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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. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes X No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of January 30, 2004 and as of the last business day of the registrant’s most recently completed second fiscal quarter. Common Stock aggregate market value held by non-affiliates as of January 30, 2004: $10,829,196,847 and as of June 30, 2003: $10,852,397,432.

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 30, 2004, Shares Outstanding: 197,829,683

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 technical industry terms used in this Form 10-K.

Appraisal well is a well drilled in the vicinity of a discovery or wildcat well in order to evaluate the extent and importance of the discovery.

Basin is a synclinal structure in the subsurface that is composed of sedimentary rock and regarded as a good prospect for exploration.

Call options are contracts giving the holder (purchaser) the right, but not the obligation, to buy (call) a specified item at a fixed price (exercise or strike price) during a specified period. The purchaser pays a nonrefundable fee (the premium) to the seller (writer).

Cash-flow hedges are derivative instruments used to mitigate the risk of variability in cash flows from crude oil and natural gas sales due to changes in market prices. Examples of such derivative instruments include fixed-price swaps, fixed-price swaps combined with basis swaps, purchased put options, costless collars (purchased put options and written call options) and producer three-ways (purchased put spreads and written call options). These derivative instruments either fix the price a party receives for its production or, in the case of option contracts, set a minimum price or a price within a fixed range.

Compression is the process of squeezing a given volume of gas into a smaller space.

Completion refers to the work performed and the installation of permanent equipment for the production of natural gas and crude oil from a recently drilled well.

Developed acreage is acreage that is 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 an exploratory or development well that does not produce oil or gas in commercial quantities.

Exploratory well is a well drilled to find and produce oil or gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir, or to extend a known reservoir. Generally, an exploratory well is any well that is not a development well, a service well or a stratigraphic test well.

Fair-value hedges are derivative instruments used to hedge or offset the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. For example, a contract is entered into whereby a commitment is made to deliver to a customer a specified quantity of crude oil or natural gas at a fixed price over a specified period of time. In order to hedge against changes in the fair value of these commitments, a party enters into swap agreements with financial counterparties that allow the party to receive market prices for the committed specified quantities included in the physical contract.

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.

Formation is a strata of rock that is recognizable from adjacent strata consisting mainly of a certain type of rock or combination of rock types with thickness that may range from less than two feet to hundreds of feet.

Gross acres or gross wells are the total acres or wells in which a working interest is owned.

Horizon is a zone of a particular formation or that part of a formation of sufficient porosity and permeability to form a petroleum reservoir.

Infill drilling refers to drilling wells between established producing wells on a lease; a drilling program to reduce the spacing between wells in order to increase production and/or recovery of in-place hydrocarbons from the lease.

Lease operating or well operating expenses are expenses incurred to operate the wells and equipment on a producing lease.

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.

Permeability is a measure of ease with which fluids can move through a reservoir.

Porosity is the ratio of the volume of empty space to the volume of solid rock in a formation, indicating how much fluid a rock can hold.

Production costs are costs incurred to operate and maintain the Company’s wells and related equipment and facilities. These costs include well operating costs, severance taxes and ad valorem taxes.

Production and processing includes direct and indirect expenses, including divisional office expenses, incurred to manage, operate and maintain the Company’s wells and related equipment and facilities.

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 developed reserves are the portion of proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods. For complete definitions of proved natural gas, NGLs and crude oil reserves, refer to the Securities and Exchange Commission’s Regulation S-X, Rule 4-10(a)(2), (3) and (4).

Proved reserves represent estimated quantities of natural gas, NGLs and crude oil 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. For complete definitions of proved natural gas, NGLs and crude oil reserves, refer to the Securities and Exchange Commission’s Regulation S-X, Rule 4-10(a)(2), (3) and (4).

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. For complete definitions of proved natural gas, NGLs and crude oil reserves, refer to the Securities and Exchange Commission’s Regulation S-X, Rule 4-10(a)(2), (3) and (4).

Put options are contracts giving the holder (purchaser) the right, but not the obligation, to sell (put) a specified item at a fixed price (exercise or strike price) during a specified period. The purchaser pays a nonrefundable fee (the premium) to the seller (writer).

Reserve replacement costs are total oil and gas capital costs, including acquisitions, incurred in order to add reserves. Reserve replacement costs per unit are calculated by dividing total oil and gas capital costs, including acquisitions, by the sum of reserve revisions, extensions, discoveries and other additions and acquisitions.

Reserve replacement ratio is calculated by dividing the sum of reserve revisions, extensions, discoveries and other additions and acquisitions by the actual production for the corresponding period.

Reservoir is a porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock and water barriers and is individual and separate from other reservoirs.

Seismic is an exploration method of sending energy waves or sound waves into the earth and recording the wave reflections to indicate the type, size, shape and depth of subsurface rock formation. (2-D seismic provides two-dimensional information and 3-D seismic provides three-dimensional pictures.)

Sour gas is natural gas containing chemical impurities, notably hydrogen sulfide, other sulfur compounds and/or carbon dioxide.

Spacing is the number of wells which conservation laws allow to be drilled on a given area of land.

Swaps are contracts between two parties to exchange streams of variable and fixed prices on specified notional amounts. One party to the swap pays a fixed price while the other pays a variable price.

Sweet gas is natural gas free of significant amounts of hydrogen sulfide or carbon dioxide when produced.

Tight gas is natural gas produced from a formation with low permeability that will not give up its gas readily at high flow rates.

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.

Writer refers to the seller of an option. The writer earns the premium on the option but bears the risk of fulfilling the obligations of the option.

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 asset portfolio, primarily in the U.S. During 2002, the Company sold approximately 1 TCFE of reserves and the Val Verde Plant. As a result of these property sales, the Company generated proceeds, before post closing adjustments, of approximately $1.2 billion. The Company used a portion of the proceeds generated from property sales to retire debt and for general corporate purposes.

In December 2001, the Company consummated the acquisition of Hunter valued at approximately U.S. $2.1 billion, resulting in goodwill of approximately $793 million. This acquisition was funded with cash on hand and 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 producing properties, primarily located in the Western Canadian Sedimentary Basin, an area in which the Company already operated. 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 acquisition added estimated proved reserves of 1.3 TCFE along with approximately two million net undeveloped acres.

In November 1999, BR consummated the acquisition of Poco Petroleums Ltd. valued at approximately $2.5 billion. The transaction was funded through the issuance of 38,393,135 shares of the Company’s Common Stock and was accounted for under the pooling of interests method.

The Company’s reportable segments are U.S., Canada and Other International. For financial information related to the Company’s reportable segments, see Note 17 of Notes to Consolidated Financial Statements. The Company’s worldwide major operating areas are discussed below.

The Company’s asset base is dominated by North American natural gas properties. Its extensive North American lease holdings extend from the U.S. Gulf Coast to the Arctic coast of Canada. The Company’s North American operations include a mix of production, development and exploration assets.

The San Juan Basin, in northwest New Mexico and southwest Colorado, is one of the Company’s major operating areas in terms of reserves and production. The San Juan Basin encompasses nearly 7,500 square miles, or approximately 4.8 million acres, with the major portion located in New Mexico’s Rio Arriba and San Juan counties. 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 almost 7,300 well completions in the San Juan Basin and holds interests in an additional 4,300 non-operated well completions.

In 2003, the Company invested $115 million in oil and gas capital, excluding acquisitions, that included 322 new wells and approximately 585 workovers of existing wells. The Company’s net production from the San Juan Basin averaged approximately 546 MMCF of natural gas per day, 31.3 MBbls of NGLs per day and 1.2 MBbls of crude oil per day during 2003. Production from the San Juan Basin grew significantly during the 1990s, first as a result of Fruitland Coal drilling and then as a result of development of tight gas formations. By the end of the decade, all formations were experiencing some decline. To mitigate Fruitland Coal production decline, the Company has an ongoing program that consists of performing workovers on existing wells, adding compression, and installing artificial lift, where appropriate. The Company also developed 35 BCFE of additional Fruitland Coal reserves by drilling new wells on 320-acre and 160-acre spacing, and added 34 BCFE of proved undeveloped reserves. In 2003, net production from the Fruitland Coal averaged 199 MMCF of natural gas per day from over 1,700 completions.

In 2003, the New Mexico Oil and Gas Conservation Division (NMOCD) granted approval to allow infill drilling on 160-acre spacing in the high-productivity portion of the Fruitland Coal pool. The approval by the NMOCD made available many drilling opportunities that are expected to result in additional production and reserves in San Juan.

Also in 2003, the Company repurchased three production interests in properties related to coalbed methane production. These repurchases added net annualized volumes of 79 MMCF of natural gas per day and 95 BCFE of reserves at a price of approximately $80 million, yielding an average acquisition cost of about $0.84 per MCFE.

The three conventional formations (Mesaverde, Pictured Cliffs and Dakota), located in the San Juan Basin, continue to provide attractive development opportunities for the Company. The Mesaverde formation, which consists of the Lewis Shale, Cliffhouse, Menefee and Point Lookout sands, is the largest producing tight gas formation in the San Juan Basin. In 2003, the Company continued its ongoing infill drilling program in this formation by developing 115 BCFE of reserves. In the Dakota formation, the Company developed 40 BCFE of additional reserves by drilling new wells on 160-acre and 80-acre spacing during 2003 and added 274 BCFE of proved undeveloped reserves. Net production from the tight gas producing formations averaged 347 MMCF of natural gas per day and 31.3 MBbls of NGLs per day.

During the year, the Company continued its cost management efforts in the San Juan Basin. Year-over-year, net operated capital costs for like-kind projects were essentially flat to 2002 as a result of a variety of process improvements. Similarly, lease operating expenses were reduced by $1.5 million from 2002, despite inflationary and operational cost pressures, resulting in unit costs per MCFE being essentially flat to 2002. This was achieved primarily through compression optimization and cost savings for produced water disposal.

The Madden Field, located in the Wind River Basin, covers more than 70,000 acres in Wyoming’s Fremont and Natrona counties. Net production averaged 88 MMCF of natural gas per day in 2003 from multiple horizons ranging in depth from 5,000 feet to over 25,000 feet, where the deep Madison formation occurs. Investments in the Wind River Basin during 2003 totaled $19 million for approximately 56 newly drilled wells and workover projects in the deep Madison and shallower formations. During the summer of 2003, the Company elected to shut-in natural gas production from the deep Madison wells after localized pipe deformations were found during inspection of the field’s high-pressure gathering system. By year end, the Company had completed repairs on four gathering lines, largely restoring production. Two other gathering lines are producing at reduced rates pending further repairs scheduled for mid-2004. In addition, the final gathering line is also expected to be completed at that time. The Company spent $4 million for repairs to the deep Madison gathering system in 2003. The Big Horn #9-4, the last of the planned deep development wells, began producing in mid-November 2003. The Company owns an approximate 50 percent working interest in the Lost Cabin Gas Plant and a 42 percent net revenue interest in the Madison reservoir.

The Williston Basin operations, in western North Dakota and eastern Montana, are primarily focused on the Cedar Creek Anticline. Total Williston Basin production averaged 13 MBbls of crude oil per day and 4 MMCF of natural gas per day. During 2003, the Company invested $66 million on horizontal drilling and workover projects, primarily located in the Cedar Hills South and East Lookout Butte waterflood units.

The Company continued its highly active waterflood development program at the Cedar Hills Unit by drilling 24 wells, extending 33 existing horizontal wells, and increasing water injection volumes. Seven of these newly drilled wells are testing 160-acre infill spacing. This spacing is also being pilot tested in East Lookout Butte and was expanded in 2003 with the addition of 11 wells. These pilots are being monitored to further assess the feasibility of infill drilling on 160-acre spacing to improve the efficiency of the waterflood.

