be required or appropriate in any report, statement 54 or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such party or to the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (iii) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation or regulatory proceeding, (iv) in order to comply with any law, order, regulation or ruling applicable to such party, or (v) to any prospective assignee, designee or participant in connection with any contemplated assignment of any rights or obligations hereunder, any designation or any sale of any participation therein, by such party pursuant to Section 8.07, if such prospective assignee, designee or participant, as the case may be, executes an agreement with the Borrower containing provisions substantially similar to those contained in this Section 8.08; provided, however, that the Borrower acknowledges that the Administrative Agent has disclosed and may continue to disclose such information as the Administrative Agent in its sole discretion determines is appropriate to the Lenders from time to time. Section 8.09 Consent to Jurisdiction. (a) The Borrower hereby irrevocably submits to the jurisdiction of any New York State or Federal court sitting in New York City and any appellate court from any thereof in any action or proceeding by the Administrative Agent, the Arranger, any Lender or the holder of any Note in respect of, but only in respect of, any claims or causes of action arising out of or relating to this Agreement or the Notes (such claims and causes of action, collectively, being "PERMITTED CLAIMS"), and the Borrower hereby irrevocably agrees that all Permitted Claims may be heard and determined in such New York State court or in such Federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any aforementioned court in respect of Permitted Claims. Service of the summons and complaint and any other process which may be served by the Administrative Agent, the Arranger, any Lender or the holder of any Note on the Borrower in any such action or proceeding in any aforementioned court in respect of Permitted Claims may be made by delivering separate copies of such process to the Borrower by courier and by certified mail (return receipt requested), fees and postage prepaid at the Borrower's address specified pursuant to Section 8.02, to the attention of each of the Treasurer and the Executive Vice President, Law. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (b) Nothing in this Section 8.09 (i) shall affect the right of the Arranger, the Borrower, any Lender, the holder of any Note or the Administrative Agent to serve legal process in any other manner permitted by law or affect any right otherwise existing of the Borrower, any Lender, the Arranger, the holder of any Note or the Administrative Agent to bring any action or proceeding in the courts of other jurisdictions or (ii) shall be deemed to be a general consent to jurisdiction in any particular court or a general waiver of any defense or a consent to jurisdiction of the courts expressly referred to in Subsection (a) above in any action or proceeding in respect of any claim or cause of action other than Permitted Claims. Section 8.10 Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York. 55 Section 8.11 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery to the Administrative Agent of a counterpart executed by a Lender shall constitute delivery of such counterpart to all of the Lenders. Delivery of an executed counterpart by facsimile shall be as effective as delivery of a manually executed original counterpart. Section 8.12 WAIVER OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT, AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OF THE NOTES OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES INC. Commitments By: -------------------------------- Name: Title: $350,000,000 JPMORGAN CHASE BANK, in its individual capacity and as Administrative Agent and Auction Administrative Agent, By: -------------------------------- Name: Title: 56 SCHEDULE I MATERIAL SUBSIDIARIES Burlington Resources Canada Ltd. Canadian Hunter Exploration Ltd. The Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company LP BROG GP Inc. BROG LP Inc. Sched. I-1 SCHEDULE II PRICING GRID
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI ------- -------- --------- -------- ------- -------- Basis for Pricing If the If the If the If the If the If Levels I-V Borrower's Borrower's Borrower's Borrower's Borrower's do not apply. senior senior senior senior senior unsecured long unsecured long unsecured long unsecured long unsecured long term debt is term debt is term debt is term debt is term debt is rated at least rated at least rated at least rated at least rated at least A by S&P or A2 A- by S&P or A3 BBB+ by S&P or BBB by S&P or BBB- by S&P or by Moody's. by Moody's. Baa1 by Baa2 by Moody's. Baa3 by Moody's. Moody's. Facility Fee Percentage .060% .080% .100% .125% .150% .200% LIBOR .290% .320% .400% .475% .700% .800% Applicable Margin
The applicable pricing level shall change on the date of any relevant change in the rating by S&P or Moody's of any public long term senior unsecured debt securities of the Borrower. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable pricing level is the higher of the two (e.g., A-/Baa1 results in Level II pricing), provided that in the event the split is more than one full category, the average (or the higher of two intermediate ratings) shall be used (e.g., A-/Baa2 results in Level III pricing, as does A-/Baa3). Sched. II-1 EXHIBIT A FORM OF NOTE New York, New York [Date] For value received, Burlington Resources Inc., a Delaware corporation (the "BORROWER"), promises to pay to the order of ______________________ (the "LENDER"), for the account of its Applicable Lending Office, the unpaid principal amount of each Advance made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Advance on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna. All Advances made by the Lender, the respective types thereof and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Advance then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make (or any error in making) any such recordation or endorsement shall not affect the Borrower's obligations hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Bridge Revolving Credit Agreement dated as of _________, 2002, among the Borrower, the Lenders party hereto, JPMorgan Chase Bank, as Administrative Agent and JPMorgan Chase Bank, as Auction Administrative Agent (as the same may be amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. BURLINGTON RESOURCES INC. By: ----------------------- Name: Title: Exh. A-1 ADVANCES AND PAYMENTS OF PRINCIPAL
Amount of Amount of Type of Principal Date Advance Advance Repaid Notation Made By ---- ------- ------- ----------- ----------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Exh. A-2 EXHIBIT B FORM OF NOTICE OF A BORROWING Date ___________ JPMorgan Chase Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Muniram Appanna Tel: (212) 552-7943 Fax: (212) 552-3295 copy to: JPMorgan Chase Bank, as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Bridge Revolving Credit Agreement dated as of _____________, 2002 (as the same may be amended from time to time, the "CREDIT AGREEMENT," the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, and JPMorgan Chase Bank, as Auction Administrative Agent. Pursuant to Section 2.02(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an A Borrowing under the Credit Agreement (the "PROPOSED A BORROWING"), and in that connection sets forth below the information relating to such A Borrowing: 1. The Business Day of the Proposed A Borrowing is _________ __, ____. 2. The Type of A Advances comprising the Proposed A Borrowing is [Base Rate Advances] [Eurodollar Rate Advances]. 3. The aggregate amount of the Proposed A Borrowing is $_______. Exh. B-1 4. The Interest Period for each Eurodollar Rate Advance made as part of the Proposed A Borrowing is [__] month[s].(1) The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By: --------------------------- Name: Title: - ------------------ (1) To be used for Eurodollar Rate Advances only. Exh. B-2 EXHIBIT C FORM OF NOTICE OF B BORROWING Date ___________ JPMorgan Chase Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Christopher Consomer Tel: (212) 552-7259 Fax: (212) 552-5627 copy to: JPMorgan Chase Bank, as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Bridge Revolving Credit Agreement dated as of ____________, 2002 (as the same may be amended from time to time, the "CREDIT AGREEMENT," the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, and JPMorgan Chase Bank, as Auction Administrative Agent. Pursuant to Section 2.19 of the Credit Agreement, the Borrower hereby gives you notice of and requests a B Borrowing under the Credit Agreement (the "PROPOSED B BORROWING"), and in that connection sets forth the terms on which such B Borrowing is requested to be made: 1. Date of B Borrowing -------------------------- 2. Proposed Amount of B Borrowing -------------------------- 3. Maturity Date -------------------------- 4. Interest Rate Basis -------------------------- 5. Interest Payment Date(s) -------------------------- 6. [Other Terms] --------------------------
Exh. C-1 The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Borrowing, before and immediately after giving effect thereto and to the application of the proceeds therefrom: (a) each representation and warranty contained in Section 4.01 is correct in all material respects as though made on and as of such date (or, if such representation and warranty is stated to be made as at a specific date or for a specific period, as at the original specified date or with respect to the original specified period); (b) no event has occurred and is continuing, or would result from such A Borrowing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and (c) the aggregate amount of the borrowings under the Credit Agreement (including the Proposed A Borrowing) and under other agreements or facilities or evidenced by other instruments or documents is not in excess of the aggregate amount of such borrowings approved as of such date by the Board of Directors of the Borrower. BURLINGTON RESOURCES INC. By ------------------------------ Name: Title: Exh. C-2 EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE Dated: _________, 20_ Reference is made to the Bridge Revolving Credit Agreement dated as of _____________, 2002 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), JPMorgan Chase Bank, as Administrative Agent, and JPMorgan Chase Bank, as Auction Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meaning. The "Assignor" and the "Assignee" referred to on Schedule 1 hereto agree as follows: Section (A). The Assignor hereby sells and assigns to the Assignee, without recourse, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof (other than in respect of B Advances) which represents the percentage interest specified on Schedule 1 hereto of all outstanding rights and obligations under the Credit Agreement (other than in respect of B Advances), including such interest in the Assignor's Commitment, the A Advances owing to the Assignor, and the Note[s] held by the Assignor. After giving effect to such sale and assignment, the Assignee's Commitment and the amount of the A Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1 hereof. Section (B). The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto; [and (iv) requests that the Administrative Agent arrange for the issuance of a new Note or Notes payable to the order of the Assignee]. Section (C). The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, Exh. D-1 continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is (subject to approval in writing by the Borrower and the Administrative Agent to the extent required) an Eligible Assignee; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; [and] (vi) specifies as its Domestic Lending Office (and address for notices) and Eurodollar Lending Office the offices set forth beneath its name on the signature pages hereof [;and (vii) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement and the Notes or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty].(1) Section (D). Following the execution of this Assignment and Acceptance by the Assignor and the Assignee, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date for this Assignment and Acceptance shall be at least five Business Days after the execution and delivery thereof to the Administrative Agent, unless otherwise specified on Schedule 1 hereto (the "EFFECTIVE DATE"). Section (E). Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement, provided, however, such assigning Lender shall retain any claim with respect to any fee, interest, cost, expense or indemnity which accrues, or relates to an event that occurs, prior to the date of such assignment pursuant to Section 2.03, 2.06, 2.07, 2.11, 2.12, 2.15 or 8.04 of the Credit Agreement. Section (F). Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. Section (G). This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York - ---------- (1) If the Assignee is not a United States person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code). Exh. D-2 IN WITNESS WHEREOF, the parties have caused this Assignment and Acceptance to be executed by their respective officers thereunto duly authorized as of the date specified thereon. Exh. D-3 Schedule 1 to Assignment and Acceptance Dated __________ Section 1. Percentage Interest assigned: % ------- Section 2. Assignee's Commitment: $ ------- Aggregate Outstanding Principal Amount of to the Assignee: $ ------- Section 3. Effective Date(2): [NAME OF ASSIGNOR] By ------------------------------- Title: [NAME OF ASSIGNEE] By ------------------------------- Title: Domestic Lending Office: [Address] Eurocurrency Lending Office: [Address] - ---------- (2) This date should be no earlier than at least five Business Days after the execution and delivery thereof to the Administrative Agent. Exh. D-4 Accepted and Consented to this day of , : -- ---------- ---- JPMORGAN CHASE BANK, as Administrative Agent By ------------------------------------------- Name: Title: Consented to this day of , : -- ---------- ---- BURLINGTON RESOURCES INC. By ------------------------------------------ Name: Title: Exh. D-5 EXHIBIT E FORM OF EXTENSION REQUEST JPMorgan Chase Bank Agency Services One Chase Manhattan Plaza, 8th Floor New York, NY 10081 Attention: Muniram Appanna Tel: (212) 552-7943 Fax: (212) 552-3295 copy to: JPMorgan Chase Bank, as Administrative Agent under the Credit Agreement referred to below 600 Travis Street, 20th Floor Houston, TX 77002 Attention: Russell Johnson Tel: (713) 216-5617 Fax: (713) 216-8870 Ladies and Gentlemen: The undersigned, Burlington Resources Inc. (the "BORROWER"), refers to the Bridge Revolving Credit Agreement dated as of ______________, 2002 (as the same may be amended from time to time, the "CREDIT AGREEMENT," the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, and JPMorgan Chase Bank, as Auction Administrative Agent. Pursuant to Section 2.21(a) of the Credit Agreement, the Borrower hereby gives you notice of and requests an extension of the Stated Termination Date under the Credit Agreement, and in that connection sets forth below the information relating to such extension: 1. The requested Stated Termination Date is _______________ __, ____.(1) 2. This Extension Request constitutes the [first] [second] exercise of the Borrower's right to extend the Stated Termination Date. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date the Stated Termination Date is extended: - ---------- (1) Such requested Stated Termination Date shall be no more than one year from the presently effective Stated Termination Date. Exh. E-1 (a) this Extension Request is being made not later than 30 days prior to the Stated Termination Date now in effect; (b) no event has occurred and is continuing which constitutes an Event of Default. BURLINGTON RESOURCES INC. By: -------------------------- Name: Title: Exh. E-2 EXHIBIT F FORM OF OPINION OF VICE PRESIDENT AND GENERAL COUNSEL FOR BORROWER ____, 2002 To each of the Lenders and the Agents Referred to Below c/o JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Re: Bridge Revolving Credit Agreement, dated as of ________________, 2002 Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3.01(iii)(d) of the Bridge Revolving Credit Agreement dated as of ______________, 2002 (as the same may be amended from time to time, the "Credit Agreement," the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, and JPMorgan Chase Bank, as Auction Administrative Agent. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the meanings ascribed to them in the Credit Agreement. I am Vice President and General Counsel of the Borrower, and I, or attorneys over whom I exercise supervision, have acted as counsel for the Borrower in connection with the preparation, execution and delivery of the Credit Agreement. In that connection, I or such attorneys have examined: (1) The Credit Agreement, executed by the parties thereto; (2) Each of the Notes (the "Notes"), executed by the Borrower; and (3) The other documents furnished by the Borrower in connection with the Credit Agreement. The documents referred to in items (1) and (2) above are collectively referred to herein as the "Documents." I, or attorneys over whom I exercise supervision, have also examined the originals, or copies certified to our satisfaction, of the agreements, instruments and other documents, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the Borrower's ability to perform its obligations under the Documents. In addition, I, or attorneys over whom I exercise supervision, have examined the originals, or copies certified to Exh. F-1 our satisfaction, of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as I have deemed necessary as a basis for the opinions hereinafter expressed. In all such examinations, I, or attorneys over whom I exercise supervision, have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures on original or certified, conformed or reproduction copies of documents of all parties (other than, with respect to the Documents, the Borrower), the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to such attorneys or me as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, I have relied upon, and assume the accuracy of, representations and warranties contained in the Credit Agreement and certificates and oral or written statements and other information of or from public officials, officers and/or representatives of the Borrower and others. To the extent it may be relevant to the opinions expressed herein, I have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such Documents and that such Documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. I am licensed to practice law in the states of Texas and Louisiana. The opinions expressed below are limited to the federal laws of the United States and, to the extent relevant hereto, the General Corporation Law of the State of Delaware, as currently in effect. I assume no obligation to supplement this opinion if any applicable laws change after the date hereof or if I become aware of any facts that might change the opinions expressed herein after the date hereof. Based upon the foregoing and upon such investigation as I have deemed necessary, and subject to the limitations, qualifications and assumptions set forth herein, I am of the following opinion: 1. The Borrower (i) is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware, and (ii) possesses all the corporate powers and all other authorizations and licenses necessary to engage in its business and operations as now conducted, the failure to obtain or maintain which would have a Material Adverse Effect. 2. The execution and delivery by the Borrower of, and the performance by the Borrower of its obligations under, the Documents are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action in respect of or by the Borrower (except to the extent that the Borrower seeks to exercise its rights under Section 2.20 of the Credit Agreement to effectuate an increase of Commitments), and do not contravene (i) the Borrower's Certificate of Incorporation or By-Laws, in each case as amended, (ii) any United States federal law, rule or regulation applicable to the Borrower (excluding provisions of United States federal law expressly referred to in and covered by the opinion of Jones, Day, Reavis & Pogue delivered to you in connection with the transactions contemplated hereby), or (iii) any contractual restriction binding on or affecting the Borrower. The Documents have been duly executed and delivered on behalf of the Borrower. Exh. F-2 3. No authorization or approval or other action by, and no notice to or filing with, any United States federal governmental authority or regulatory body (including, without limitation, the Federal Energy Regulatory Commission) is required for the due execution and delivery by the Borrower of, and the performance by the Borrower of its obligations under, the Documents, except those required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants and warranties contained in the Documents. 4. To the best of my knowledge, there is no action, suit or proceeding pending or overtly threatened against or involving the Borrower or any of its Material Subsidiaries, which, in my reasonable judgment (taking into account the exhaustion of all appeals), would have a material adverse effect upon the consolidated financial condition of Borrower and its consolidated Subsidiaries taken as a whole, or which purports to affect the legality, validity, binding effect or enforceability of any Document. These opinions are given as of the date hereof and are solely for your benefit in connection with the transactions contemplated by the Credit Agreement. These opinions may not be relied upon by you for any other purpose or relied upon by any other person for any purpose without my prior written consent. Very truly yours, Frederick J. Plaeger Vice President and General Counsel Exh. F-3 EXHIBIT G FORM OF OPINION OF JONES, DAY, REAVIS & POGUE, NEW YORK COUNSEL FOR BORROWER ________, 2002 To Each of the Lenders and the Administrative Agent Referred to Below c/o JPMorgan Chase Bank 270 Park Avenue New York, New York 10017 Re: Bridge Revolving Credit Agreement, dated as of ________________, 2002 Ladies and Gentlemen: We have acted as special New York counsel for Burlington Resources Inc., a Delaware corporation (the "Borrower"), in connection with the Bridge Revolving Credit Agreement dated as of ______________, 2002 (as the same may be amended from time to time, the "Credit Agreement," the terms defined therein being used herein as therein defined), among the Borrower, the Lenders parties thereto, JPMorgan Chase Bank, as Administrative Agent, and JPMorgan Chase Bank, as Auction Administrative Agent. This opinion is delivered to you pursuant to Section 3.01(iii)(e) of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein have the meanings assigned to such terms in the Credit Agreement. The Uniform Commercial Code, as amended and in effect in the State of New York on the date hereof, is referred to herein as the "NY UCC." With your permission, all assumptions and statements of reliance herein have been made without any independent investigation or verification on our part except to the extent, if any, otherwise expressly stated, and we express no opinion with respect to the subject matter or accuracy of the assumptions or items upon which we have relied. In connection with the opinions expressed herein, we have examined such documents, records and matters of law as we have deemed necessary for the purposes of this opinion. We have examined, among other documents, the following: (a) An executed copy of the Credit Agreement; (b) An executed copy of each of the Notes (the "Notes"); and (c) An executed copy of the Officer's Certificate of the Borrower delivered to us in connection with this opinion, a copy of which is attached hereto as Annex A. Exh. G-1 The documents referred to in items (a) and (b) above are referred to herein collectively as the "Documents." In all such examinations, we have assumed the legal capacity of all natural persons executing documents, the genuineness of all signatures, the authenticity of original and certified documents and the conformity to original or certified copies of all copies submitted to us as conformed or reproduction copies. As to various questions of fact relevant to the opinions expressed herein, we have relied upon, and assume the accuracy of, representations and warranties contained in the Documents and certificates and oral or written statements and other information of or from representatives of the Borrower and others and assume compliance on the part of all parties to the Documents with their respective covenants and agreements contained therein. With respect to the opinions expressed in paragraph (a) below, our opinions are limited (x) to our actual knowledge, if any, of the specially regulated business activities and properties of the Borrower based solely upon an officer's certificate in respect of such matters and without any independent investigation or verification on our part and (y) to our review of only those laws and regulations that, in our experience, are normally applicable to transactions of the type contemplated by the Documents. To the extent it may be relevant to the opinions expressed herein, we have assumed that the parties to the Documents other than the Borrower have the power to enter into and perform such Documents and to consummate the transactions contemplated thereby and that such Documents have been duly authorized, executed and delivered by, and constitute legal, valid and binding obligations of, such parties. Based upon the foregoing, and subject to the limitations, qualifications and assumptions set forth herein, we are of the opinion that: (a) The execution and delivery to the Administrative Agent and the Lenders by the Borrower of the Documents and the performance by the Borrower of its obligations thereunder (i) do not require under present law any filing or registration by the Borrower with, or approval or consent to the Borrower of, any governmental agency or authority of the State of New York, except those, if any, required in the ordinary course of business in connection with the performance by the Borrower of its obligations under certain covenants contained in the Documents and (ii) do not violate any present law, or present regulation of any governmental agency or authority of the State of New York applicable to the Borrower or its property. (b) Each of the Documents constitutes an enforceable obligation of the Borrower in accordance with its terms. (c) The borrowings by the Borrower under the Credit Agreement and the application of the proceeds thereof as provided in the Credit Agreement will not violate Regulation T, U or X of the Board of Governors of the Federal Reserve System. The opinions set forth above are subject to the following qualifications: Exh. G-2 (A) We express no opinion as to: (i) the effect of any law of any jurisdiction other than the State of New York wherein the Administrative Agent or any Lender may be located or wherein enforcement of any document referred to above may be sought that limits the rates of interest legally chargeable or collectible; and (ii) any filing, registration, approval or consent of the Federal Energy Regulatory Commission or any other United States federal agency or authority needed in connection with the