The Anadarko Basin, located principally in western Oklahoma, encompasses over 30,000 square miles and contains some of the deepest producing formations in the world. The Company controls over 250,000 net acres and produces from multiple horizons ranging in depth from 11,000 feet to over 21,000 feet. Net production for 2003 from the Anadarko Basin averaged 78 MMCF of natural gas per day and 0.4 MBbls of NGLs per day. During 2003, the Company invested $27 million in the Anadarko Basin. Operated activity focused on the Red Fork formation in Roger Mills County, Oklahoma where the Company drilled 19 wells.

Permian Basin operations, in west Texas, are focused on the Waddell Ranch Field. Total Permian Basin production in 2003 averaged 15 MMCF of natural gas per day, 3.5 MBbls of crude oil per day and 1.6 MBbls of NGLs per day, with the Waddell Ranch Field contributing 11 MMCF of natural gas per day, 2.8 MBbls of crude oil per day and 1.6 MBbls of NGLs per day. During 2003, the Company invested $9 million in Permian Basin operations.

The Fort Worth Basin of north central Texas had a significant increase in activity in 2003 for the Company following the 2002 acquisition of a largely undeveloped Barnett Shale formation acreage position in Denton County, Texas. Net volumes increased from 18 MMCF of natural gas per day, 0.3 MBbls of NGLs per day and 0.3 MBbls of crude oil per day at the beginning of the year to 34 MMCF of natural gas per day, 4.1 MBbls of NGLs per day and 1.1 MBbls of crude oil per day at year end. The Company employed up to nine rigs during the year to drill 163 wells in the Barnett Shale formation including a two-well pilot program to test horizontal well technology. The Company invested $90 million in 2003 with production averaging 28 MMCF of natural gas per day, 2.1 MBbls of NGLs per day and 0.7 MBbls of crude oil per day.

The Onshore Gulf Coast includes a number of drilling trends in south Louisiana, as well as 660,000 acres of fee lands where the Company owns the mineral rights and surface lands. In 2003, the Company invested $75 million in 52 drilling, workover and facilities projects in south Louisiana. Net production for 2003 averaged 94 MMCF of natural gas per day, 6.6 MBbls of crude oil per day and 1.2 MBbls of NGLs per day.

In the Western Canadian Sedimentary Basin, the Company’s portfolio of opportunities includes conventional exploration and development in Alberta, British Columbia and Saskatchewan, as well as frontier exploration in the Mackenzie Delta in the Northwest Territories.

Canadian activity in 2003 focused on production growth, reserve additions and cost control on the integrated assets acquired since 1999 by expanding original activity into large-scale repeatable drilling programs in conventional and lower permeability reservoirs. Oil and gas capital investment in Canada was $679 million, including acquisitions, and resulted in the completion of 737 gross wells.

The Deep Basin area, in Alberta and British Columbia, consists of the Elmworth, Wapiti, Noel and Brassey Fields. The Company acquired interests in 84,000 acres of mineral rights through Crown Land sales in Alberta and British Columbia. This included approximately 40,000 acres in the Brassey area to extend drilling activity in the tight gas trend. In 2003, a $256 million oil and gas capital program was focused on exploration and development in the Deep Basin area. As a result, 180 wells were drilled and 233 MMCF of natural gas per day and 15.6 MBbls of NGLs per day were produced from this area, representing a 12 percent increase year over year.

In the Deep Basin, the 2003 program focused on continued exploitation of tight gas reservoirs in the Cadomin and Chinook formations. Regulatory approval to reduce well spacing in the Cadomin from 640-acres to 320-acres was expanded from a 33-section area at the start of the year to 83 sections, with an additional 32 sections pending final regulatory approval. As a result of the down-spacing approvals, the Company drilled 28 infill wells in the Cadomin formation in the Elmworth area and 19 infill wells in the Chinook formation.

The O’Chiese and Whitecourt areas in central Alberta yielded 2003 production of 226 MMCF of natural gas per day, 8.9 MBbls of NGLs per day and 2.7 MBbls of crude oil per day. The O’Chiese and Whitecourt areas were the focus of a $156 million exploration and development program in 2003 that mostly targeted the Lower Cretaceous and Jurassic sands, the principal historical targets. A total of 168 wells were drilled, including 26 wells in shallow gas formations.

The Company continued exploration and development activities in the greater Ring Border area on the border of northern Alberta and British Columbia. Production in this area during 2003 averaged 111 MMCF of natural gas per day and 1.9 MBbls of NGLs per day. A capital program in this area of $72 million targeted the Bluesky, Gething and Montney formations and 101 wells were drilled. This included 19 wells that extended the Gutah discovery west of the Ring Border Unit. The Kahntah Field, lying northwest of the Ring Border Field, was also brought on-stream to the existing Ring Border plant.

In the Kaybob area, production for the year averaged 69 MMCF of natural gas per day and 0.7 MBbls of NGLs per day. This represents production growth of 54 percent over 2002. During 2003, the Company invested $78 million, drilled 59 wells in the Lower Cretaceous formation and expanded the wholly owned Berland River gas processing plant.

The Viking Kinsella property produced approximately 87 MMCF of natural gas per day in 2003, a 42 percent increase over 2002. An additional 79 wells were drilled on the property in 2003. The infrastructure was expanded with the purchase of a gas processing plant at Scoville Lake and the construction of a new gas processing plant at Vernon Lake.

In the MacKenzie Delta, a successful exploration well was drilled at the Langley K-30 location resulting in a discovery from the Eocene Taglu formation.

The Company’s Other International operations include a combination of exploration projects, large field development projects and production operations. Key focus areas are Northwest Europe, North Africa, China and South America.

Operations in Northwest Europe provided the majority of the Company’s production outside of North America during 2003, from assets in the East Irish Sea and in the Dutch sector of the North Sea.

The East Irish Sea assets consist of eight licenses covering 249,000 acres. The Company has a 100 percent working interest in seven operated gas fields. First production from two sweet gas fields, Millom and Dalton, commenced in 1999. A new sub-sea well was completed during mid-2003, bringing the total number of producing wells in the Millom and Dalton Fields to nine. Net production from the East Irish Sea averaged 96 MMCF of natural gas per day during 2003. The Company invested $218 million of capital in this area, including $108 million of oil and gas capital.

In 2003, the development of the sour gas fields in the East Irish Sea continued with first production planned by mid-2004. During 2003, three production wells were completed from the offshore platform and tested at a combined rate of over 180 MMCF of natural gas per day. The pipeline transporting gas from these offshore facilities was also completed during 2003 and construction work continued on the new onshore terminal that will process the sour gas prior to sale.

The Company’s remaining Northwest European shelf operations consist of non-operated production from the CLAM venture in the Dutch offshore sector. During the second quarter of 2003, the Company acquired the remaining 50% interest in CLAM for a purchase price of approximately $100 million (including cash acquired at closing of $25 million). The CLAM assets yielded an annual production rate of 43 MMCF of natural gas per day in 2003.

In North Africa, the Company continued with its exploration and development programs in both Algeria and Egypt. In Algeria, on Block 405a Menzel Lejmat North, in which the Company has a 65 percent working interest, activity was primarily focused on bringing on line the Company-operated MLN central processing facility for crude oil production. Operated crude oil production into the processing plant commenced in July 2003. Net production to the Company in July 2003 was 4.9 MBbls of crude oil per day and increased to 12.4 MBbls of crude oil per day in December 2003. Net annual production from the MLN property averaged 3.9 MBbls of crude oil per day. In December 2003, production from the MLN satellite fields in Block 405a: MLW; MLNW; KMD and MLC commenced, accounting for the higher year-end production. The Company’s capital investments in this area in 2003 totaled $71 million.

The Ourhoud Field, in which the Company has a 3.7 percent working interest, produced throughout the year. Some operational difficulties with crude oil export pumps prevented the field from producing at its targeted rate until the final few weeks of the year. During 2003, net production was 4.1 MBbls of crude oil per day.

During early 2003, the final required exploration well in Block 405a, MLSE-8, was drilled. This well was a minor natural gas discovery in shallow zones. However, a subsequent test of deeper horizons for producible hydrocarbons failed to flow. The well has been suspended, pending possible future use in a gas development. Subsequent to drilling the MLSE-8 well, a final relinquishment of non-development areas in Block 405a was submitted to Sonatrach, the Algerian national oil company, and awaits finalization.

In the Akfadou PSC, Block 402d, in which the Company has a 75 percent working interest, seismic interpretation was completed and locations were agreed upon for the two commitment exploration wells required under the contract.

In Egypt, where the Company has a 50 percent non-operated working interest in the Offshore North Sinai permit, an appraisal well, Tao-2, was drilled. The well did not find producible hydrocarbons and was abandoned as a dry hole. Plans continue for the Offshore North Sinai gas project and discussions have continued with the Egyptian authorities on timing and the location for the related onshore facilities for that project.

In the Far East, the Company continued its focus on selected basins in China. An offshore oil development project started production in 2003, and an onshore gas development program is in its early phase working toward long-term expansion. The Company is also targeting opportunities to add to its existing leasehold position. The Company invested $44 million in China in 2003.

During the year, fabrication on the Panyu offshore oil development project in the Pearl River Mouth Basin of the South China Sea was completed with installation and commissioning of all components. The Panyu development involves two offshore oil fields, Bootes and Ursa, located in Block 15/34, in which the Company holds a 24.5 percent working interest. First production was achieved in October 2003 and production rapidly increased thereafter. In December 2003, the average net production was 11.1 MBbls of crude oil per day, with net production for the year of 1.2 MBbls of crude oil per day.

The Company holds a 100 percent working interest in the onshore Chuanzhong Block in the Sichuan Basin, a natural gas project currently at the end of the appraisal phase. The project represents an opportunity to apply the Company’s expertise in the development of tight gas reservoirs in an area with substantial reserve potential. Three appraisal wells were drilled in 2003 and completion of the appraisal program and initiation of development is expected to occur in 2004. During 2003, net production in this area was 4 MMCF of natural gas per day.

The Company’s efforts in South America during 2003 focused on expanding near-term production potential and enhancing long-term exploration opportunities. Net production from South America averaged 2.8 MBbls of crude oil per day and 24 MMCF of natural gas per day. The Company invested $43 million of capital in South America during the year.

In Ecuador, the Company holds a 30 percent working interest in Block 7 and a 37.5 percent working interest in Block 21. Phase I development of the Yuralpa Field in Block 21 was completed with first production achieved during December 2003. One development well was successfully drilled in Block 7 during 2003. The Oso well was deepened to an untested target, which resulted in a new field discovery in the Hollin formation. Testing of the well was ongoing at

In Argentina, the Company holds a 25.7 percent working interest in the Sierra Chata concession in the Neuquen Basin. This asset has a net sales capacity of 45 MMCF of natural gas per day from 39 producing wells. During 2003, natural gas sales were curtailed due to low gas prices in Argentina, with the Company’s net production averaging only 24 MMCF of natural gas per day. Deferrals of capital programs and a close focus on operating costs have helped mitigate the economic impact of the poor market conditions over the last two years. Market conditions exhibited signs of improvement at year-end 2003.

Elsewhere in South America, the Company entered into an agreement to acquire a 23.9 percent working interest in Peru’s Block 90, located 100 kilometers north of the Camisea area in the Ucayali Basin. This block was re-configured from the previously held Block 34/35 concessions. Also in Peru, field geologic studies and a 2-D seismic acquisition program were completed in Block 87 in which the Company holds a 70 percent working interest that could be relinquished in 2004. In Colombia, the Company signed an exploration contract with Ecopetrol for a 100 percent interest in the Orquidea area.

Drilling activity in 2003 was principally in the Western Canadian Sedimentary, San Juan, Onshore Gulf Coast, Ft. Worth, Permian, Anadarko, Wind River and Williston Basins. The following table sets forth the Company’s net productive and dry wells.