execution, delivery and performance by the Borrower of the Documents, the consummation of the transactions contemplated thereby and compliance with the terms and conditions thereof. (B) Our opinions above as to enforceability are subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent transfer, voidable preference, moratorium, receivership, conservatorship, arrangement or similar laws, and related judicial doctrines, from time to time in effect affecting creditors' rights and remedies generally, (ii) general principles of equity (including, without limitation, standards of materiality, good faith, fair dealing and reasonableness, equitable defenses, the exercise of judicial discretion and limits on the availability of equitable remedies), whether such principles are considered in a proceeding at law or in equity and (iii) the qualification that certain other provisions of the Documents may be unenforceable in whole or in part under the laws (including judicial decisions) of the State of New York or the United States of America, but the inclusion of such provisions does not affect the validity as against the Borrower of the Documents as a whole, and the Documents contain adequate provisions for enforcing payment of the obligations governed thereby, subject to the other qualifications contained in this letter. (C) We express no opinion as to the enforceability of any provision in the Documents: (i) permitting the Administrative Agent, any Lender or any other person or entity to enforce any right or remedy thereunder, except in compliance with the NY UCC and other applicable laws; or (ii) relating to indemnification, contribution or exculpation in connection with violations of any securities laws or statutory duties or public policy, or in connection with willful, reckless or unlawful acts or gross negligence of the indemnified or exculpated party or the party receiving contribution; or (iii) relating to exculpation of any party in connection with its own negligence that a court would determine in the circumstances under applicable law to be unfair or insufficiently explicit; or (iv) providing that any Lender or other person or entity may exercise set-off rights other than in accordance with and pursuant to applicable law; or (v) relating to forum selection to the extent the forum is a federal court; or Exh. G-3 (vi) relating to forum selection to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of New York; or (vii) relating to choice of governing law to the extent that the enforceability of any such provision is to be determined by any court other than a court of the State of New York or may be subject to constitutional limitations; or (viii) specifying that provisions thereof may be waived only in writing, to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created that modifies any provision of such Documents; or (ix) giving any person or entity the power to accelerate obligations without any notice to the obligor. (D) Our opinions as to enforceability are subject to the effect of generally applicable rules of law that: (i) provide that forum selection clauses in contracts are not necessarily binding on the court(s) in the forum selected; and (ii) limit the availability of a remedy under certain circumstances when another remedy has been elected; and (iii) may, where less than all of a contract may be unenforceable, limit the enforceability of the balance of the contract to circumstances in which the unenforceable portion is not an essential part of the agreed exchange, or that permit a court to reserve to itself a decision as to whether any provision of any agreement is severable; and (iv) govern and afford judicial discretion regarding the determination of damages and entitlement to attorneys' fees and other costs. (E) We express no opinion as to the enforceability of any purported waiver, release, variation, disclaimer, consent or other agreement to similar effect (all of the foregoing, collectively, a "Waiver") by the Borrower under any of the Documents to the extent limited by provisions of applicable law (including judicial decisions), or to the extent that such a Waiver applies to a right, claim, duty, defense or ground for, or a circumstance that would operate as, a discharge or release otherwise existing or occurring as a matter of law (including judicial decisions), except to the extent that such a Waiver is effective under and is not prohibited by or void or invalid under applicable law (including judicial decisions). (F) For purposes of our opinions above, insofar as they relate to the Borrower, we have assumed that (i) the Borrower is a corporation validly existing in good standing in its jurisdiction of incorporation, has all requisite power and authority, and has obtained all requisite corporate, shareholder, third party and governmental authorizations, consents and approvals, and made all requisite filings and registrations, necessary to execute, deliver and perform the Documents (except to the extent noted in paragraph (a) above), and that such execution, delivery and performance will not violate or conflict with any law, rule, regulation, order, decree, judgment, instrument or agreement binding upon or applicable to it or its properties (except to Exh. G-4 the extent noted in paragraph (a) above), and (ii) the Documents have been duly executed and delivered by the Borrower. (G) For purposes of the opinions set forth in paragraph (c) above, we have assumed that (i) neither the Administrative Agent nor any of the Lenders has or will have the benefit of any agreement or arrangement (excluding the Documents) pursuant to which any Advances are directly or indirectly secured by Margin Stock, (ii) neither the Administrative Agent nor any of the Lenders nor any of their respective affiliates has extended or will extend any other credit to the Borrower directly or indirectly secured by Margin Stock and (iii) neither the Administrative Agent nor any of the Lenders has relied or will rely upon any Margin Stock as collateral in extending or maintaining any Advances pursuant to the Credit Agreement. We express no opinion as to the compliance or noncompliance, or the effect of the compliance or noncompliance, of each of the addressees with any state or federal laws or regulations applicable to each of them by reason of their status as or affiliation with a federally insured depository institution, except as expressly set forth in paragraph (c) above. The opinions expressed herein are limited to the federal laws of the United States of America (in the case of the matters covered in paragraph (c) above) and the laws of the State of New York (in the case of the matters covered in paragraphs (a) and (b) above), as currently in effect. Our opinions are limited to those expressly set forth herein, and we express no opinions by implication. The opinions expressed herein are solely for the benefit of the Administrative Agent and the Lenders and may not be relied on in any manner or for any purpose by any other person or entity. Very truly yours, JONES, DAY, REAVIS & POGUE Exh. G-5 EXHIBIT H FORM OF DESIGNATION AGREEMENT Dated __________, 20__ Reference is made to the Bridge Revolving Credit Agreement dated as of _____________, 2002 (such agreement, as in effect on the date hereof and as it may hereafter be amended, modified or supplemented from time to time, being the "CREDIT AGREEMENT") among Burlington Resources Inc., a Delaware corporation (the "BORROWER"), the Lenders party thereto (the "LENDERS"), JPMorgan Chase Bank, as administrative agent for the Lenders (the "ADMINISTRATIVE AGENT"), and JPMorgan Chase Bank, as Auction Administrative Agent. Terms defined in the Credit Agreement are used herein with the same meaning. ______________ (the "DESIGNATOR"), ____________ (the "DESIGNEE"), and Burlington Resources Inc., a Delaware corporation (the "BORROWER"), agree as follows: 1. The Designator designates the Designee, and the Designee hereby accepts such designation, to have a right to make B Advances pursuant to Section 2.19 of the Credit Agreement. 2. The Designator makes no representations or warranties and assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto and (ii) the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto. 3. The Designee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 4.01 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Designation Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Designator or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) confirms that it is a Designated Bidder; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vi) specifies as its Applicable Lending Office with respect to B Advances (and address for notices) the offices set forth beneath its name on the signature pages hereof. Exh. H-1 4. Following the execution of this Designation Agreement by the Designator, the Designee and the Borrower, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Designation Agreement shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on the signature page hereto (the "EFFECTIVE DATE"). 5. Upon such acceptance and recording by the Administrative Agent, as of the Effective Date, the Designee shall be a party to the Credit Agreement with a right to make B Advances as a Lender pursuant to Section 2.19 of the Credit Agreement and the rights and obligations of a Lender related thereto. 6. This Designation Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Designation Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. Effective Date:(2) _______________, 20___ [NAME OF DESIGNATOR] By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- [NAME OF DESIGNEE] By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- - ---------- (2) This date should be no earlier than the date of acceptance by the Administrative Agent. Exh. H-2 Applicable Lending Office (and addresses for notices) [Address BURLINGTON RESOURCES INC. By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Accepted and Approved this ____ day of ___________, 20__ JPMORGAN CHASE BANK, as Administrative Agent By: ------------------------------------ Name: Title: Exh. H-3 EX-21.1 7 h92808ex21-1.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 BURLINGTON RESOURCES INC. SUBSIDIARIES OF THE REGISTRANT The following is a list of the significant subsidiaries of Burlington Resources Inc. showing the place of incorporation or organization and the percentage of voting securities owned.
PERCENTAGE OF VOTING SECURITIES OWNED JURISDICTION OF DIRECTLY OR INCORPORATION INDIRECTLY BY NAME OF COMPANY OR ORGANIZATION IMMEDIATE PARENT --------------- --------------- ---------------- Burlington Resources International Inc...... Delaware 100% Burlington Resources Hydrocarbons Inc....... Delaware 100% Burlington Resources Oil & Gas Company LP... Delaware 100% Burlington Resources Trading Inc............ Delaware 100% Glacier Park Company........................ Delaware 100% The Louisiana Land and Exploration Company.. Maryland 100% BROG GP Inc................................. Delaware 100% BROG LP Inc................................. Delaware 100% Burlington Resources Canada Ltd............. Alberta, Canada 100% Canadian Hunter Exploration Ltd............. Alberta, Canada 100% Burlington Resources Canada Partnership..... Alberta, Canada 100%
The names of certain subsidiaries are omitted as such subsidiaries, considered as a single subsidiary, would not constitute a significant subsidiary. EX-23.1 8 h92808ex23-1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 Registration Nos. (333-91247, 333-95071, 333-52324, 33-22493, 33-25807, 33-26024, as amended in Registration No. 2-97533, 33-33626, 33-46518, 33-53973, 333-02029, 333-32603, 333-40565 and 333-60081) and on Form S-3 Registration Nos. (33-54477, 333-24999, 333-52213, 333-83163, 333-89899, and 333-36032) of Burlington Resources Inc. of our report dated February 13, 2002 relating to the financial statements, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP Houston, Texas February 15, 2002 EX-23.2 9 h92808ex23-2.txt CONSENT OF KPMG EXHIBIT 23.2 [KPMG LLP LETTERHEAD] The Board of Directors Burlington Resources Inc. We consent to the incorporation by reference in the registration statements on Form S-8 (Nos. 33-22493, 33-25807, 33-26024 (as amended in 2-97533), 33-33626, 33-46518, 33-53973, 333-02029, 333-32603, 333-40565, 333-60081, 333-91247, 333-95071 and 333-52324) and on Form S-3 (Nos. 33-54477, 333-24999, 333-52213, 333-83163, 333-89899, 333-36032 and 333-61600) of Burlington Resources Inc. of our report dated March 3, 2000, with respect to the consolidated income statement, retained earnings and cash flows of Burlington Resources Canada Ltd. for the year ended December 31, 1999 which report is filed as an exhibit to the Annual Report of Burlington Resources Inc. on Form 10-K for the year ended December 31, 2001. /s/ KPMG LLP Chartered Accountants Calgary, Canada February 14, 2002 EX-23.3 10 h92808ex23-3.txt CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.3 [ERNST & YOUNG LETTERHEAD] CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS We consent to the inclusion of our report dated February 2, 2001 (except for note 14 which is as of February 15, 2002) with respect to the consolidated financial statements of Canadian Hunter Exploration Ltd. ("Canadian Hunter") filed as an exhibit to the Annual Report on Form 10-K of Burlington Resources Inc. ("Burlington") for the year ended December 31, 2001 filed with the United States Securities and Exchange Commission. We consent to the incorporation by reference in the following Registration Statements of our report dated February 2, 2001 (except for note 14 which is as of February 15, 2002) with respect to the consolidated financial statements of Canadian Hunter filed as an exhibit to the Annual Report on Form 10-K of Burlington for the year ended December 31, 2001.