As of December 31, 2003, 110 gross wells, representing approximately 73 net wells, were being drilled.

Working interests in developed and undeveloped acreage at December 31, 2003 follow.

In 2003, worldwide capital expenditures related to oil and gas activities were $1,585 million and included 67 percent associated with development, 19 percent for exploration and 14 percent for proved property acquisitions. Exploration costs expensed under the successful efforts method of accounting are included in capital expenditures for oil and gas activities.

The Company’s average daily production represents its net ownership and includes royalty interests and net profit interests owned by the Company. The Company’s average daily production and average sales prices follow.

The Company’s production unit costs follow. Production costs include production taxes and well operating costs.

The following table sets forth estimates by the Company’s petroleum engineers of proved natural gas, NGLs and crude oil reserves at December 31, 2003. These reserves have been prepared in accordance with the Securities and Exchange Commission’s regulations. These reserves have been reduced for royalty interests owned by others.

Miller and Lents, Ltd. and Sproule Associates Limited, independent oil and gas consultants, have reviewed the estimates of proved reserves of natural gas, crude oil and NGLs that the Company attributed to its net interests in oil and gas properties as of December 31, 2003. Miller and Lents, Ltd. reviewed the reserve estimates for the Company’s U.S. and international interests (excluding Canada and Argentina) and Sproule Associates Limited reviewed the Company’s interests in Canada and Argentina. Based on their review of more than 80 percent of the Company’s reserve estimates, it is their judgment that the estimates are reasonable in the aggregate. For more information, see independent oil and gas consultants letters on page 63.

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.”

Competition— The Company actively competes for reserve acquisitions, exploration leases and sales of natural gas and crude oil, frequently against companies with substantially larger financial and other resources. In its marketing activities, the Company competes with numerous companies for the sale of natural gas, crude oil and NGLs. Competitive factors

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. However, based on current standards concerning transportation and storage activities and any proposed or contemplated standards, the Company believes that the impact of such standards is not material to the Company’s operations, capital expenditures or financial position. Compliance with such standards has been incorporated by the Company in its operations over many years and no material capital expenditures are allocated to such compliance.

All of the Company’s sales of its domestic natural gas are currently deregulated, although governmental agencies 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, the Company’s international operations are subject to environmental regulations administered 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.

The environmental laws and regulations applicable to the Company and its operations include, among others, the following United States federal laws and regulations:


•	Clean Air Act, and its amendments, which governs air emissions;

•	Clean Water Act, which governs discharges to waters of the United States;

•	Comprehensive Environmental Response, Compensation and Liability Act, which imposes liability where hazardous releases have occurred or are threatened to occur;

•	Resource Conservation and Recovery Act, which governs the management of solid waste;

•	Oil Pollution Act of 1990, which imposes liabilities resulting from discharges of oil into navigable waters of the United States;

•	Emergency Planning and Community Right-to-Know Act, which requires reporting of toxic chemical inventories;

•	Safe Drinking Water Act, which governs the underground injection and disposal of wastewater; and

•	U.S. Department of Interior regulations, which impose liability for pollution cleanup and damages.

In addition, many states and foreign countries where the Company operates have similar environmental laws and regulations covering the same types of matters. In Canada, environmental compliance is governed by various statutes, regulations and codes promulgated at different levels of government including the federal Fisheries Act and Canadian Environmental Protection Act; and provincially, the Environmental Protection and Enchancement Act, the Oil and Gas Conservation Act and the Pipeline Act in the province of Alberta; and the Waste Management Act, the Environmental Assessment Act and the Environment Management Act in the province of British Columbia.

The Company routinely obtains permits for its facilities and operations in accordance with these applicable laws and regulations on an ongoing basis. There are no known issues that have a significant adverse effect on the permitting process or permit compliance status of any of the Company’s facilities or operations.

The ultimate financial impact of these environmental laws and regulations is neither clearly known nor easily determined as new standards continue to evolve. Environmental laws and regulations are expected to have an increasing impact on

the Company’s operations in the United States and in most countries in which it operates. Potential permitting costs are variable and directly associated with the type of facility and its geographic location. Costs, for example, may be incurred for air emission permits, spill contingency requirements, and discharge or injection permits. These costs are considered a normal, recurring cost of the Company’s ongoing operations and not an extraordinary cost of compliance with government regulations.

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 maintains insurance coverage for spills, pollution and certain other environmental risks, although it is not fully insured against all such risks. The insurance coverage maintained by the Company provides for the reimbursement to the Company of costs incurred for the containment and clean-up of materials that may be suddenly and accidentally released in the course of the Company’s operations. 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 and as with other companies engaged in similar businesses, environmental costs and liabilities are inherent in the Company’s operations, there can be no assurance that material costs and liabilities will not be incurred in the future.

Filings of Reserve Estimates With Other Agencies— During 2003, the Company filed estimates of its oil and gas reserves for the year 2002 with the Department of Energy. These estimates differ by 5 percent or less from the reserve data presented. For information concerning proved natural gas, NGLs and crude oil reserves, see page 70.

The Company had 2,111 and 2,003 employees at December 31, 2003 and 2002, respectively. At December 31, 2003, the Company had no union employees.

The Company’s Web site address is www.br-inc.com. The Company makes available free of charge on or through its Web site, its annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after such material is electronically filed with, or furnished to, the United States Securities and Exchange Commission. Such reports, which include the Company’s annual and quarterly financial statements, are also filed in Canada on the System for Electronic Document Analysis and Retrieval (SEDAR) and are also available to the Company’s stockholders, including those residing in Ontario, Canada, from the Company upon request at no charge.

No matters were submitted to a vote of Burlington Resources Inc.’s security holders during the fourth quarter of 2003.

Bobby S. Shackouls, 53— Chairman of the Board, President and Chief Executive Officer, Burlington Resources Inc., July 1997 to present.

Randy L. Limbacher, 45— Office of the Chairman, Burlington Resources Inc., January 2004 to present. Executive Vice President and Chief Operating Officer, Burlington Resources Inc., December 2002 to present. Senior Vice President, Production, Burlington Resources Inc., April 2001 to December 2002. President and Chief Executive Officer, BROG GP Inc., general partner of Burlington Resources Oil & Gas Company LP, December 2000 to July 2001. President and Chief Executive Officer, Burlington Resources Oil & Gas Company, July 1998 to December 2000.

Steven J. Shapiro, 51— Office of the Chairman, Burlington Resources Inc., January 2004 to present. Executive Vice President and Chief Financial Officer, Burlington Resources Inc., December 2002 to present. Senior Vice President and

L. David Hanower, 44— Senior Vice President, Law and Administration, Burlington Resources Inc., July 1998 to present.

John A. Williams, 59— 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.

The Company’s common stock, par value $.01 per share (Common Stock) is traded on the New York Stock Exchange under the symbol “BR” and on the Toronto Stock Exchange under the symbol “B.” At December 31, 2003, the number of record holders of Common Stock was 12,631. Information on Common Stock prices and quarterly dividends is shown on page 73 under the subheading “Quarterly Financial Data—Unaudited.” See also “Equity Compensation Plan Information” under Part III, Item 12 of this report.

The selected financial data for the Company set forth below for the five years ended December 31, 2003 should be read in conjunction with the consolidated financial statements and accompanying notes thereto.


(1)	Year 2003 includes an adjustment of $203 million or $1.02 per share related to the Canadian federal income tax rate reduction.

(2)	Year 2003 includes a cumulative effect of change in accounting principle (Cumulative Effect) loss of $0.30 related to the adoption of Statement of Financial Accounting Standards (SFAS) No. 143, Asset Retirement Obligations. Year 2001 includes a Cumulative Effect gain of $0.01 related to the adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is one of the largest independent exploration and production companies in North America. The Company explores for, develops and produces natural gas, NGLs and crude oil, primarily from its properties located in the Rocky Mountain natural gas fairway of North America, complemented by several key international projects. The Company’s North American activities are concentrated in areas with known hydrocarbon resources, which are conducive to large, multi-well, repeatable drilling programs and the Company’s technical skills. Internationally, the Company is focused on the start-up and delivery of several key projects.

Basin Excellence^SM is the Company’s concept of concentrating its operations and expertise in core areas where it believes it holds significant competitive advantages. These areas are typically in high potential geologic basins with large crude oil and natural gas resources that support multiple-year development programs. These are also areas where the Company holds significant land or mineral interest positions, has teams with years of relevant geologic, geophysical, engineering and operational experience, has access to production, processing and gathering infrastructure and has excellent relations with partners, suppliers and land and mineral interest owners. The Company believes that it has attained or will ultimately attain this stature in several areas throughout the world that currently represent the majority of its core assets. These assets traditionally yield high returns on investment, and, therefore, the Company has concentrated its activities in these areas and exited other areas that did not meet these standards.

The Company has adopted a very disciplined capital allocation process, with the objective of achieving volumetric growth (in the range of three to eight percent as a long-term annual average) coupled with strong financial returns.

In managing its business, the Company must deal with numerous risks and uncertainties. These risks and uncertainties can be broadly categorized as: “subsurface,” which includes the presence, size and recoverability of hydrocarbons; “regulatory,” which includes access and permitting necessary to conduct its operations; “operational,” which includes logistical, timing and infrastructure issues, especially internationally, which is often beyond the Company’s control, and “commercial,” which includes commodity price volatility, local price differentials in its various areas of operations and attention to operating margins. Each of these factors is challenging and highly variable.

To address subsurface risks, the Company utilizes most of the latest technological tools available to assess and mitigate these risks. These tools include, but are not limited to, modern geophysical data and interpretation software, petrophysical information, physical core data, production histories, paleontology data and satellite imagery. In spite of these technologies, the multitude of unknown variables that exist below the surface of the earth make it difficult to consistently and accurately predict drilling results. The Company has put considerable emphasis in recent years on creating an asset portfolio that improves the reliability of those predictions; however, these types of operations tend to exploit or develop smaller quantities of hydrocarbon reserves and, as a result, the Company must develop more of these opportunities in order to maintain production. Similarly, the Company has reduced its focus on areas where there is far less analytical data available and drilling outcomes are less predictable, such as wildcat exploration operations in sparsely explored areas. The Company is constantly assessing its drilling opportunities to achieve balance in its drilling program for risk and financial returns. In order to make this possible, the Company attempts to maintain a large inventory of drillable projects from which its technical and management teams can select a drilling program in any given period.

On regulatory and operational matters, the Company actively manages its exploration and production activities. The Company values sound stewardship and strong relationships with all stakeholders in conducting its business. The Company attempts to stay abreast of emerging issues to effectively anticipate and manage potential impacts to the Company’s operations.

At the Company, managing the commercial risks is an ongoing priority. Considerable analysis of historical price trends, supply statistics, demand projections and infrastructure constraints form the basis of the Company’s outlook for the commodity prices it may receive for its future production. Because much of this data is very dynamic, the Company’s view and the market’s view of future commodity pricing can change rapidly. Based on the Company’s ongoing assessment of the underlying data and the markets, the Company will from time to time use various financial tools to hedge the price it will receive for a particular commodity in the future. The primary purpose of these activities is to provide for sector leading financial returns on the significant investments that the Company makes annually to replenish its productive base and grow its reserves while leaving as much commodity price upside as possible for the Company’s stockholders. Margin enhancement is another important element of the Company’s business, including attention to cash operating and administrative costs and marketing activities, such as securing transportation to alternative market hubs to protect against weak producing-area prices. The Company may also enter into transportation agreements that allow the Company to sell a portion of its production in alternative markets when local prices are weak.