Form Registration Statement No. Description Registrant Date Filed - ---- -------------------------- ----------- ---------- ---------- S-8 33-22493 Registration Statement Burlington Resources Inc. June 15, 1988 S-8 33-25807 Registration Statement Burlington Resources Inc. December 1, 1988 S-8 33-26024 as amended in 2-97533 Registration Statement Burlington Resources Inc. December 12, 1988 as amended on December 29, 1989 S-8 33-33626 Registration Statement Burlington Resources Inc. March 1, 1990 S-8 33-46518 Registration Statement Burlington Resources Inc. March 19, 1992 S-8 33-53973 Registration Statement Burlington Resources Inc. June 3, 1994 S-3 33-54477 Registration Statement Burlington Resources Inc. July 7, 1994 S-8 333-02029 Registration Statement Burlington Resources Inc. March 28, 1996 S-3 333-24999 Registration Statement Burlington Resources Inc. April 11, 1997 S-8 POS 333-32603 Post-Effective Amendment Burlington Resources Inc. November 18, 1997 No. 1 to Form S-4 S-3 333-36032 Registration Statement Burlington Resources Inc. May 1, 2000 Burlington Resources Capital I Burlington Resources Capital II Burlington Resources Finance Company S-8 333-40565 Registration Statement Burlington Resources Inc. November 18, 1997 S-3 333-52213 Registration Statement Burlington Resources Inc. May 8, 1998 Burlington Resources Capital I Burlington Resources Capital II S-8 333-52324 Registration Statement Burlington Resources Inc. December 20, 2000 S-8 333-60081 Registration Statement Burlington Resources Inc. July 29, 1998 S-3 333-61600 Registration Statement Burlington Resources Inc. May 24, 2001 Burlington Resources Capital I Burlington Resources Capital II Burlington Resources Finance Company S-3 333-83163 Registration Statement Burlington Resources Inc. July 19, 1999 Burlington Resources Capital I Burlington Resources Capital II S-3 333-89899 Registration Statement Burlington Resources Inc. October 29, 1999 S-8 333-91247 Registration Statement Burlington Resources Inc. November 18, 1999 S-8 333-95071 Registration Statement Burlington Resources Inc. January 20, 2000
/s/ ERNST & YOUNG LLP Calgary, Canada February 15, 2002 Chartered Accountants EX-99.1 11 h92808ex99-1.txt AUDIT OPINION OF KPMG EXHIBIT 99.1 [KPMG LETTERHEAD] AUDITORS' REPORT TO THE SHAREHOLDER OF BURLINGTON RESOURCES CANADA LTD. We have audited the consolidated statements of income, retained earnings and cash flows of Burlington Resources Canada Ltd. (formerly Burlington Resources Canada Energy Ltd.) for the year ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the results of the Company's operations and cash flows for the year ended December 31, 1999 in accordance with United States generally accepted accounting principles. KPMG LLP Chartered Accountants Calgary, Canada March 3, 2000 EX-99.2 12 h92808ex99-2.txt AUDIT OPINION OF ERNST & YOUNG LLP EXHIBIT 99.2 AUDITORS' REPORT To the Board of Directors of CANADIAN HUNTER EXPLORATION LTD. We have audited the consolidated balance sheet of CANADIAN HUNTER EXPLORATION LTD. (the "Corporation") as at December 31, 2000 and the consolidated statements of net income and retained earnings and cash flow for the year then ended. These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2000 and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in Canada. /s/ Ernst & Young LLP Calgary, Canada February 2, 2001 (except for note 14 which is as of February 15, 2002) Chartered Accountants EX-99.3 13 h92808ex99-3.txt AUDITED CONSOLIDATED FIN. STMTS OF CANADIAN HUNTER EXHIBIT 99.3 Consolidated Financial Statements CANADIAN HUNTER EXPLORATION LTD. December 31, 2000 CANADIAN HUNTER EXPLORATION LTD. Consolidated Balance Sheet (THOUSANDS OF CANADIAN DOLLARS) As at December 31, 2000 ASSETS CURRENT Accounts receivable 212,777 Inventories 18,948 Other current assets [Note 3] 3,351 ---------- 235,076 Other assets [Note 3] 33,064 Property, plant and equipment [Note 4] 1,252,484 ---------- 1,520,624 ========== LIABILITIES CURRENT Accounts payable and accrued liabilities 180,164 Income taxes payable 19,909 Current portion of deferred revenue and other liabilities [Note 5] 4,256 ---------- 204,329 Deferred revenue and other liabilities [Note 5] 52,266 Long-term debt [Note 6] 234,883 Future income tax liability 397,060 Minority interest 13,998 ---------- 902,536 ---------- SHAREHOLDERS' EQUITY Share capital [Note 8] 347,638 Retained earnings 270,445 Cumulative translation adjustment 5 ---------- 618,088 ---------- 1,520,624 ==========
See accompanying notes On behalf of the Board: Clifford A. Rae Stephen J. Savidant DIRECTOR DIRECTOR 2 CANADIAN HUNTER EXPLORATION LTD. Consolidated Statement of Net Income and Retained Earnings (THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS) Year Ended December 31, 2000 REVENUE Petroleum and natural gas sales 909,315 Royalties (200,488) ---------- 708,827 ---------- EXPENSES Production 56,198 General and administrative 24,266 Interest and other financing charges [Note 6] 65,012 Depletion, depreciation and amortization 192,839 Other 1,732 Minority interest 426 ---------- 340,473 ---------- INCOME BEFORE INCOME TAXES 368,354 Income taxes [Note 7] Current 17,195 Future 143,430 ---------- Net income 207,729 ---------- RETAINED EARNINGS, BEGINNING OF YEAR 68,488 Cash issued under incentive share option plan [Note 8] (5,772) ---------- RETAINED EARNINGS, END OF YEAR 270,445 ========== NET INCOME PER SHARE [NOTE 8] Basic $ 3.49 Fully diluted $ 3.37
See accompanying notes 3 CANADIAN HUNTER EXPLORATION LTD. Consolidated Statement of Cash Flow (THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS) Year Ended December 31, 2000 OPERATING ACTIVITIES NET INCOME 207,729 Add items not involving cash Depletion, depreciation and amortization 192,195 Deferred revenue recognized in the year [Note 5] 49,334 Future income taxes 143,430 Minority interest 426 ---------- Funds from operations 593,114 Net change in non-cash working capital [Note 12] (78,246) ---------- Cash provided by operating activities 514,868 ---------- INVESTING ACTIVITIES Exploration and development of oil and natural gas properties (356,971) Acquisition of equipment and other assets (4,684) Acquisition of oil and natural gas properties (93,097) Acquisition of Atalaya Energy S. A. [Note 2] (54,530) Disposition of oil and natural gas properties 30,533 Increase in other assets (14,956) Net change in non-cash working capital [Note 12] 14,997 ---------- Cash used in investing activities (478,708) ---------- FINANCING ACTIVITIES Cash issued under incentive share option plan (5,772) Share capital issued [Note 8] 118 Drawings on long-term debt [Note 6] 74,504 Foreign exchange (21) Decrease in deferred revenue and other liabilities (104,989) ---------- Cash used in financing activities (36,160) ---------- NET CHANGE IN CASH -- Cash, beginning of year -- ---------- CASH, END OF YEAR -- ---------- FUNDS FROM OPERATIONS PER SHARE [NOTE 8] Basic $ 9.96 Fully diluted $ 9.56
See accompanying notes 4 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada. A summary of the differences between accounting principles generally accepted in Canada and those generally accepted in the United States is contained in Note 15 to these statements. As these financial statements have been prepared for a special purpose, to meet the United States filing requirements for financial statement disclosure for a significant acquisition by Burlington Resources Inc., comparative financial statements have not been presented. CONSOLIDATION The consolidated financial statements of Canadian Hunter Exploration Ltd. (the "Corporation") include the financial position and the results of operations for all of its subsidiaries. A substantial portion of the Corporation's activities are conducted jointly with others and the consolidated financial statements reflect only the Corporation's proportionate interest in such activities. PROPERTY, PLANT AND EQUIPMENT The Corporation follows the full cost method of accounting for oil and natural gas operations, as prescribed by The Canadian Institute of Chartered Accountants, whereby all costs relating to the exploration for and the development of oil and natural gas reserves are capitalized and accumulated in country-by-country cost centres. Capitalized costs include lease and reserve acquisition costs, geological and geophysical costs, carrying charges of non-producing properties, costs of drilling both productive and non-productive wells and direct overhead expenditures related to exploration and development activities. Costs capitalized are depleted and depreciated using the unit-of-production method based on gross proven oil and natural gas reserves converted to a common unit of measure utilizing relative heating value. In determining its depletion base the Corporation includes the cost of unproven land and an estimate of future costs to be incurred in developing proven reserves. The entire proceeds from the disposal of oil and natural gas properties are applied as a reduction of capitalized costs, except when such disposition would result in a greater than 20 percent change in the rate of depletion, in which case a gain or loss on disposal would be recorded. In applying the full cost method of accounting, the Corporation performs a ceiling test which restricts capitalized costs less accumulated depletion and depreciation, future income tax liabilities and site restoration from exceeding the estimated undiscounted value of future net revenue derived from gross proven oil and natural gas reserves, less the aggregate of estimated future general and administrative, financing, site restoration and abandonment costs, net of salvage values, and income tax costs, plus the lower of cost and estimated net realizable value of unproved properties. In calculating the ceiling test, year-end prices of oil and natural gas are used and all costs are assumed to be held constant. Estimated future site restoration and abandonment costs are calculated using the unit-of-production method. Costs are based on engineering estimates using current costs and technology and in accordance with current legislation and industry practices. The annual charge is recorded as additional depletion and depreciation. Depreciation of equipment and other assets is provided using the declining balance method at rates ranging from 10 percent to 33 percent per annum. 5 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 INVENTORIES Inventories of materials and supplies are carried at the lower of average cost and net realizable value. DEFERRED REVENUE AND OTHER LIABILITIES Payments received for products not delivered until required in the future are deferred and recorded as revenue when the products are delivered or the right to take delivery expires. Payments received in respect of the natural gas transportation agreement are recorded as revenue over the term of the contract. FOREIGN CURRENCY TRANSLATION All of the Corporation's foreign operations are self-sustaining. The accounts are translated using the current rate method in which assets and liabilities are converted to Canadian dollars at the exchange rate in effect at the balance sheet date and revenues and expenses are translated at the monthly average exchange rate during the month in which the transaction occurred. Translation gains or losses are included in a separate component of shareholders' equity. FINANCIAL INSTRUMENTS The Corporation periodically enters into financial instrument and commodity contracts to reduce its exposure to adverse changes in commodity prices, interest rates and foreign exchange rates. Costs and gains on hedge contracts are recognized in income in the same period as the hedged transactions are settled. Costs and gains associated with unwinding a hedged position, if material, would be recognized in the same period that the hedged item was recognized in income. The fair value of accounts receivable, accounts payable and accrued liabilities, income taxes payable, and long-term debt approximates their carrying amounts. INCOME TAXES The Corporation follows the liability method in accounting for income taxes. Under this method future tax assets and liabilities are determined based on differences between financial reporting and income tax bases of assets and liabilities, and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on future tax assets and liabilities of a change in tax rates is recognized in net income in the period in which the change occurs. 6 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 PENSION COSTS The Corporation has both a defined benefit and a defined contribution pension plan. (a) Defined benefit plan For the defined benefit pension plan, the Corporation uses the projected benefit actuarial method prorated on length of service and best estimate assumptions to value benefit obligations. The obligation for the defined benefit pension plan is determined through periodic actuarial reports that are based on projections of interest, employees' compensation levels, and length of service to the time of retirement. Adjustments arising from plan amendments, experience gains and losses, and changes in assumptions are amortized over various periods depending on the nature of the adjustment, ranging from the term of the employment contract to which the adjustment relates, to the estimated average remaining service lives of the related employee group. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. Current service costs are expensed in the year. Commencing January 1, 2000, the Corporation prospectively applied the new accounting recommendations for employee future benefits. In applying the new recommendation, the pension liability is calculated using a discount rate based on the current market interest rate of high quality debt instruments rather than an estimated rate. This resulted in a transitional asset of $5,754 which is being amortized over the estimated average remaining service life of 15 years. (b) Defined contribution plan Costs associated with the defined contribution pension plan are based upon specific amounts contributed on behalf of participating employees during the year and are expensed as incurred. SHARE-BASED COMPENSATION PLANS The Corporation has both an incentive share option plan and an employee share savings plan. For the incentive share option plan no compensation expense is recognized when options are issued. If the options are repurchased from employees, the excess consideration paid over the exercise price of the option purchased is charged to retained earnings. If the option holder purchases the shares at the option price, the consideration received from the option holder is credited to share capital. For the employee share savings plan, any contributions made by the Corporation are charged to compensation expense in the current year. USE OF ESTIMATES Management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. 7 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 2. ACQUISITIONS Effective March 1, 2000, the Corporation purchased 78 percent of the outstanding shares of Atalaya Energy S.A. ("Atalaya") for cash consideration of US$37,516 (CDN$54,530). Atalaya is engaged in the exploration for and production of natural gas and liquids in Argentina. The Corporation has made an offer to acquire the remaining 22 percent of the outstanding shares of Atalaya. This offer expires September 2001. This transaction was accounted for using the purchase method with the results of operations included in the consolidated statement of net income from the date of acquisition. The Corporation allocated the purchase price to the assets and liabilities of the acquired company as follows: NET ASSETS ACQUIRED Property, plant and equipment 78,367 Net non-cash working capital 3,548 Future income tax liability (14,242) Minority interest (13,143) ------------ 54,530 ============