All of the risks and uncertainties described above create opportunities in the exploration and production business to the extent they drive the relative valuations of three distinct asset classes in the business. The first asset class is the

commodities themselves—natural gas, NGLs and crude oil. The prices for this asset class are generally established by the purchasers of these commodities, but closely track the prices that are set through the public trading of futures contracts for those same commodities. The second asset class consists of the physical oil and gas properties that may contain proved, probable and possible reserves as well as exploratory potential. The value of physical assets are usually established in a private market created by a willing seller and a willing buyer of a given property or group of properties. The third asset class consists of the equities of the publicly traded exploration and production companies that are valued in the public market place daily. Because these three asset classes are not always valued consistently with each other, opportunities may exist from time to time to take advantage of these various valuation differences. These valuation differences are key to the Company’s capital allocation philosophy.

At the Company, there are three types of investment alternatives that constantly compete for available capital. These include drilling opportunities, acquisition opportunities and financial alternatives such as share repurchases, dividends and debt repayment. Depending on circumstances and the relative valuations of the asset classes described above, the Company allocates capital among its investment alternatives which is an allocation approach that is rate-of-return based. Its goal is to ensure that capital is being invested in the highest return opportunities available at any given time.

Much of what has been described above is conducted and handled routinely. The ability of the Company’s management and staff to take into account all relevant factors, which fluctuate constantly, will be a key determinant in the Company’s future performance.

The Company’s business model strives to achieve both production growth and sector-leading financial returns when compared to other independent oil and gas exploration and production companies. This model requires the continuous development of natural gas and crude oil reserves to fuel growth, while maintaining a rigorous focus on cost structure and capital efficiency.

Key to achieving the Company’s financial goals is its disciplined capital investment approach. The Company deploys the net operating cash flows it generates among its core capital programs, as well as acquisitions and other financial uses, such as share repurchases and dividend payments. Although commodity prices are volatile, the Company generally does not favor increasing or decreasing its capital program in response to commodity prices. Instead, the Company seeks to exercise a disciplined approach in order to keep its cost structure as low as possible.

The Company expects to continue focusing on exploring for and producing North American natural gas as its primary business. As of year-end 2003, about 90 percent of the Company’s natural gas and crude oil production was in North America. While the Company’s management recognizes that the North American natural gas business has many characteristics of a mature, slow-growth business, it believes that finding or acquiring and producing North American natural gas will continue to be a profitable, high-return business for the Company due to certain unique advantages that position it to be successful. First, the Company has long-lived asset positions in gas resource-prone basins. Secondly, the Company has production decline rates that it believes are lower-than-industry-averages. In addition, the Company focuses heavily on maintaining a competitive cost structure. Finally, the Company employs a capital allocation approach that favors discipline and balance.

The Company’s international business segment is less mature, but is currently undergoing a significant growth phase following several years of major project development. As a result, the international business is expected to represent about 15 percent of the Company’s natural gas and crude oil production in 2004 and remain at a level of 15 percent to 20 percent for the foreseeable future. A discussion of the Company’s reserve replacement costs and capital expenditures follow.

Finding and developing sufficient amounts of natural gas and crude oil reserves at economical costs are critical to the Company’s long-term success. In 2003, the Company’s reserve replacement costs were $1.23 per MCFE excluding acquisitions or $1.19 per MCFE including acquisitions. The Company replaced 142 percent of its worldwide production from all sources and 118 percent of its worldwide production excluding acquisitions during 2003.

In 2004, the Company expects to spend approximately $1.5 billion of capital for oil and gas activities, excluding acquisitions. This level is roughly the same as recent years and represents the level of investment the Company believes is needed in each of the next few years to achieve its stated target of three to eight percent average annual production growth. Approximately 85 percent of the Company’s 2004 capital program is allocated to its North American programs in Canada and the U.S. This represents an increase of approximately 10 percent from prior years, primarily due to the fact that significant international project development spending was largely completed in 2003. In North America, in 2004 the Company is allocating a higher percentage of its capital investment to the U.S. given the higher Canadian service costs and the weakening of the U.S. dollar. Below is a discussion of the Company’s production growth.

The Company has a goal to achieve between three and eight percent average annual production growth. In 2003, production volumes were 2,567 MMCFE per day, essentially flat to 2002’s volumes. However, when considering production volumes related to assets that were retained following the 2002 divestiture program, production volumes increased about 10 percent compared to 2002. In 2004, the Company expects production volumes to average between 2,665 and 2,879 MMCFE per day. This production growth is expected to be driven by steady production growth in North America and accelerating production growth from several international projects.

In 2004, the Company expects production growth in Canada as a result of the investment in its large repeatable development programs, such as in the Deep Basin. In the U.S., the Company expects production growth as a result of restoring full production at the Madden Field by mid-year 2004, as well as increased production from Cedar Creek, Barnett Shale and south Louisiana drilling programs. Internationally, the Company expects to maintain production in Algeria, increase production in offshore China, and initiate start-up of the sour gas fields in the East Irish Sea by mid-year 2004.

While these activities are subject to the risks and delays inherent to this business as discussed above, the Company believes that these sources of production growth are currently available and is now focused on identifying sources of production growth for the future.

In addition to the Company’s production growth goal, it is committed to generating sector-leading returns on capital employed when compared to other independent oil and gas exploration and production companies. While commodity prices play a very significant role in the Company’s financial returns, the Company focuses on controllable elements such as certain operating costs. In 2004, the Company expects to keep its operating and administrative costs about the same as 2003 on a per unit of production basis. However, it expects depletion and depreciation expense to increase about 10 to 15 percent in 2004, compared to 2003, as a result of rate changes related to Canadian and other international properties and unfavorable exchange rate impacts. Other costs could also increase as a result of unfavorable exchange rate impacts in Canada. Although subject to the upward cost pressures generally experienced by

the industry, the Company believes it can differentiate its performance from that of its peers as a result of several initiatives underway to maintain its diligence on costs, specifically in the areas of purchasing, continuous process improvement, and knowledge transfer. The Company will continue to focus on capital efficiency and cost control.

Commodity prices are impacted by many factors that are outside of the Company’s control. Historically, commodity prices have been volatile and the Company expects them to remain that way in the future. Commodity prices are affected by changes, including but not limited to, supply, market demands, overall economic activity, weather, pipeline capacity constraints, inventory storage levels, basis differentials and other factors. As a result, the Company cannot accurately predict future natural gas, NGLs and crude oil prices, and therefore, it cannot determine what impact increases or decreases in production volumes will have on future revenues or net operating cash flows. However, based on average daily natural gas production in 2003, the Company estimates that a $0.10 per MCF change in natural gas prices would have an impact on annual revenues of approximately $69 million. Also, based on average daily crude oil production in 2003, the Company estimates that a $1.00 per barrel change in crude oil prices would have an impact on annual revenues of approximately $17 million.

While it is difficult to predict future plans with respect to acquisitions, the Company actively seeks acquisition opportunities that build upon the Company’s existing core asset basins and conform to its Basin Excellence^SM concept. Although the Company does not plan major acquisitions, they play a large role in this industry’s consolidation and must be considered. Generally, acquisitions for the Company fall into one of two categories: bolt-on transactions and other acquisitions. Bolt-on transactions are usually relatively small and involve acquiring properties and assets in areas where the Company already controls a core position. Other acquisitions tend to be transactions that involve the Company acquiring a core position in an area where it either has no position or a relatively small position. In either case, the purpose of acquiring assets is to assist the Company in adding to its existing inventory of future growth opportunities. Depending on the commodity price environment at any given time, the property acquisition market can be extremely competitive. Because of its focus on sector-leading financial returns, the Company takes a very disciplined approach to property acquisitions, making it very difficult to predict the number and frequency of future transactions.

The Company’s total debt to total capital (total capital is defined as total debt and stockholders’ equity) ratio at December 31, 2003 and December 31, 2002 was 41 percent and 51 percent, respectively. In December 2003, the Company retired Canadian $100 million (U.S. $75 million) of 6.40% Notes. The 20 percent reduction in total debt to total capital was attributable to the Company’s strong net income, coupled with the strength of the Canadian currency and the retirement of debt partially offset by the repurchase of Common Stock. Based on the current price environment, the Company believes that it will generate sufficient cash from operating activities to fund its 2004 capital expenditures, excluding any potential major acquisition(s). At December 31, 2003, the Company had $757 million of cash and cash equivalents on hand.

Burlington Resources Capital Trust I, Burlington Resources Capital Trust II (collectively, the Trusts), BR and Burlington Resources Finance Company (BRFC) have a shelf registration statement of $1,500 million on file with the Securities and Exchange Commission. Pursuant to the 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 2001, the Company’s Board of Directors authorized the Company to redeem, exchange or repurchase up to an aggregate of $990 million principal amount of debt securities.

The Company had credit commitments in the form of revolving credit facilities (Revolvers) as of December 31, 2003. The Revolvers are comprised of agreements for $600 million, $400 million and Canadian $390 million (U.S. $300 million). The $600 million Revolver expires in December 2006 and the $400 million and Canadian $390 million Revolvers expire in December 2004 unless renewed by mutual consent. The Company has the option to convert any remaining balances on the $400 million and Canadian $390 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). The Revolvers are available to cover debt due within one year. Therefore, commercial paper, if any, credit facility notes and fixed-rate debt due within one year are generally classified as long-term debt. At December 31, 2003, there were no amounts outstanding under the Revolvers and no outstanding commercial paper.

Net cash provided by operating activities in 2003 increased $990 million and $433 million over 2002 and 2001, respectively, primarily due to higher commodity prices. Key drivers of net operating cash flows are commodity prices, production volumes and operating costs. Average natural gas prices increased 51 percent and 20 percent over 2002 and 2001, respectively, while NGLs prices increased 41 percent and 22 percent over the same period. Production volumes were essentially flat to 2002 but up 8 percent over 2001. While the Company believes that 2004 production will exceed 2003 levels, the Company is unable to predict future commodity prices, and as a result cannot provide any assurance about future levels of net cash provided by operating activities. See page 17 for a discussion of commodity prices.

Generally, producing natural gas and crude oil reservoirs have declining production rates. Production rates are impacted by numerous factors, including but not limited to, geological, geophysical and engineering matters, production curtailments and restrictions, weather, market demands and the Company’s ability to replace depleting reserves. The Company’s inability to adequately replace reserves could result in a decline in production volumes, one of the key drivers of generating net operating cash flows. The Company’s reserve replacement ratio for the year ended December 31, 2003 was 142 percent and has averaged 187 percent over the last three years. Results for any year are a function of the success of the Company’s drilling program and acquisitions. While program results are difficult to predict, the Company’s current drilling inventory provides the Company opportunities to replace its production in 2004.

The Company has various commitments primarily related to leases for office space, other property and equipment and demand charges on firm transportation agreements for its production of natural gas and crude oil. The Company expects to fund these commitments with cash generated from operations. The following table summarizes the Company’s contractual obligations at December 31, 2003.


(1)	See Note 9 of Notes to Consolidated Financial Statements for details of long-term debt.
(2)	See Note 14 of Notes to Consolidated Financial Statements for discussion of these commitments.
(3)	The Company expects to contribute $11 million to its U.S. pension plans in 2004. See Note 13 of Notes to Consolidated Financial Statements for discussion of the Company’s pension plans.

The Company also has liabilities of $28 million related to postretirement benefits on its Consolidated Balance Sheet at December 31, 2003. Due to the nature of these benefits, the Company cannot determine precisely when the payments will be made for these benefits. See Note 13 of Notes to Consolidated Financial Statements for discussion of postretirement benefits.

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 long-term natural gas 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, 2003, the aggregate unfavorable mark-to-market position under the aforementioned hedging agreements was approximately $13 million. A rating change would have had no impact on the Company related to the natural gas purchase agreement since the mark-to-market position under such agreement 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 $31 million as of December 31, 2003.

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 for site restoration and dismantlement, royalty payment appeals and exploration and development 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 10.17, 10.18 and 10.28 to this Form 10-K.