3. OTHER ASSETS Prepaid natural gas contract 21,459 Long-term sales tax receivable 14,956 ------------ 36,415 Less current portion 3,351 ------------ 33,064 ============
PREPAID NATURAL GAS CONTRACT The Corporation has a prepaid natural gas contract which represents a continuing obligation of a major independent producer to deliver to the Corporation approximately 10,865 mmbtu per day of natural gas. As at December 31, 2000 the remaining obligation totaled 25 bcf of natural gas. LONG-TERM SALES TAX RECEIVABLE Long-term sales tax receivable consists of sales tax paid on the purchase of foreign properties. This tax is recoverable as revenue is earned from the properties purchased. 8 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 4. PROPERTY, PLANT AND EQUIPMENT
ACCUMULATED DEPLETION AND COST DEPRECIATION NET BOOK VALUE ------------ ------------ -------------- Oil and natural gas properties 2,830,269 (1,591,124) 1,239,145 Equipment and other assets 48,703 (35,364) 13,339 ------------ ------------ ------------ 2,878,972 (1,626,488) 1,252,484 ============ ============ ============
General and administrative expenses of $11,297 were capitalized in 2000. 5. DEFERRED REVENUE AND OTHER LIABILITIES Prepaid natural gas contracts 2,115 Future site restoration 37,107 Natural gas transportation agreement 13,022 Provision for future lease costs 3,613 Pension liability [Note 9] 665 ------------ 56,522 Less current portion 4,256 ------------ 52,266 ============
PREPAID NATURAL GAS CONTRACTS In 1991 the Corporation entered into a natural gas pre-sale agreement with a co-generation facility in Syracuse, New York to supply 120 bcf of natural gas over a 16 year period, and in connection therewith a pre-payment equal to $101,328 was received. As at December 31, 1999, the Corporation's remaining supply commitment totaled 69 bcf of natural gas. On August 2, 2000 the remaining obligation was terminated for a payment of $103,082. During the year the Corporation entered into an AECO/Nymex differential contract with a third party. As part of the contract, the Corporation received a payment for a call premium on 20,000 mmbtu per day to October 2001. FUTURE SITE RESTORATION The Corporation estimates total future site restoration and abandonment costs to be $78,792 at December 31, 2000 of which $37,107 has been accrued as a liability and $5,851 has been charged to income during the year. 9 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 NATURAL GAS TRANSPORTATION AGREEMENT The Corporation is a party to a natural gas transportation agreement for the utilization of pipeline capacity of 19,438 mmbtu per day to October 31, 2023. In return, a payment of US$10,500 was received which is being amortized into income over the term of the contract. PROVISION FOR FUTURE LEASE COSTS The provision for future lease costs relates to the subleasing of seven floors of space within the Calgary head office. This provision represents the difference between the original lease rate and the estimated amounts recoverable under subleases during the remaining term of the lease which expires in 2003. The provision is being amortized over the term of the lease. 6. LONG-TERM DEBT Canadian dollar debt 144,271 US dollar debt 90,612 ------------ 234,883 ============
BANK CREDIT FACILITIES The Corporation has arranged $500,000 of unsecured lines of credit with four major Canadian banks. Drawings on these lines have a revolving term which may, at the Corporation's discretion, be converted into an amortizing term. If the term date is not extended, the facilities will become repayable in equal quarterly payments over 4 years. No amount is required to be paid on these facilities within the next year and accordingly no current portion of long-term debt was recognized. The remaining available line of credit at December 31, 2000 is $198,808. The average rate of interest paid by the Corporation during the year on these facilities was 6.21 percent. INTEREST AND OTHER FINANCING CHARGES Interest on long-term debt 16,208 Loss on termination of a prepaid natural gas contract 48,634 Other 170 ------------ 65,012 ============
10 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 7. INCOME TAXES The future income tax provision results primarily from the deduction, as permitted by tax legislation, of exploration and development expenditures in advance of the related deductions in the financial statements. The effective tax rate used in the financial statements differs from the statutory income tax rate due to the following: INCOME BEFORE TAXES 368,354 Statutory rate 44.87% ------------ Expected income taxes 165,280 Add/(deduct): Non-deductible crown charges, net of Alberta Royalty Tax Credit 79,313 Resource allowance (78,716) Tax benefit not previously recognized (529) Provincial royalty tax deduction (1,842) Large corporations tax 2,194 Other (5,075) ------------ Provision for income tax expense 160,625 ------------ Effective tax rate 43.61% ============
11 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 8. SHARE CAPITAL Authorized Unlimited number of common shares Unlimited number of preferred shares - issuable in series Issued Common shares
SHARES AMOUNT (000's) ($000's) ------------ ------------ BALANCE, BEGINNING OF YEAR 59,657 347,520 Issued during year 12 118 ------------ ------------ BALANCE, END OF YEAR 59,669 347,638 ============ ============
Certain members of management have the right to receive 92,540 common shares which were issued at a price of $8.63 per share. These common shares were issued under the Corporation's share purchase plan and are held as security for loans receivable from management of $799. For financial statement reporting purposes, these loans have been deducted from shareholders' equity. COMMON SHARE OPTIONS The Corporation has an incentive share option plan under which options granted to acquire common shares vest proportionately over five years and expire ten years after the grant date. The exercise price is equal to the market price of the Corporation's common shares on the last trading day preceding the date of grant.
NUMBER OF OPTIONS WEIGHTED AVERAGE (000'S) PRICE/SHARE ------------ ---------------- OUTSTANDING AT BEGINNING OF YEAR 2,224 9.84 Granted 803 23.92 Exercised (292) 9.67 Forfeited (40) 14.46 ------------ ------------ OUTSTANDING AT END OF YEAR 2,695 13.99 ------------ ------------ EXERCISABLE AT END OF YEAR 153 10.14 ------------ ------------
12 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 At December 31, 2000 the following options to purchase common shares were outstanding:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------- -------------------------------- NUMBER NUMBER RANGE OF EXERCISE OF OPTIONS WEIGHTED AVERAGE WEIGHTED AVERAGE OF OPTIONS WEIGHTED AVERAGE PRICE (000'S) EXERCISE PRICE YEARS TO EXPIRY (000'S) EXERCISE PRICE - ----------------- ------------ ---------------- ---------------- ------------ ---------------- Under $15.00 1,855 $ 9.60 8.0 145 $ 9.59 $15.00 to $25.00 39 $ 18.35 8.4 6 $ 18.94 Over $25.00 801 $ 23.94 9.2 2 $ 25.10 ------------ ------------ ------------ ------------ ------------ Total 2,695 $ 13.99 8.4 153 $ 10.14 ============ ============ ============ ============ ============
At December 31, 2000, there were 2,863,286 common shares reserved for the granting of additional options. EARNINGS PER SHARE AND FUNDS FROM OPERATIONS PER SHARE Earnings per common share and funds from operations per common share have been calculated using the weighted average number of common shares of 59,574,775. Fully diluted earnings per common share have been calculated based on the assumption that all options issued, to the extent they are not antidilutive, have been exercised. The fully diluted earnings per share amount assumes 62,244,550 fully diluted shares outstanding, and includes imputed interest of $1,725 at a rate of 5 percent on the proceeds from the exercise of options. 13 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 9. PENSION PLAN For the current year, the Corporation used an independent actuary for determining the defined benefit pension plan funding and accounting reporting requirements. Summary information relating to the defined benefit plan at December 31, 2000 is as follows: Significant actuarial assumptions: Expected long-term rate of return on plan assets (%) 7.0 Discount rate (%) 7.0 Rate of compensation increase (%) 4.5 ------------ Accrued benefit obligation: Accrued benefit obligation, beginning of year 16,450 Current service cost 222 Interest cost 1,184 Actuarial losses 757 Benefits paid (904) ------------ Accrued benefit obligation, end of year 17,709 ------------ Plan assets*: Fair value of plan assets, beginning of year 21,783 Actual return on plan assets 1,918 Employer contributions 151 Benefits paid (904) ------------ Fair value of plan assets, end of year 22,948 ------------ Funded status - plan surplus: 5,239 Unamortized net actuarial gains 552 Unamortized net transitional asset (5,370) ------------ Net accrued benefit asset 421 Net balance sheet liability 665 ------------ Excess of fund assets over net balance sheet liability 1,086 ------------ Pension expense: Defined benefit 344 Defined contribution 1,017 ------------ 1,361 ============
*Pension fund assets consist of short-term and money market investments. 14 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 10. FINANCIAL INSTRUMENTS FINANCIAL CONTRACTS To reduce its exposure to adverse changes in commodity prices, interest rates and foreign exchange rates, from time-to-time the Corporation utilizes financial instruments such as swaps and fixed commodity contracts to hedge against market fluctuations. COMMODITY CONTRACTS At December 31, 2000, the Corporation had the following natural gas hedging positions in place:
NOTIONAL UNRECOGNIZED CONTRACT AVERAGE LOSS AT AMOUNT FIXED PRICE DECEMBER 31, CONTACT TYPE CONTRACT PERIOD (UNITS) ($/UNIT) 2000 ------------ --------------- -------- ----------- ------------ AECO fixed price January 2001 to 20,000 GJ/day $4.15 61,727 October 2005 AECO/NYMEX January 2001 to 20,000 mmbtu/day US$0.045 11,878 differential October 2001
The AECO/NYMEX differential has a US$5.00/mmbtu Nymex ceiling. The AECO fixed price contract was entered into simultaneously with the termination of the prepaid natural gas contract. The above estimated unrecognized amounts are based on the market value of these financial instruments as at year end, and represent the amounts the Corporation would receive or pay to terminate the contracts at year end. No amount for these instruments is recorded in the financial statements. CREDIT RISK A significant portion of the Corporation's accounts receivable are due from entities in the oil and gas industry. Concentration of credit risk is mitigated by having a broad customer base, which includes a significant number of companies engaged in joint operations with the Corporation. The Corporation routinely assesses the financial strength of its partners and customers, including parties involved in marketing or other commodity arrangements. The Corporation is exposed to credit risk associated with possible non-performance by financial instrument counter parties. The Corporation believes the risks of non-performance are minimal as the counter parties are major financial institutions that have an investment-grade credit rating as determined by recognized credit rating agencies. The Corporation also limits its total exposure to individual counter parties. 15 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 OFF-BALANCE-SHEET RISK The Corporation entered into a foreign exchange forward contract to hedge its net investment in a self-sustaining foreign subsidiary. This forward contract to exchange US$38,983 for Canadian dollars at an exchange rate of 1.4529 matures on September 2005. As a result of the forward contract, the exchange gains and losses recorded on translation of the subsidiaries' financial statements will be offset by the gains and losses attributable to the foreign exchange forward contract. 11. COMMITMENTS Operating leases under existing lease commitments are as follows: 2001 4,869 2002 4,443 2003 1,076 ------------ 10,388 ============
12. STATEMENT OF CASH FLOW The net changes in non-cash working capital consist of the following: CASH (USED IN) PROVIDED BY Accounts receivable (148,444) Inventories (14,327) Accounts payable and accrued liabilities 81,774 Income taxes payable 14,200 ------------ (66,797) Atalaya Energy S.A. net working capital [Note 2] 3,548 ------------ (63,249) ============
The change in non-cash working capital relates to the following activities: Operating (78,246) Investing 14,997 ------------ (63,249) ============
Cash taxes paid in 2000 were $3,009 and cash interest paid in 2000 was $15,419. 16 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 13. SEGMENTED INFORMATION The Corporation has operations in Canada and Argentina. All activities relate to the exploration, development and production of oil, liquids and natural gas.