In December 2000, the Company’s Board of Directors authorized the repurchase of up to $1 billion of the Company’s Common Stock. Through April 30, 2003, the Company had repurchased $816 million of its Common Stock under the program authorized in December 2000. In April 2003, the Company’s Board of Directors voted to restore the authorization level to $1 billion effective May 1, 2003.

During 2003, the Company repurchased approximately 7 million shares of its Common Stock for approximately $361 million and, as of December 31, 2003, had authority to repurchase an additional $762 million of its Common Stock under the current authorization. As of December 31, 2003, $5 million of the share repurchases were not cash settled during the period. Since December 2000, the Company has repurchased approximately 24 million shares or $1 billion of its Common Stock.

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.

The Company has off-balance sheet arrangements that it believes have not and are not reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. 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 Evangeline Gas Pipeline Company (Evangeline) are $16 million and $2 million, respectively. As of December 31, 2003, Lost Creek had outstanding debt totaling $48 million and Evangeline had outstanding debt totaling $38 million. Lost Creek and Evangeline’s debts are non-recourse to the Company, and as a result, the Company has no legal responsibility or obligation for these debts. Management believes that Lost Creek and Evangeline are financially stable and therefore will be in a position to repay their outstanding debts.

The Company’s consolidated capital expenditures were down 3 percent and 48 percent compared to 2002 and 2001, respectively. Year 2001 includes the Hunter acquisition. The Company utilizes a disciplined approach to capital spending. Excluding acquisitions, the Company’s capital spending related to internal development and exploration is up 36 and 25 percent compared to 2002 and 2001, respectively. However, at the current capital spending levels, the Company believes that spending is sufficient to add adequate reserves and achieve the target of three to eight percent

average annual production growth. Capital expenditures in 2004, excluding proved property acquisitions, are expected to be approximately $1.5 billion, essentially the same as 2003. Capital expenditures in 2004 are expected to be primarily for internal development and exploration of oil and gas properties. Capital spending in 2004 related to internal development and exploration is expected to be about 3 percent higher than 2003. Capital expenditures are expected to be funded from internally generated 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 asset portfolio primarily in the U.S. During 2002, the Company completed the sale of the Val Verde Plant (Val Verde) and certain non-core, non-strategic properties that consisted of high cost structure, high production volume decline rates and limited growth opportunities. As a result of these property sales, the Company generated proceeds, before post closing adjustments, of approximately $1.2 billion and recognized a net pretax gain of $68 million. The producing properties that were sold during 2002 contributed approximately 230 MMCFE and 458 MMCFE per day during the years 2002 and 2001, respectively. The Company used a portion of the proceeds generated from property sales to retire debt and for general corporate purposes.

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.

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.

Substantially all of the Company’s natural gas, NGLs and crude oil production is sold on the spot market or under short-term contracts at market sensitive prices. Spot market prices for domestic natural gas and crude oil 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 North America producing basin or at a North America market hub, which is referred to as the “basis differential.” Basis differentials can vary widely depending on various factors, including but not limited to, local supply and demand.

On January 1, 2001, the Company adopted Statement of Financial Accounting Standards (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 on 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.

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 natural gas and crude oil may have on the fair value of the Company’s derivative instruments. For example, at

December 31, 2003, 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 $35 million decrease in the net unrealized gain. The derivative instruments in place at December 31, 2003 hedged approximately 13 percent of the Company’s expected natural gas production volumes through 2004.

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.

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 and monitoring procedures. In the normal course of business, collateral is not required for financial instruments with credit risk.

The Company’s reported cash flows related to its Canadian operating subsidiaries are based on cash flows measured in Canadian dollars and converted to the U.S. dollar equivalent based on the average of the Canadian to U.S. dollar exchange rates for the period reported. The Company’s Canadian operating subsidiaries have no financial obligations that are denominated in U.S. dollars.

On January 21, 2004, the Board of Directors (Board) declared a common stock quarterly cash dividend of $0.15 per share, payable April 9, 2004 to shareholders of record on March 10, 2004. Dividend levels are determined by the Board based on profitability, capital expenditures, financing and other factors. The Company declared and paid cash dividends on Common Stock totaling approximately $115 million and $85 million, respectively, during 2003.

On January 21, 2004, the Company’s Board also announced a 2-for-1 split (Split) on the Company’s Common Stock in the form of a share distribution payable on June 1, 2004 to shareholders of record on May 5, 2004. The Split is subject to shareholder approval of an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of the Company’s Common Stock from 325 million to 650 million.

The Company’s estimate of proved reserves reflects quantities of natural gas, crude oil and NGLs which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic conditions. The process of estimating quantities of natural gas, NGLs and crude oil reserves requires judgment in the evaluation of all available geological, geophysical, engineering and economic data, including production data, reservoir pressure data and data collected as a result of development or exploration drilling. Economic and operating conditions, such as product prices, operating costs, development costs, production tax rates and actions of domestic or foreign governments influence the estimation of reserves. Any significant variance in these assumptions could materially affect the estimated quantity and value of the Company’s reserves.

The Company has policies and procedures through which the required engineering, geological, and economic data is gathered and proved reserves are estimated. Experienced and qualified company engineers perform and oversee reserve estimates. Additionally, more than 80 percent of the Company’s reserve estimates during 2001, 2002 and 2003 were subjected to external review by independent oil and gas consultants, who in their judgement determined the estimates to be reasonable in the aggregate. For more information, see independent oil and gas consultants letters on page 63.

Despite the inherent imprecision in these engineering estimates, the Company’s reserves are used throughout its financial statements. As described in Note 1 of Notes to Consolidated Financial Statements, the Company uses the unit-of-production method to amortize its oil and gas properties. Changes in reserve quantities as described above will

The Company accounts for its oil and gas properties using the successful efforts method of accounting for its exploration and development activities. Acquisition and development costs are capitalized and amortized using the unit-of-production method based on proved and proved developed reserves estimated by the Company’s reserve engineers. Changes in reserve quantities as described below will cause corresponding changes in depletion expense in periods subsequent to the quantity revision. Unsuccessful exploration or dry hole wells are expensed in the period in which the wells are determined to be dry and could have a significant effect on results of operations.

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 natural gas, NGLs and crude oil reserves, future natural gas, NGLs and crude oil prices and costs to extract these reserves. Downward revisions in estimated reserve quantities, increases in future cost estimates or depressed natural gas, NGLs and crude oil prices could cause the Company to reduce the carrying amounts of its properties. See Note 16 of Notes to Consolidated Financial Statements for impairment of oil and gas properties.

Costs attributable to the Company’s unproved properties are not subject to the impairment analysis described above, however, a portion of the costs associated with such properties is subject to amortization on a composite basis based on past experience and average property lives. As these properties are developed and reserves are proven, the remaining capitalized costs are subject to depreciation and depletion. If the development of these properties is deemed unsuccessful, the capitalized costs related to the unsuccessful activity is expensed in the year the determination is made. The rate at which the unproved properties are written off depends on the timing and success of the Company’s future exploration program.

The Company has significant obligations to plug and abandon natural gas and crude oil wells and related equipment as well as to dismantle and abandon plants at the end of oil and gas production operations. The Company records the fair value of a liability for an ARO in the period in which it is incurred and a corresponding increase in the carrying amount of the related asset. Subsequently, the asset retirement costs included in the carrying amount of the related asset are allocated to expense using a systematic and rational method. In addition, increases in the discounted ARO liability resulting from the passage of time are reflected as additional depreciation, depletion and amortization expense in the Consolidated Statement of Income.

Estimating the future ARO requires management to make estimates and judgments regarding timing, existence of a liability, as well as what constitutes adequate restoration. The Company uses the present value of estimated cash flows related to its ARO to determine the fair value. Inherent in the present value calculation are numerous assumptions and judgments including the ultimate costs, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the present value of the existing ARO liability, a corresponding adjustment is made to the related asset.

As described in Note 4 of Notes to Consolidated Financial Statements, the Company accounts for goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires an annual impairment assessment in lieu of periodic amortization. The impairment assessment requires management to make estimates regarding the fair value of the reporting unit to which goodwill has been assigned. The Company determined the fair value of its Canadian reporting unit using a combination of the income approach and the market approach. Under the income approach, the Company estimated the fair value of the reporting unit based on the present value of expected future cash flows. Under the market approach, the Company estimated the fair value based on market multiples of reserves and production for comparable companies.

in future periods. In the market approach, the Company makes certain judgments about the selection of comparable companies, comparable recent company and asset transactions and transaction premiums. Although the Company based its fair value estimate on assumptions it believes to be reasonable, those assumptions are inherently unpredictable and uncertain.

In accordance with SFAS No. 5, a provision for legal, environmental and other contingencies is charged to expense when the loss is probable and the cost can be reasonably estimated. Determining when expenses should be recorded for these contingencies and the appropriate amounts for accrual is an estimation process that includes the subjective judgment of management. In many cases, management’s judgment is based on the advice and opinions of legal counsel and other advisers, the interpretation of laws and regulations, which can be interpreted differently by regulators and/or courts of law, the experience of the Company and other companies in dealing with similar matters and the decision of management on how it intends to respond to a particular contingency (for example, a decision to contest a matter vigorously or a decision to seek a negotiated settlement). The Company’s management closely monitors known and potential legal, environmental and other contingencies and periodically determines when the Company should record losses for these items based on information available to the Company.

SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets, were issued in June 2001 and became effective for the Company July 1, 2001 and January 1, 2002, respectively. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Additionally, SFAS No. 141 requires companies to disaggregate and report certain intangibles assets separately from goodwill. SFAS No. 142 establishes new guidelines for accounting for goodwill and other intangible assets. Under SFAS No. 142, goodwill and certain other intangible assets are not amortized, but rather are reviewed annually for impairment. One interpretation being considered relative to these standards is that oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves for both undeveloped and developed leaseholds should be classified separately from oil and gas properties, and included as intangible assets on the Company’s consolidated balance sheets. In addition, the disclosures required by SFAS No. 141 and No. 142 related to intangibles would be included in the notes to the consolidated financial statements. Historically, the Company, like many other oil and gas companies, has included oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves as part of the oil and gas properties, even after SFAS No. 141 and No. 142 became effective.

This interpretation of SFAS No. 141 and No. 142 would only affect the Company’s consolidated balance sheet classification of oil and gas leaseholds. The Company’s results of operations and cash flows would not be affected, since these oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves would continue to be amortized in accordance with accounting rules for oil and gas companies provided in SFAS No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies.

At December 31, 2003, the Company had undeveloped and developed leaseholds of approximately $1.3 billion and $2.4 billion that would have been classified on the consolidated balance sheet as intangible undeveloped leaseholds and intangible developed leaseholds, respectively, if it had applied the interpretation currently being discussed. The Company will continue to classify its oil and gas mineral rights held under lease and other contractual rights representing the right to extract such reserves as oil and gas properties until further guidance is provided.

The Company’s consolidated net income increased $747 million or $3.75 diluted earnings per common share in 2003 primarily due to higher commodity prices. Net income in 2003 included a tax benefit of $214 million or $1.07 diluted earnings per common share related to the reduction of the Canadian federal income tax and the Alberta provincial corporate income tax rates. Net income in 2002 included a tax benefit of $26 million or $0.13 diluted earnings per common share related to the reduction of the Alberta provincial corporate income tax rate in Canada and the reversal of a tax valuation reserve of $27 million or $0.13 diluted earnings per common share related to the sale of assets in the United Kingdom (U.K.) sector of the North Sea.