CANADA ARGENTINA TOTAL CORPORATE ------------ ------------ --------------- Petroleum and natural gas sales 895,592 13,723 909,315 Property, plant and equipment 1,096,577 155,907 1,252,484
14. SUBSEQUENT EVENT Effective December 5, 2001, Burlington Acquisition Corporation, an indirect wholly-owned subsidiary of Burlington Resources Inc., acquired all of the issued and outstanding common shares of the Corporation. 15. UNITED STATES ACCOUNTING PRINCIPLES These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"). These principles, as they pertain to the Corporation's consolidated financial statements, conform in all material respects with accounting principles generally accepted in the United States ("U.S. GAAP") except that: (a) Unrealized gains and losses relating to the translation of long-term monetary liabilities repayable in foreign funds are deferred and amortized over the remaining term of the liability. In accordance with U.S. GAAP, these gains and losses would be recognized in earnings in the period in which they occur. (b) U.S. GAAP requires recognition of an additional minimum pension liability equal to the excess of the unfunded accumulated benefit obligation over the accrued pension cost. The additional minimum pension liability is recognized in other comprehensive income, a component of shareholders' equity, to the extent it exceeds the sum of the unrecognized prior service cost. (c) The Canadian GAAP ceiling test is comparable to the method promulgated by the Securities and Exchange Commission ("SEC") except that the SEC method requires the projected future net cash from proved reserves be discounted at 10 percent and does not require a deduction for general and administrative and financing cost from those net cash flows. (d) Prior to January 1, 2001, fully diluted per share amounts under Canadian GAAP are calculated utilizing the imputed earnings method which incorporates the dilutive effect of the stock options outstanding under the stock option plan and the imputed interest earned on the cash received upon conversion of these options. In accordance with U.S. GAAP, the treasury stock method calculates the diluted per share amounts assuming the proceeds that arise from the exercise of outstanding, in the money options are used to purchase common shares of the Corporation at their average market price for the period. Effective January 1, 2001, Canadian GAAP requires the use of the treasury stock method. (e) In accordance with Canadian GAAP, the payment associated with the cash settlement of stock options is included as a reduction of shareholders' equity when the stock options are cash settled as long as the cash settlement was at the holder's option. Under U.S. GAAP, when options include a cash settlement feature, compensation expense is recognized in the Consolidated Statement of Net Income and Retained Earnings over the vesting period and is adjusted for changes in the quoted market price of the common stock between the grant date and the measurement date. 17 CANADIAN HUNTER EXPLORATION LTD. Notes to Consolidated Financial Statements (THOUSANDS OF CANADIAN DOLLARS) Year Ended December 31, 2000 (f) In accordance with Canadian GAAP, the implementation of a new tax rate is applied to the computation of income taxes in the period in which it has been substantially enacted. A tax rate is substantially enacted when the proposed change is specified in sufficient detail to be understood and applied in practice, has been drafted in legislative or regulatory form and has been tabled in Parliament or presented in Council. Under U.S. GAAP, a new tax rate cannot be applied until the period it has been enacted into law. (g) In accordance with Canadian GAAP, foreign currency translation adjustments arising upon consolidation of self-sustaining foreign subsidiaries are recorded directly to the cumulative translation adjustment, a separate component of shareholders' equity. Under U.S. GAAP, these foreign currency translation adjustments are included in other comprehensive income which is a component of shareholder's equity. (h) Under U.S. GAAP, funds from operations per share cannot be reported in the financial statements. (i) In accordance with Canadian GAAP, the fair value and unrealized gains and losses of financial instruments qualifying as cash flow hedges are not recorded on the balance sheet. The costs and gains on hedge contracts are recognized in income in the same period as the hedged transactions are settled. Effective January 1, 2001, under U.S. GAAP, the fair value of those instruments are reflected as an asset or liability on the balance sheet with the effective portion of the unrealized gains or losses included in other comprehensive income. The ineffective portion of unrealized gains and losses as well as the fair market value of any derivatives not designated or qualifying as hedges are reflected in earnings. 18 EX-99.4 14 h92808ex99-4.txt UNAUDITED CONSOLIDATED FIN. STMTS OF CANADIAN HUN. EXHIBIT 99.4 [CANADIAN HUNTER LOGO] Interim Report Q3 2001 For the period ended September 30, 2001 - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS
$ MILLIONS SEPTEMBER 30, 2001 December 31, 2000 ------------------ ----------------- (UNAUDITED) ASSETS Current Cash and marketable securities 6.1 -- Accounts receivable 93.3 212.7 Inventories 16.6 18.9 Other current assets 3.4 3.4 ------------ ------------ 119.4 235.0 Other assets 31.3 33.1 Property, plant and equipment 1,541.6 1,252.5 ------------ ------------ 1,692.3 1,520.6 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable and accrued liabilities 131.7 180.2 Income taxes payable 154.4 19.9 Current portion of deferred revenue and other liabilities 6.3 4.2 ------------ ------------ 292.4 204.3 Deferred revenue and other liabilities 55.0 52.3 Long-term debt -- 234.9 Future income tax liability 437.2 397.1 Minority interest -- 14.0 ------------ ------------ 784.6 902.6 ------------ ------------ SHAREHOLDERS' EQUITY Share capital 347.9 347.6 Retained earnings 559.8 270.4 ------------ ------------ 907.7 618.0 ------------ ------------ 1,692.3 1,520.6 ============ ============
CONSOLIDATED STATEMENTS OF NET INCOME FOR THE PERIOD ENDED SEPTEMBER 30 (UNAUDITED)
Three months Nine months ---------------------- ---------------------- $ MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000 -------- -------- -------- -------- REVENUE Petroleum and natural gas sales 190.6 227.6 993.1 532.4 Royalties (39.3) (52.4) (234.4) (116.1) -------- -------- -------- -------- 151.3 175.2 758.7 416.3 -------- -------- -------- -------- EXPENSES Production 18.6 13.8 57.4 39.3 General and administrative 7.4 5.3 19.8 15.6 Interest and other financing charges [NOTE 4] 0.1 53.1 3.3 60.4 Depletion, depreciation and amortization 65.1 48.9 195.9 132.3 Other (1.9) (0.2) (1.6) (1.4) Minority interest -- 0.2 0.2 0.5 -------- -------- -------- -------- 89.3 121.1 275.0 246.7 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 62.0 54.1 483.7 169.6 Income taxes Current -- 0.8 135.3 2.1 Future 15.7 19.8 54.1 73.0 -------- -------- -------- -------- NET INCOME 46.3 33.5 294.3 94.5 ======== ======== ======== ======== NET INCOME PER SHARE Basic 0.77 0.56 4.94 1.59 Diluted [NOTE 2] 0.76 0.55 4.82 1.55
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE PERIOD ENDED SEPTEMBER 30 (UNAUDITED)
Three months Nine months -------------------- -------------------- $ MILLIONS 2001 2000 2001 2000 ------- ------- ------- ------- RETAINED EARNINGS, BEGINNING OF PERIOD 514.1 127.0 270.4 68.5 Net income 46.3 33.5 294.3 94.5 Cash issued under incentive share option plan (0.6) (1.3) (4.9) (3.8) ------- ------- ------- ------- RETAINED EARNINGS, END OF PERIOD 559.8 159.2 559.8 159.2 ======= ======= ======= =======
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE PERIOD ENDED SEPTEMBER 30 (UNAUDITED)
Three months Nine months ---------------------- ---------------------- $ MILLIONS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000 -------- -------- -------- -------- OPERATING ACTIVITIES Net income 46.3 33.5 294.3 94.5 Add (deduct) items not involving cash Depletion, depreciation and amortization 64.6 48.7 195.4 132.0 Deferred revenue (1.3) 47.1 (4.5) 48.5 Future income taxes 15.7 19.8 54.1 73.0 Minority interest -- 0.2 0.2 0.5 -------- -------- -------- -------- Funds from operations 125.3 149.3 539.5 348.5 Net change in non-cash working capital 5.7 (3.4) 213.9 (55.5) -------- -------- -------- -------- CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES 131.0 145.9 753.4 293.0 -------- -------- -------- -------- INVESTING ACTIVITIES Exploration and development of oil and natural gas properties (126.4) (64.1) (445.7) (241.0) Acquisition of equipment and other assets (1.4) (0.4) (3.1) (2.2) Acquisition of oil and natural gas properties (6.0) (14.5) (6.3) (20.8) Disposition of oil and natural gas properties -- 28.0 0.9 28.4 Corporate acquisitions, net [NOTE 3] (43.4) -- (43.4) (54.5) Net change in non-cash working capital balances 0.1 (0.2) (13.2) (4.3) -------- -------- -------- -------- CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (177.1) (51.2) (510.8) (294.4) -------- -------- -------- -------- FINANCING ACTIVITIES Cash issued under incentive share option plan (0.1) (1.2) (8.0) (3.8) Share capital issued -- -- 0.2 0.1 Repayment of long-term debt -- -- (234.9) -- Drawings on long-term debt -- 8.9 -- 109.7 Increase (decrease) in deferred revenue and other liabilities (1.6) (102.4) 6.2 (104.6) -------- -------- -------- -------- CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1.7) (94.7) (236.5) 1.4 -------- -------- -------- -------- Net change in cash and marketable securities (47.8) -- 6.1 -- Cash and marketable securities, beginning of period 53.9 -- -- -- -------- -------- -------- -------- Cash and marketable securities, end of period 6.1 -- 6.1 -- ======== ======== ======== ======== FUNDS FROM OPERATIONS PER SHARE Basic 2.09 2.51 9.05 5.85 Diluted [NOTE 2] 2.06 2.44 8.83 5.71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 ACCOUNTING POLICIES The accounting policies used in the preparation of these interim