The Company’s consolidated revenues increased $1,343 million in 2003. Higher revenues were primarily due to higher commodity prices, resulting in increased revenues of $1,322 million. Revenues also increased $26 million due to higher processing and other revenues. Processing and other revenues increased $20 million and $19 million, respectively, due to ineffectiveness on cash-flow and fair-value hedges and changes in fair value instruments that do not qualify for hedge accounting. The amounts were partially offset by a decrease of $18 million related to lower sales volumes and $19 million related to the sale of Val Verde in June 2002. The revenue variances related to commodity prices and sales volumes are described below.

Commodity prices are one of the key drivers of earnings and net operating cash flow generation. Higher commodity prices contributed $1,322 million to the increase in revenues in 2003. Average natural gas prices, including a $0.09 realized loss per MCF related to hedging activities, increased $1.63 per MCF in 2003 resulting in increased revenues of $1,129 million. Average NGLs prices increased $5.94 per barrel in 2003, resulting in higher revenues of $140 million. Average crude oil prices, including a $0.09 realized loss per barrel related to hedging activities, increased $3.11 per barrel in 2003, resulting in increased revenues of $53 million. See page 17 for a discussion of commodity prices.

Sales volumes are another key driver that impact the Company’s earnings and net operating cash flow generation. Lower sales volumes in 2003 resulted in a decline in revenues of $18 million. Average crude oil sales volumes decreased 2.6 MBbls per day in 2003, reducing revenues $23 million. Average crude oil sales volumes decreased 13.8 MBbls per day primarily due to asset sales in 2002 in the Gulf of Mexico, Canada, the U.K. sector of the North Sea and the Williston Basin. This decrease in crude oil sales volumes was partially offset by an increase of 10.8 MBbls per day resulting from higher production at Ourhoud Field and the Company-operated MLN Field in Algeria, south Louisiana and Cedar Creek. Average natural gas sales volumes decreased 17 MMCF per day in 2003, resulting in decreased revenues of $20 million. Average natural gas sales volumes decreased 108 MMCF per day primarily due to asset sales in 2002 in the Gulf of Mexico, the U.K. sector of the North Sea and Sonora. This decrease in natural gas sales volumes was partially offset by an increase of 93 MMCF per day primarily as a result of the drilling programs in Canada and the Fort Worth Basin. Average NGLs sales volumes increased 4.7 MBbls per day in 2003, resulting in higher revenues of $25 million year over year. Average NGLs sales volumes increased 4.8 MBbls per day in the San Juan Basin and the Fort Worth Basin.

Total costs and other income— net increased $342 million in 2003. This increase in total costs and other income— net was primarily due to items discussed below. The increase in the exchange rate in Canada during 2003 impacted certain costs and expenses for the Company. Changes in the Canadian dollar versus the U.S. dollar could impact costs and expenses in future years. However, at this time, the Company cannot predict what impact the Canadian exchange rate will have on costs and expenses in the future.

DD&A expense increased $94 million primarily due to higher unit-of-production rates on the Canadian properties which have higher rates than average unit-of-production rates for the Company partially offset by the divestiture of higher cost properties in 2002 and lower crude oil and natural gas production volumes. Taxes other than income taxes increased $64 million primarily due to higher production taxes resulting from higher crude oil and natural gas revenues.

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 natural gas, NGLs and crude oil reserves, future natural gas, NGLs and crude oil prices and costs to extract these reserves. In 2003, the Company recorded charges of $63 million related to the impairment of oil

Gain on disposal of assets decreased $60 million primarily due to the divestiture program that was announced by the Company in late 2001 and completed in late 2002. Transportation expense increased $54 million primarily due to higher contract rates primarily resulting from the sale of Val Verde in 2002. Other expense— net increased $44 million primarily due to lower interest income and higher expenses related to foreign currency transactions.

Exploration costs decreased $34 million primarily due to lower drilling rig expenses of $32 million attributable to a loss incurred by the Company in 2002 related to the remaining terms of a sublease of a deepwater drilling rig, and $19 million due to lower geological and geophysical (G&G) and other expenses. These decreases were partially offset by higher exploratory dry hole costs of $15 million and higher amortization of undeveloped lease costs of $2 million.

Income tax expense increased $195 million in 2003. The increase in tax expense was primarily due to higher pretax income of $1,001 million. In November 2003, the Government of Canada passed Bill C-48, which reduced the Canadian federal income tax rate for companies in the natural resource sector from 28 percent to 21 percent over five years beginning in 2003. As a result, in 2003, the Company recorded a benefit of $203 million related to the reduction in the Canadian federal income tax rate. The Company also recorded a net tax benefit of $27 million in 2003 related to the successful appeal of the 1996-1998 IRS tax audit. Additionally, the Company recorded higher tax benefits of $11 million in 2003 related to interest deductions allowed in both the U.S. and Canada on transactions associated with cross-border financing. In 2003, the Company resolved all disputes under tax sharing agreements with certain former affiliates. As a result, during 2003, the Company recorded a $3 million decrease in income tax expense. The Company recorded lower tax benefits of $15 million related to the reduction in the Alberta provincial corporate income tax rate in Canada. Year 2002 included a tax benefit associated with the reversal of a tax valuation allowance of $27 million related to the sale of assets in the U.K. sector of the North Sea.

The Company’s consolidated net income decreased $107 million or $0.45 diluted earnings per common share in 2002 primarily as a result of lower commodity prices partially offset by higher commodity sales volumes. Net income also included a benefit of $27 million or $0.13 diluted earnings per common share as a result of the reversal of a tax valuation reserve related to the sale of assets in the U.K. sector of the North Sea and a tax benefit of $26 million or $0.13 diluted earnings per common share related to the reduction of the Alberta corporate income tax rate in Canada.

The Company’s consolidated revenues decreased $451 million in 2002. Lower revenues were primarily driven by reduced commodity prices, resulting in reduced revenues of $619 million. Processing and other revenues, which represented less than one percent of the Company’s total revenues in 2002, declined $70 million. This decline was primarily due to a reduction in revenues of $31 million and $20 million, respectively, related to ineffectiveness on cash-flow and fair-value hedges and changes in the fair value of derivative instruments that do not qualify for hedge accounting. Processing and other revenues also declined $22 million due to the sale of Val Verde in the second quarter of 2002. These amounts were partially offset by an increase of $241 million related to higher sales volumes. Revenue variances related to commodity prices and sales volumes are described below.

Lower commodity prices resulted in reduced revenues of $619 million in 2002. Average natural gas prices, including a $0.16 realized gain per MCF related to hedging activities, decreased $0.83 per MCF resulting in lower revenues of $580 million. Lower average natural gas prices were impacted by location basis differentials that varied widely compared to the same period in 2001 primarily in the western U.S. and western Canada. Average NGLs prices declined $2.33 per barrel while average crude oil prices, including an $0.18 realized gain per barrel related to hedging activities, increased $0.66 per barrel in 2002. The decline in NGLs prices reduced revenues $51 million while the increase in crude oil prices increased revenues $12 million in 2002.

Higher sales volumes resulted in increased revenues of $241 million in 2002. Average natural gas sales volumes increased 192 MMCF per day resulting in higher revenues of $282 million. In Canada, average natural gas sales volumes increased 369 MMCF per day primarily due to the acquisitions of Canadian Hunter Exploration Ltd. (Hunter) in late 2001 and ATCO in early 2002 and its drilling program. The increase in natural gas sales volumes was partially offset by reductions of 172 MMCF per day resulting from natural declines in production and asset sales in the Onshore Gulf Coast, the Gulf of Mexico Shelf, the San Juan Basin and the Permian Basin. Average NGLs sales volumes increased 13.0 MBbls per day, resulting in increased revenues of $80 million in 2002. Average NGLs sales volumes increased 14.9 MBbls per day also primarily due to the acquisition of Hunter. Average crude oil sales volumes decreased 14.1 MBbls per day, resulting in reduced revenues of $121 million in 2002. Average crude oil sales volumes decreased 12.4 MBbls per day primarily due to natural declines in production and asset sales in the Gulf of Mexico Shelf, Canada and the Permian Basin.

Total costs and other income— net decreased $113 million in 2002. The decrease included a $184 million charge related to the impairment of oil and gas properties held for sale and a restructuring charge of $10 million related to severance and other exit costs recorded in 2001.

DD&A increased $98 million in 2002 primarily due to a higher unit-of-production rate related to changes in production resulting from the Canadian acquisitions, which had higher rates than the average unit-of-production rates for the Company. DD&A also increased due to higher natural gas production volumes primarily in Canada.

Interest expense increased $84 million primarily due to higher debt balances during 2002 resulting from the Hunter acquisition in late 2001 and other property acquisitions consummated in early 2002.

Exploration costs increased $28 million in 2002 primarily due to higher amortization of undeveloped lease costs of $54 million, higher drilling rig costs of $17 million and higher G&G and other expenses of $20 million partially offset by lower exploratory dry hole costs of $63 million. The higher drilling rig expenses, which were approximately $40 million during 2002, were attributable to the subletting of a deepwater drilling rig under lease to the Company. This $40 million charge covered the anticipated loss for the remaining term of the lease.

Transportation expense increased $17 million primarily due to higher contract rates, and administrative expenses increased $12 million primarily due to higher payroll and benefits.

Gain on disposal of assets increased $60 million due to the divestiture of Val Verde and non-core, non-strategic properties in 2002. Taxes other than income taxes decreased $43 million primarily due to lower crude oil and natural gas revenues, and production and processing expenses decreased $38 million, including the $10 million restructuring charge recorded in 2001, primarily due to lower well operating costs. Other income— net increased $27 million primarily due to higher interest income, lower foreign currency transaction losses and lower miscellaneous expenses incurred in 2002.

Income tax expense decreased $234 million in 2002. The decrease in tax expense was primarily due to lower pretax income of $338 million. In 2002, the Company recorded a benefit of $27 million associated with the reversal of a tax valuation allowance related to the sale of assets in the U.K. sector of the North Sea. During 2002, the Company recorded higher tax benefits of $86 million related to interest deductions allowed in both the U.S. and Canada on transactions associated with cross-border financing. The Company also recorded higher tax benefits of $23 million as a result of a reduction in the Alberta provincial corporate income tax rate in Canada. These benefit increases were partially offset by lower net Section 29 Tax Credits of $23 million and higher tax expense of $12 million related to an increase in the U.K.’s income tax rate.

proceedings by the United States Judicial Panel on Multidistrict Litigation 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 during the period of 1985 to the present. 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. The plaintiffs and the intervenor have not specified in their pleadings the amount of damages they seek from the Company. On December 5, 2003, the United States Judicial Panel on Multidistrict Litigation entered an order transferring the cases alleging claims of below-market prices, improper deductions, and transactions with affiliated companies for further pre-trial proceedings and trial in Wright v. AGIP, 5:03CV264, United States District Court for the Eastern District of Texas, Texarkana Division. The cases alleging improper measurement techniques remain pending in MDL-1293.

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. Most of these proceedings involve production volumes and royalties that are the subject of Natural Gas Royalties Qui Tam Litigation.

Based on the Company’s present understanding of the various governmental and civil False Claims Act proceedings described above, the Company believes that it has substantial defenses to these claims and intends to vigorously assert such defenses. The Company is also exploring the possibility of a settlement of these claims. Although there has been no formal demand for damages, the Company currently estimates, based on its communications with the intervenor, that the amount of underpaid royalties on onshore production claimed by the intervenor in these proceedings is approximately $68 million. In the event that the Company is found to have violated the civil False Claims Act, the Company could also be subject to double damages, civil monetary penalties and other sanctions, including a temporary suspension from bidding on and entering into future federal mineral leases and other federal contracts for a defined period of time. The Company has established a reserve that management believes to be adequate to provide for this potential liability based upon its evaluation of this matter.