consolidated financial statements conform with those used in Canadian Hunter's annual consolidated financial statements except as indicated in note 2. These interim consolidated financial statements do not include all of the disclosures included in Canadian Hunter's annual consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2000. NOTE 2 CHANGE IN ACCOUNTING POLICY Effective January 1, 2001, Canadian Hunter retroactively adopted the Canadian Institute of Chartered Accountants new standard requiring the use of the "treasury stock method" rather than the "imputed interest method" to determine the dilutive effect of stock options and other dilutive instruments. Had the imputed interest method been used for the nine months ended September 30, 2001, diluted net income per share would have been $4.73 (2000 - $1.54) and diluted funds from operations per share would have been $8.64 (2000 - $5.61). Had the imputed interest method been used for the quarter ended September 30, 2001, diluted net income per share would have been $0.75 (2000 - $0.55) and diluted funds from operations per share would have been $2.01 (2000 - $2.40). NOTE 3 CORPORATE ACQUISITIONS In August 2001, Canadian Hunter purchased the remaining 22 percent of the shares of Atalaya Energy S.A. ("Atalaya"). In March, 2000 Canadian Hunter purchased 78% of the outstanding shares of Atalaya for $54.5 million. Atalaya is engaged in the exploration for and production of natural gas and liquids in Argentina. In September 2001, Canadian Hunter acquired all of the outstanding common shares of a private Canadian company. These transactions were accounted for using the purchase method. Canadian Hunter allocated the 2001 corporate purchase prices to the assets and liabilities as follows:
($ millions) CANADA INTERNATIONAL CORPORATE TOTAL Property, plant and equipment 1.3 27.1 28.4 Net non-cash working capital 0.8 0.8 1.6 Future income tax asset (liability) 18.8 (7.0) 11.8 Other 1.6 -- 1.6 -------- -------- -------- TOTAL 22.5 20.9 43.4 -------- -------- --------
NOTE 4 INTEREST AND OTHER FINANCING CHARGES In 2000, interest and other financing charges included $48.6 million related to a loss on termination of a prepaid natural gas contract. NOTE 5 SUBSEQUENT EVENT - OFFER TO PURCHASE ALL OF THE COMMON SHARES OF CANADIAN HUNTER Effective December 5, 2001, Burlington Acquisition Corporation, an indirect wholly-owned subsidiary of Burlington Resources Inc., acquired all of the issued and outstanding common shares of the Corporation. SEGMENTED INFORMATION FOR THE THREE MONTHS ENDED SEPTEMBER 30 (UNAUDITED)
CANADA ARGENTINA CORPORATE TOTAL 2001 2000 2001 2000 2001 2000 --------- --------- --------- --------- --------- --------- FINANCIAL ($MILLIONS) Petroleum and natural gas sales 182.6 225.1 8.0 2.5 190.6 227.6 Funds from operations 120.0 147.7 5.3 1.6 125.3 149.3 Net income 45.3 33.1 1.0 0.4 46.3 33.5 Capital expenditures Exploration and development 124.9 62.6 1.5 1.5 126.4 64.1 Acquisition of oil and natural gas properties 6.0 14.5 -- -- 6.0 14.5 Disposition of oil and natural gas properties -- (28.0) -- -- -- (28.0) Corporate acquisitions, net 22.5 -- 20.9 -- 43.4 -- --------- --------- --------- --------- --------- --------- OPERATING Production Natural gas (mmcf/d) 479 425 35 9 514 434 Natural gas liquids (bbls/d) 8,587 7,871 168 52 8,755 7,923 Crude oil (bbls/d) 831 1,266 -- -- 831 1,266 Total (boe/d) 89,250 79,883 5,987 1,559 95,237 81,442 --------- --------- --------- --------- --------- --------- Prices Natural gas ($/mcf) 3.56 4.97 2.29 2.20 3.47 4.89 Natural gas liquids ($/bbl) 28.57 37.51 29.58 37.87 28.59 37.51 Crude oil ($/bbl) 38.78 33.76 -- -- 38.78 33.76 Total ($/boe) 22.22 30.62 14.17 14.06 21.70 30.22 --------- --------- --------- --------- --------- --------- Netback ($/boe) Product revenue 22.22 30.62 14.17 14.06 21.70 30.22 Royalties (4.67) (7.10) (1.62) (1.49) (4.47) (6.95) Operating expense (2.06) (1.82) (3.01) (2.21) (2.12) (1.83) --------- --------- --------- --------- --------- --------- Operating netback 15.49 21.70 9.54 10.36 15.11 21.44 General and administrative expense (0.87) (0.69) (0.46) (1.38) (0.85) (0.70) Interest expense (0.02) (0.61) 0.06 -- (0.02) (0.56) Current taxes (0.01) (0.11) -- -- (0.01) (0.11) --------- --------- --------- --------- --------- --------- Cash netback 14.59 20.29 9.14 8.98 14.23 20.07 ========= ========= ========= ========= ========= =========
SEGMENTED INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30 (UNAUDITED)
CANADA ARGENTINA CORPORATE TOTAL 2001 2000 2001 2000 2001 2000 --------- --------- --------- --------- --------- --------- FINANCIAL ($MILLIONS) Petroleum and natural gas sales 972.4 526.6 20.7 5.8 993.1 532.4 Funds from operations 527.3 345.4 12.2 3.1 539.5 348.5 Net income 292.5 93.9 1.8 0.6 294.3 94.5 Capital expenditures Exploration and development 434.9 238.5 10.8 2.5 445.7 241.0 Acquisition of oil and natural gas properties 6.3 20.7 -- 0.1 6.3 20.8 Disposition of oil and natural gas properties (0.9) (28.4) -- -- (0.9) (28.4) Corporate acquisitions, net 22.5 -- 20.9 54.5 43.4 54.5 --------- --------- --------- --------- --------- --------- OPERATING Production Natural gas (mmcf/d) 489 403 29 7 518 410 Natural gas liquids (bbls/d) 9,260 7,502 149 41 9,409 7,543 Crude oil (bbls/d) 859 1,478 -- -- 859 1,478 Total (boe/d) 91,684 76,137 4,920 1,211 96,604 77,348 --------- --------- --------- --------- --------- --------- Prices Natural gas ($/mcf) 6.51 4.00 2.30 2.16 6.26 3.96 Natural gas liquids ($/bbl) 36.64 34.06 35.16 36.27 36.62 34.07 Crude oil ($/bbl) 41.80 36.49 -- -- 41.80 36.49 Total ($/boe) 38.85 25.24 14.45 13.73 37.53 25.01 --------- --------- --------- --------- --------- --------- Netback ($/boe) Product revenue 38.85 25.24 14.45 13.73 37.53 25.01 Royalties (9.27) (5.53) (1.58) (1.51) (8.86) (5.45) Operating expense (2.11) (1.84) (3.21) (2.10) (2.17) (1.84) --------- --------- --------- --------- --------- --------- Operating netback 27.47 17.87 9.66 10.12 26.50 17.72 General and administrative expense (0.73) (0.70) (1.09) (2.29) (0.75) (0.73) Interest expense (0.13) (0.56) -- (0.28) (0.13) (0.55) Current taxes (5.41) (0.10) -- -- (5.11) (0.10) --------- --------- --------- --------- --------- --------- Cash netback 21.20 16.51 8.57 7.55 20.51 16.34 ========= ========= ========= ========= ========= =========
CAPITAL EXPENDITURES FOR THE PERIOD ENDED SEPTEMBER 30 (UNAUDITED)
Three months Nine months --------------------- ---------------------- $ MILLIONS 2001 2000 2001 2000 -------- -------- -------- -------- Lease acquisition and rentals 32.2 24.5 91.9 48.2 Seismic 4.7 1.2 19.3 9.0 Drilling and completions 60.3 24.6 199.8 115.9 Facilities 26.9 11.0 128.0 59.1 Capitalized general and administrative 2.3 2.8 6.7 8.8 -------- -------- -------- -------- Exploration and development expenditures 126.4 64.1 445.7 241.0 Acquisition of oil and natural gas properties 6.0 14.5 6.3 20.8 Disposition of oil and natural gas properties -- (28.0) (0.9) (28.4) Corporate acquisitions, net 43.4 -- 43.4 54.5 Other 1.4 0.4 3.1 2.2 -------- -------- -------- -------- Total capital expenditures 177.2 51.0 497.6 290.1 ======== ======== ======== ========
DRILLING HISTORY FOR THE PERIOD ENDED SEPTEMBER 30, 2001 (UNAUDITED)
Three months Nine months Gross Net Gross Net -------- -------- -------- -------- EXPLORATORY Natural gas 30 24.3 122 98.7 Crude oil -- -- -- -- Dry 9 9.0 23 21.4 -------- -------- -------- -------- Total exploratory 39 33.3 145 120.1 -------- -------- -------- -------- DEVELOPMENT Natural gas 28 21.8 127 93.2 Crude oil -- -- -- -- Dry 5 4.9 12 10.5 -------- -------- -------- -------- Total development 33 26.7 139 103.7 -------- -------- -------- -------- Total wells drilled 72 60.0 284 223.8 -------- -------- -------- -------- SUCCESS RATIO (%) Exploratory 77 73 84 82 Development 85 82 91 90 -------- -------- -------- -------- Overall 81 77 88 86 ======== ======== ======== ========
EX-99.5 15 h92808ex99-5.txt BURLINGTON RESOURCES INC. PRO FORMA INCOME STMTS. EXHIBIT 99.5 UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME On December 5, 2001, Burlington Resources Inc. ("BR") acquired all of the outstanding common stock of Canadian Hunter Exploration Ltd. ("Hunter") for cash consideration of C$53 per share representing an aggregate value of approximately U.S. $2.1 billion. The acquisition was funded primarily with the proceeds from the issuance of $1.5 billion of fixed-rate notes and $400 million of commercial paper. The acquisition was accounted for under the purchase method in accordance with SFAS No. 141, Business Combinations. The following unaudited pro forma combined statements of income are presented to give effect to the acquisition of Hunter by BR under the purchase method of accounting. The unaudited pro forma combined statements of income for the year ended December 31, 2000 and the nine months ended September 30, 2001 assume that the transaction had been consummated on January 1, 2000. The unaudited pro forma combined statements of income do not reflect any cost savings or other synergies which may result from the transaction and are not necessarily indicative of future results of operations. These unaudited pro forma combined statements of income are presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") under the successful efforts method of accounting for oil and gas properties. The unaudited pro forma combined statements of income should be read in conjunction with the historical consolidated financial statements of BR and Hunter, including the notes thereto, included in this Form 10-K and Exhibits 99.3 and 99.4 to this Form 10-K, respectively. 1 EXHIBIT 99.5 UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2001 -------------------------------------------------- HUNTER HISTORICAL PRO FORMA BR U.S. GAAP ADJUSTMENTS PRO FORMA HISTORICAL (NOTE 1) (NOTE 2) COMBINED ---------- ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) REVENUES............................................ $2,715 $525 $ -- $3,240 ------ ---- ----- ------ COSTS AND EXPENSES Taxes Other Than Income Taxes..................... 130 2 -- 132 Transportation Expense............................ 191 31 -- 222 Production and Processing......................... 368 36 -- 404 Depreciation, Depletion and Amortization.......... 527 127 (5)(2a) 649 Exploration Costs................................. 201 1 23(2b) 245 20(2e) Administrative.................................... 119 12 4(2c) 135 ------ ---- ----- ------ Total Costs and Expenses............................ 1,536 209 42 1,787 ------ ---- ----- ------ Operating Income.................................... 1,179 316 (42) 1,453 Interest Expense.................................... 132 2 82(2d) 216 Other Expense (Income) - Net........................ 4 (3) -- 1 ------ ---- ----- ------ Income from Continuing Operations Before Income Taxes............................................. 1,043 317 (124) 1,236 Income Tax Expense (Benefit)........................ 406 124 (82)(2f) 448 ------ ---- ----- ------ Income from Continuing Operations................... $ 637 $193 $ (42) $ 788 ====== ==== ===== ====== BASIC EARNINGS PER COMMON SHARE..................... $ 3.05 $ 3.77 ====== DILUTED EARNINGS PER COMMON SHARE................... $ 3.04 $ 3.75 ====== ====== Weighted Average Number of Common Shares Outstanding....................................... 209 209 ====== ====== Weighted Average Number of Common Shares Outstanding, Including Dilution................... 210 210 ====== ======