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, filed in 1995 in the District Court in The Hague and currently pending in the Court of Appeal in The Hague, 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 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. Plaintiffs seek damages of $97.5 million as of January 1, 1997, plus interest. For all relevant periods, the Company owned a 37.5 percent 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. After receiving additional evidence from the parties, the Court of Appeals subsequently issued a ruling in favor of defendants. In an interim judgment issued on December 18, 2003, the Court of Appeals found that defendants should not have assumed that they were extracting oil from the Q-1 Block, that Unocal was not entitled to compensation for any production occurring prior to 1992 and that damages, if any, would be limited to the proceeds Unocal would have received for oil extracted from the Q-1 Block, less the costs Unocal would have incurred to produce the oil from an existing well in the L16a Block. The Court of Appeals ordered that further evidence be presented to a court appointed expert to determine whether any damages had been suffered by Unocal. The Company and the other defendants are continuing to present evidence to the Court and 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. If the Company is successful in enforcing the indemnities, its working interest share of any adverse judgment could be reduced to 15 percent for some of the periods covered by plaintiffs’ lawsuit. The Company currently does not believe that an unfavorable outcome is probable nor, in the event of an unfavorable outcome, is the Company reasonably able to estimate the possible loss, if any, or range of loss in this lawsuit. Accordingly, there has been no reserve established for this matter.

The Company and its former affiliate, El Paso Natural Gas Company, have also been named as defendants in two class action lawsuits styled Bank of America, et al. v. El Paso Natural Gas Company, et al., Case No. CJ-97-68, and Deane W. Moore, et al. v. Burlington Northern, Inc., et. al., Case No. CJ-97-132, each filed in 1997 in the District Court of Washita County, State of Oklahoma and subsequently consolidated by the court. Plaintiffs contend that defendants underpaid royalties from 1983 to the present on natural gas produced from specified wells in Oklahoma through the use of below-

market prices, improper deductions and transactions with affiliated companies and in other instances failed to pay or delayed in the payment of royalties on certain gas sold from these wells. The plaintiffs seek an accounting and damages for alleged royalty underpayments, plus interest from the time such amounts were allegedly due. Plaintiffs additionally seek the recovery of punitive damages. The plaintiffs have not specified in their pleadings the amount of damages they seek from the Company. However, through pre-trial discovery, plaintiffs have provided defendants with alternative theories of recovery claiming monetary damages of up to $263.6 million in principal, plus interest, punitive damages and attorney’s fees. The Company believes it has substantial defenses to these claims and is vigorously asserting such defenses. The Company and El Paso Natural Gas Company have asserted contractual claims for indemnity against each other. The court has certified the plaintiff classes of royalty and overriding royalty interest owners, and the parties are proceeding with pre-trial discovery. It is anticipated that this matter will be scheduled for trial during 2004. The Company currently does not believe that an unfavorable outcome is probable nor, in the event of an unfavorable outcome, is the Company reasonably able to estimate the possible loss, if any, or range of loss in these lawsuits. Accordingly, there has been no reserve established for this matter.

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, including: claims for personal injury and property damage, claims challenging oil and gas royalty, ad valorem and severance tax payments, claims related to joint interest billings under oil and gas operating agreements, claims alleging mismeasurement of volumes and wrongful analysis of heating content of natural gas and other claims in the nature of contract, regulatory or employment disputes. None of the governmental proceedings involve foreign governments.

The Company has established reserves for certain legal proceedings which are included in Other Liabilities and Deferred Credits on the Consolidated Balance Sheet. The establishment of a reserve involves an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible that the Company could incur additional loss with respect to those matters in which reserves have been established of up to approximately $25 million to $30 million in excess of the amounts currently accrued. Future changes in the facts and circumstances could result in actual liability exceeding the estimated ranges of loss and the amounts accrued.

While the ultimate outcome and impact on the Company cannot be predicted with certainty, management believes that the resolution of these legal proceedings through settlement or adverse judgment will not have a material adverse effect on the consolidated financial position or results of operations of the Company, although cash flow could be significantly impacted in the reporting periods in which such matters are resolved.

On December 23, 2003, the FASB issued SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106. This statement revises employers’ disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, Employers’ Accounting for Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. The new rules require additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The new disclosures are effective for 2003 calendar year-end financial statements. The Company has adopted the revised disclosures as of December 31, 2003. See Note 13 of Notes to Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The adoption of SFAS No. 150 during 2003 did not impact the Company’s consolidated financial position or results of operations.

amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. In addition, with some exceptions, all provisions of SFAS No. 149 should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on the Company’s consolidated financial position or results of operations.

The Company, in discussions of its future plans, expectations, objectives and anticipated performance in periodic reports filed by the Company with the SEC (or documents incorporated by reference therein) may include projections or other forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “should” and similar expressions. 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 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.

Commodity Prices—Changes in natural gas, NGLs and crude oil 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 could also impact the Company’s determination of proved reserves and the standardized measure of discounted future net cash flows relative to natural gas, NGLs and crude oil 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. These and other commodity price risks that could cause actual results to differ from projections and forward-looking statements are further described in Part II, “Commodity Risk.”

Exploration and Production Risk—The Company’s business is subject to all of the risks and uncertainties normally associated with the exploration for and development and production of natural gas, NGLs and crude oil, including uncertainties as the presence, size and recoverability of hydrocarbons. The exploration for natural gas and crude oil is a high-risk business in which significant numbers of dry holes and high associated costs can be incurred in the process of seeking commercial discoveries.

The process of estimating quantities of proved reserves is inherently uncertain and requires making subjective engineering, geological, geophysical and economic assumptions. 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. Reserves which require the use of improved recovery techniques for production are included in proved reserves if supported by a suitable analogy, a successful pilot project or the operation of an installed program.

Projecting future natural gas, NGLs and crude oil 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, NGLs 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 weather conditions, 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 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 Canada, Algeria, the East Irish Sea, China, Ecuador, Wyoming, North Dakota 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, access to surface locations and facilities, opposition by non-government organizations and local indigenous communities, the availability, costs and performance of the necessary drilling equipment and infrastructure, drilling risks, operating hazards, unexpected cost increases and technical difficulties in constructing, modifying and operating equipment, plants and facilities, 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, acts of terrorism and other political risks, increases in taxes and governmental royalties, renegotiation or abrogation of contracts with governmental entities, changes in laws and policies governing operations of foreign-based companies, currency restrictions and exchange rate fluctuations, world economic cycles, restrictions or quotas on production and commodity sales, limited market access 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 natural gas, NGLs and crude oil 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 natural gas, NGLs and crude oil, 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 natural gas, NGLs and crude oil, 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 stages 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.

Legal and Regulatory Risk—The Company’s operations are affected by foreign, national, state and local laws and regulations. Restrictions on production, price or gathering rate controls, changes in taxes, royalties and other amounts payable to governments or governmental agencies and other changes in or litigation arising under laws and regulations, or interpretations thereof, could have a significant effect on the Company’s operations or financial results. The Company’s operations in some geographic areas may be negatively impacted by legal proceedings, the actions of national, state and local governments, and the actions of non-governmental organizations that delay, restrict or prevent the Company’s access to surface locations for natural gas and crude oil exploration and production activities. The Company’s operations also may be negatively impacted by laws, regulations and legal proceedings pertaining to the valuation and measurement of natural gas, crude oil and NGLs and payment of royalties from such sales. Existing litigation involving the valuation and measurement of natural gas, crude oil and NGLs and payment of royalties from such sales is described in Note 14 of the Notes to Consolidated Financial Statements. Other legal and regulatory risks that could cause actual results to differ from projections and other forward-looking statements are described in Part I, “Other Matters.”

Political and Security Risk—Domestic and international political and security risks, including changes in government, seizure of property, civil unrest, armed hostilities and acts of terrorism, could have a significant effect on the Company’s operations or financial results.

Environmental Regulations and 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 and liability for remedial actions under environmental 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.

Burlington Resources Inc. (BR) is a holding company engaged, through its principal subsidiaries, Burlington Resources Oil & Gas Company LP, The Louisiana Land and Exploration Company (LL&E), Burlington Resources Canada Ltd. (formerly known as Poco Petroleums Ltd.), Burlington Resources Canada (Hunter) Ltd. (formerly known as Canadian Hunter Exploration Ltd.) (Hunter), and their affiliated companies (collectively, the Company), in the exploration for and the development, production and marketing of natural gas, NGLs and crude oil. BR ranks among the world’s largest independent oil and gas companies and holds one of the industry’s leading positions in North American natural gas reserves and production. Its extensive North American lease holdings extend from the U.S. Gulf Coast to the Arctic coast of Canada. The Company’s North American operations include a mix of production, development and exploration assets. International operations focus on Northwest Europe, North Africa, China, and South America.

The consolidated financial statements of the Company include the accounts of BR and its majority-owned subsidiaries. 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.

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 of materials, supplies and products are valued at the lower of average cost or market. Inventories consisted of the following.

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 unit-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 (lease acquisition costs) are capitalized and amortized on a composite basis, based on past success, experience and average lease term 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 expected undiscounted future cash flows are less than the asset’s net book value. Cash flows are determined based upon reserves using prices and costs consistent with those used for internal decision making. The underlying commodity prices embedded in the Company’s estimated cash flows are the product of a process that begins with the NYMEX pricing and adjusted for estimated location and quality differentials, as well as other factors that management believes will impact realizable prices. Although prices used are likely to approximate market, they do not necessarily represent current market prices. Given that spot hydrocarbon market prices are subject to volatile changes, it is the Company’s opinion that a long-term look at market prices will lead to a more appropriate valuation of long-term assets.

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 unless doing so significantly affects the unit-of-production amortization rate, in which case a gain or loss is recognized currently. 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, net of salvage, at their estimated net present value and amortized on a unit-of-production basis over the remaining life of the related proved developed reserves. See Note 10 of Notes to Consolidated Financial Statements.

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.

Goodwill represents the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The Company accounts for its goodwill in accordance with Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, which requires the Company to test goodwill for impairment annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable, rather than amortize.

Natural gas, NGLs and crude oil revenues are recorded using the entitlement method. Under the entitlement method, revenue is recorded when title passes based on the Company’s net interest. The Company records its entitled share of revenues based on entitled volumes and contracted sales prices. The sales price for natural gas, NGLs and crude oil are adjusted for transportation cost and other related deductions. The transportation costs and other deductions are based on contractual or historical data and do not require significant judgment. Subsequently, these deductions and transportation costs are adjusted to reflect actual charges based on third party documents. Historically, these adjustments have been insignificant. Since there is a ready market for natural gas, crude oil and NGLs, the Company sells the majority of its products soon after production at various locations at which time title and risk of loss pass to the buyer. As a result, the Company maintains a minimum amount of product inventory in storage. Gas imbalances occur when the Company sells more or less than its entitled ownership percentage of total gas production. Any amount received in excess 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, 2003 and 2002, the Company had net gas imbalance receivables of $19 million.

It is the Company’s policy to calculate and pay royalties on natural gas, crude oil and NGLs in accordance with the particular contractual provisions of the lease, license or concession agreements and the laws and regulations applicable to those agreements. Royalty liabilities are recorded in the period in which the natural gas, crude oil or NGLs are produced and are included in Accounts Payable in the Consolidated Balance Sheet.

The assets, liabilities and operations of BR’s Canadian operating 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 exchange rates. Gains and losses related to translating these assets and liabilities are recorded in Accumulated Other Comprehensive Income (Loss). At December 31, 2003 and 2002, the balance in Accumulated Other Comprehensive Income (Loss) related to foreign currency translation was a gain of $676 million and a loss of $126 million, respectively. 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 operating 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. Included

in net income for the years ended December 31, 2003, 2002 and 2001 are losses of $7 million, $1 million and $7 million, respectively.