See accompanying Notes to Unaudited Pro Forma Combined Statements of Income. 2 EXHIBIT 99.5 UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2000 -------------------------------------------------- HUNTER HISTORICAL PRO FORMA BR U.S. GAAP ADJUSTMENTS PRO FORMA HISTORICAL (NOTE 1) (NOTE 2) COMBINED ---------- ---------- ----------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) REVENUES............................................ $3,147 $501 $ -- $3,648 ------ ---- ------ ------ COST AND EXPENSES................................... Taxes Other than Income Taxes....................... 147 2 149 Transportation Expense.............................. 240 23 263 Production and Processing........................... 463 36 499 Depreciation, Depletion and Amortization............ 704 130 8(2a) 842 Exploration Costs................................... 237 1 19(2b) 283 26(2e) Administrative...................................... 165 15 8(2c) 188 ------ ---- ------ ------ Total Costs and Expenses............................ 1,956 207 61 2,224 ------ ---- ------ ------ Operating Income.................................... 1,191 294 (61) 1,424 Interest Expense.................................... 197 44 109(2d) 350 Other Expense (Income) - Net........................ 27 1 -- 28 ------ ---- ------ ------ Income Before Income Taxes.......................... 967 249 (170) 1,046 Income Tax Expense (Benefit)........................ 292 108 (111)(2f) 289 ------ ---- ------ ------ Income from Continuing Operations................... $ 675 $141 $ (59) $ 757 ====== ==== ====== ====== BASIC EARNINGS PER COMMON SHARE..................... $ 3.13 $ 3.51 ====== ====== DILUTED EARNINGS PER COMMON SHARE................... $ 3.12 $ 3.50 ====== ====== Weighted Average Number of Common Shares Outstanding....................................... 216 216 ====== ====== Weighted Average Number of Common Shares Outstanding, Including Dilution................... 216 216 ====== ======
See accompanying Notes to Unaudited Pro Forma Combined Statements of Income. 3 EXHIBIT 99.5 PRO FORMA STATEMENTS OF INCOME NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME 1. CONVERSION OF HUNTER TO U.S. GAAP AND U.S. DOLLARS The historical consolidated financial statements of Hunter were prepared under Canadian GAAP and in Canadian dollars. For these unaudited pro forma combined financial statements, the historical financial information of Hunter has been converted to U.S. GAAP using the full cost method of accounting for oil and gas properties and converted to U.S. dollars using the average exchange rates for the nine months ended September 30, 2001 (.6506) and the year ended December 31, 2000 (.6737). U.S. GAAP STATEMENTS OF INCOME -- HUNTER
PERIOD ENDED SEPTEMBER 30, 2001 -------------------------------------------------------------------- HUNTER HUNTER HUNTER HISTORICAL U.S. HISTORICAL HISTORICAL CANADIAN GAAP CONFORMING U.S. U.S. GAAP GAAP ADJUSTMENTS ADJUSTMENTS GAAP U.S. $ ---------- ----------- ----------- ---------- ---------- (IN MILLIONS) REVENUES............................. C$759 C$48(a) C$-- C$810 $527 ----- ---- ---- ----- ---- 3(g) COSTS AND EXPENSES Production and Processing.......... 57 (2)(c) 55 36 Taxes Other than Income Taxes...... 2(c) 2 2 Transportation Expense............. 48(a) 48 31 General and Administrative......... 20 (1)(d) 19 12 Interest and Other Financing Charges......................... 3 (3)(e) -- -- Exploration Costs.................. 1(d) 1 1 Depreciation, Depletion and Amortization.................... 196 196 127 Other.............................. (1) 1(b) -- -- Minority Interest.................. -- -- -- ----- ---- ---- ----- ---- Total Costs and Expenses............. 275 48 (2) 321 209 ----- ---- ---- ----- ---- Operating Income (Loss).............. 484 3 2 489 318 Interest Expense..................... -- -- 3(e) 3 2 Other Expense (Income) - Net......... -- (1)(b) (1) (1) ----- ---- ---- ----- ---- Income Before Income Taxes........... 484 3 -- 487 317 Income Tax Expense................... 190 2(f) -- 192 124 ----- ---- ---- ----- ---- NET INCOME........................... C$294 C $1 C$-- C$295 $193 ===== ==== ==== ===== ====
4 EXHIBIT 99.5 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED)
YEAR ENDED DECEMBER 31, 2000 ------------------------------------------------------------------------- HUNTER HUNTER HUNTER HISTORICAL U.S. HISTORICAL HISTORICAL CANADIAN GAAP CONFORMING U.S. U.S. GAAP GAAP ADJUSTMENTS ADJUSTMENTS GAAP U.S. $ ---------- ----------- ----------- ---------- ---------- (IN MILLIONS) REVENUES........................ C$709 C$34(a) C$-- C$743 $501 ----- ---- ---- ----- ---- COSTS AND EXPENSES Production and Processing..... 56 (3)(c) 53 36 Taxes Other than Income Taxes...................... -- 3(c) 3 2 Transportation Expense........ -- 34(a) 34 23 Administrative................ 24 (2)(d) 22 15 Interest and Other Financing Charges.................... 65 (65)(e) -- Exploration Costs............. -- 2(d) 2 1 Depreciation, Depletion and Amortization............... 193 193 130 Other......................... 2 (2)(b) -- -- Minority Interest............. -- -- -- -- ----- ---- ---- ----- ---- Total Costs and Expenses........ 340 34 (67) 307 207 ----- ---- ---- ----- ---- Operating Income................ 369 -- 67 436 294 Interest Expense................ -- -- 65(e) 65 44 Other Expense (Income) - Net.... -- -- 2(b) 2 1 ----- ---- ---- ----- ---- Income Before Income Taxes...... 369 -- -- 369 249 Income Tax Expense.............. 161 -- -- 161 108 ----- ---- ---- ----- ---- NET INCOME...................... C$208 C$-- C$-- C$208 $141 ===== ==== ==== ===== ====
(a) Reflects reclassification of transportation expenses from revenues to production and processing in accordance with U.S. GAAP. (b) Reclassify other expenses from operating expense to non-operating expense to conform to BR's presentation. (c) Reclassify production taxes included in production and processing costs to conform to BR's presentation. (d) Reclassify certain costs included in general and administrative expense to exploration expense to conform to BR's presentation. (e) Reclassify interest expense from operating expense to non-operating expense to conform to BR's presentation. (f) To adjust income taxes related to U.S. GAAP adjustment using a blended statutory tax rate of 43%. (g) Reflects recognition of unrealized gains on derivative financial instruments in accordance with U.S. GAAP. 2. PRO FORMA ADJUSTMENTS (a) To adjust depreciation, depletion and amortization ("DD&A") expense for Hunter based on the step-up to estimated fair value of the assets assuming the acquisition occurred on January 1, 2000 and to record DD&A at a field level under successful efforts method of accounting. The Company's pro forma depreciation, depletion and amortization per mcfe equivalent is $.818 for the year ended December 31, 2000 and for the nine months ended September 30, 2001. (b) Reflects the increase in exploration expense for the recognition of geological and geophysical expenses, lease rentals and exploratory dry hole costs previously capitalized under the full cost method of accounting for oil and gas properties used by Hunter prior to the acquisition. 5 EXHIBIT 99.5 NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME -- (CONTINUED) (c) Reflects increase due to recognition of general and administrative costs under the successful efforts method of accounting for oil and gas properties to conform to BR's accounting policies. These costs were capitalized under the full cost method of accounting for oil and gas properties used by Hunter prior to the acquisition. (d) Reflects additional pro forma interest expense related to $1.5 billion of fixed rate debt and $400 million of commercial paper issued to fund the Hunter acquisition. It is assumed that the borrowings occurred on January 1, 2000. Interest expense was computed using weighted average interest rates of 6.5% and 2.5% on the fixed rate debt and commercial paper, respectively. A .125 percent change in interest rates would impact pro forma interest expense by approximately $500 thousand and $375 thousand for the year ended December 31, 2000, and the nine months ended September 30, 2001, respectively. (e) Reflects impairment of unproved leasehold costs acquired under the successful efforts method of accounting. (f) To reflect the tax effect of the pro forma adjustments. The tax effect was calculated using a blended statutory tax rate of 43% for cost and expense items except for interest expense, which was calculated using a blended statutory tax rate of 79% reflecting the deductibility of interest expense in both Canada and the U.S. 6 -----END PRIVACY-ENHANCED MESSAGE-----