The Company enters into derivative contracts, primarily options and swaps, to hedge future natural gas and crude oil 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 and interest rate fluctuations. On January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. In accordance with 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, changes in the fair value of the derivative are recognized currently in earnings. If the derivative qualifies for hedge accounting, changes in the fair value of the derivative are either recognized in income along with the corresponding change in fair value 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 if and when a hedging instrument becomes ineffective. The Company assesses hedge effectiveness based on total changes in the fair value of its derivative instruments. 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 items is discontinued in instances where the related fair-value hedging instrument becomes ineffective. The balance in the fair-value hedge adjustment account is recognized in income when the hedged item is sold. If the Company determines that it is probable that a hedged forecasted transaction will not occur, deferred gains or losses on the related hedging instrument are recognized in earnings immediately.

Gains and losses on hedging instruments and adjustments of the carrying amounts of hedged items are included in revenues and are included in realized prices in the period that the hedged item is sold. 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 revenues in the period in which they occur. The resulting cash flows are reported as cash flows from operating activities.

The Company manages and controls market and counterparty credit risk through established formal internal control procedures which are reviewed on an ongoing basis. In the normal course of business, collateral is not required for financial instruments with credit risk.

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.

The Company follows the weighted-average-cost method of accounting for treasury stock transactions.

At December 31, 2003, the Company has three stock-based employee compensation plans, which are described in Note 12 of Notes to Consolidated Financial Statements. 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 Common Stock on the date of the grant.

The weighted average fair values of options granted during the years 2003, 2002 and 2001 were $10.85, $10.83 and $13.35, 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 2003, 2002 and 2001: stock price volatility of 32 percent, 31 percent and 35 percent, respectively; risk free rate of return ranging from 2.5 percent to 5 percent; dividend yields of 1.18 percent, 1.43 percent and 1.32 percent, respectively; and an expected term of 3 to 5 years.

The following table illustrates the effect on net income and earnings per share had the Company applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

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.

Basic 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 199 million, 201 million and 207 million for the years ended December 31, 2003, 2002 and 2001, respectively. Diluted EPS reflects the potential dilution that could occur if contracts to issue common stock and related stock options were exercised. The weighted average number of common shares outstanding for computing diluted EPS, including dilutive stock options, was 200 million, 202 million and 208 million for the years ended December 31, 2003, 2002 and 2001, respectively. For the years ended December 31, 2003, 2002 and 2001, approximately 1 million, 4 million and 4 million shares, respectively, attributable to the exercise of outstanding options were excluded from the calculation of diluted EPS because the effect was antidilutive. The Company has no preferred stock affecting EPS, and therefore, no adjustments related to preferred stock were made to reported net income in the computation of EPS.

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 natural gas, NGLs and crude oil reserve volumes and the future development, dismantlement and abandonment costs, estimates relating to certain natural gas, NGLs and crude oil revenues and expenses as well as estimates related to deferred income taxes. Actual results could differ from those estimates.

In May 2003, the Company purchased an additional 50 percent interest in CLAM Petroleum B.V. (CLAM) for approximately $100 million, including cash acquired at closing of $25 million, resulting in a total purchase price for the

common equity of approximately $75 million. The Company owned 50 percent of CLAM prior to the acquisition and had accounted for its interest under the equity method of accounting. Effective on the date of acquisition, the Company began consolidating CLAM’s financial results.

In August 2002, the Company purchased certain oil and gas properties located in Wise and Denton Counties, Texas for $141 million. On January 3, 2002, the Company consummated a property acquisition, for properties located in the Viking-Kinsella area, from ATCO Gas and Pipelines Ltd. (ATCO), a Canadian regulated gas utility, for approximately $344 million.

In December 2001, BR acquired all of the outstanding shares of Hunter valued at approximately U.S. $2.1 billion, resulting in goodwill of approximately $793 million. All of the goodwill was assigned to the Company’s Canadian reporting unit. 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 2001.

The following table presents the unaudited pro forma results of the Company as though the acquisition had occurred on January 1, 2001. Pro forma results are not necessarily indicative of actual results.

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 asset portfolio, primarily in the U.S. During 2002, the Company completed the sale of the Val Verde Plant and certain non-core, non-strategic properties that consisted of high cost structure, high production volume decline rates and limited growth opportunities. As a result of this divestiture program, the Company generated proceeds, before post closing adjustments, of approximately $1.2 billion and recognized a net pretax gain of $68 million in 2002. The Company used a portion of the proceeds generated from property sales to retire debt and for general corporate purposes.

The entire goodwill balance of $982 million at December 31, 2003, which is not deductible for tax purposes, is related to the acquisition of Hunter in December 2001. With the acquisition of Hunter, the Company gained Hunter’s significant interest in Canada’s Deep Basin, North America’s third-largest natural gas field, increased its critical mass and enhanced its position as a leading North American natural gas producer. The Company also obtained the exploration

expertise of Hunter’s workforce, gained additional cost optimization, increased purchasing power and gained greater marketing flexibility in optimizing sales and accessing key market information. The goodwill was assigned to the Company’s Canadian reporting unit which includes all of the Company’s Canadian subsidiaries.

The provisions of SFAS No. 142 require that a two-step impairment test be performed annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The first step of the test for impairment compares the book value of the Company’s reporting unit to its estimated fair value. The second step of the goodwill impairment test which is only required if the net book value of the reporting unit exceeds the fair value, compares the implied fair value of goodwill to its book value to determine if an impairment is required.

The Company performed step one of its annual goodwill impairment test in the fourth quarter of 2003 and determined that the fair value of the Company’s Canadian reporting unit exceeded its net book value as of September 30, 2003. Therefore, step two was not required.

The fair value of the Company’s Canadian reporting unit was determined using a combination of the income approach and the market approach. Under the income approach, the Company estimated the fair value of the reporting unit based on the present value of expected future cash flows. Under the market approach, the Company estimated the fair value based on market multiples of reserves and production for comparable companies as well as recent comparable transactions.

The income approach is dependent on a number of factors including estimates of forecasted revenue and costs, proved reserves, as well as the success of future exploration for and development of unproved reserves, appropriate discount rates and other variables. Downward revisions of estimated reserve quantities, increases in future cost estimates, divestiture of a significant component of the reporting unit, continued weakening of the U.S. dollar, change in capital structure, or depressed natural gas, NGLs and crude oil prices could lead to an impairment of all or a portion of goodwill in future periods. In the market approach, the Company makes certain judgments about the selection of comparable companies, comparable recent company and asset transactions and transaction premiums. Although the Company based its fair value estimate on assumptions it believes to be reasonable, those assumptions are inherently unpredictable and uncertain.

The following table reflects the changes in the carrying amount of goodwill during the year as it relates to the Canadian reporting unit.

The jurisdictional components of income before income taxes and cumulative effect of change in accounting principle follow.

Reconciliation of the federal statutory income tax rate to the effective income tax rate follows.

(1) In 2003, the Government of Canada passed Bill C-48 which reduced the Canadian federal income tax rate for companies in the natural resource sector resulting in a benefit of $203 million (-12.9%) to the Company. The Company also recorded a benefit of $11 million (-0.7%) and $26 million (-4.5%) in 2003 and 2002, respectively, due to reductions in the Alberta provincial corporate income tax rate in Canada. Also in 2002, the Company recorded an expense of $12 million (2.2%) related to an increase in the U.K.’s income tax rate.

(2) In 2003, a tax benefit associated with section 29 tax credits was provided in the amount of $27 million (-1.7%) as a result of an appeal proceeding related to the 1996-1998 federal income tax audit. In 2002, the tax benefit associated with section 29 tax credits was reduced by $16 million (2.9%) as a result of the 1996-1998 federal income tax audit. Adjustments related to section 29 tax credit certification issues of $7 million (-0.7%) were made in 2001.

(3) The Company recorded benefits of $97 million, $86 million and $20 million in 2003, 2002 and 2001, respectively, related to interest deductions allowed in both the U.S. and Canada.

(4) In 2002, this rate primarily consisted of the reversal of a $27 million (-4.8%) tax valuation reserve related to the sale of assets in the U.K. Sector of the North Sea.

The net deferred income tax liabilities at December 31, 2003 and 2002 include deferred state income tax liabilities of approximately $56 million and $53 million, respectively. The net deferred income tax liabilities also include foreign tax liabilities of approximately $1,564 million and $1,119 million at December 31, 2003 and 2002, respectively. No deferred U.S. income tax liability has been recognized on undistributed earnings of certain foreign subsidiaries as they have been deemed permanently invested outside the U.S. It is not practicable to estimate the deferred tax liability related to such undistributed earnings. At December 31, 2003, undistributed earnings for which a U.S. deferred income tax liability has not been recognized total $1,033 million.

The 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. Of the $150 million tax benefit for operating loss carryforwards, which relate to foreign jurisdictions, $124 million has no expiration date and $26 million will expire between 2004 and 2009.

The Company uses derivative instruments to manage risks associated with natural gas and crude oil price volatility as well as interest rate and foreign currency exchange rate fluctuations. Derivative instruments that meet the hedge criteria in SFAS No. 133 are designated as cash-flow hedges, fair-value hedges, or foreign-currency hedges. Derivative instruments that do not meet the hedge criteria in SFAS No. 133 are not designated as hedges. Derivative instruments designated as cash-flow hedges are used by the Company to mitigate the risk of variability in cash flows from natural gas and crude oil sales due to changes in market prices. Fair-value hedges are used by the Company to hedge or offset the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment. In addition to hedges of commodity prices, the Company also uses foreign-currency swaps to hedge its exposure to exchange rate fluctuations related to its Canadian subsidiaries.

At December 31, 2003, the Company’s cash-flow hedges consisted of fixed-price swaps and producer collars (purchased put options and written call options). The fixed-price swap agreements are used to fix the prices of anticipated future natural gas production. The costless collars are used to establish floor and ceiling prices on anticipated future natural gas and crude oil production. There were no net premiums received when the Company entered into these option agreements.

At December 31, 2003, the Company’s fair-value hedges consisted of commodity price swaps and interest rate swaps. The Company’s commodity price swaps are used to hedge against changes in the fair value of unrecognized firm commitments representing physical contracts that require the delivery of a specified quantity of natural gas or crude oil at a fixed price over a specified period of time. The swap agreements allow the Company to receive market prices for the committed specified quantities included in the physical contracts.

In July 2003, the Company entered into interest rate swap agreements with an aggregate notional amount of $50 million related to principal amounts of $50 million, 5.6% Notes due December 1, 2006. The objective of these transactions is to protect the designated debt against changes in fair value due to changes in the benchmark interest rate, which was designated as six-month LIBOR. Under the interest rate swap agreements, the Company receives a fixed rate equal to 5.6% per annum and pays the benchmark interest rate plus 3.36 percent. Interest expense on the debt is adjusted to reflect payments made or received under the hedge agreements.

At December 31, 2003, the Company’s foreign-currency hedges consisted of foreign currency swaps used to fix the amount of Canadian dollars a Canadian subsidiary receives on anticipated sales denominated in U.S. dollars.

At December 31, 2003, the Company’s derivative positions included option contracts that are not designated as hedges. These positions were entered into to offset the cost of other option positions that are designated as hedges.

As of December 31, 2003, the Company had the following commodity related derivative instruments outstanding with average underlying prices that represent hedged prices of commodities at various market locations.

As of December 31, 2003, the Company had the following derivative instruments outstanding related to interest rate and foreign currency swaps.

The derivative assets and liabilities represent the market values of the Company’s derivative instruments as of December 31, 2003. During the years ended 2003, 2002 and 2001, hedging activities related to cash settlements decreased revenues by $63 million, increased revenues by $114 million and decreased revenues by $322 million, respectively. In addition, during 2002 and 2001, losses of $22 million and gains of $14 million, respectively, were recorded in revenues associated with ineffectiveness of cash-flow and fair-value hedges. During 2003, 2002 and 2001 gains of $9 million, losses of $10 million and gains of $10 million, respectively, were recorded in revenues related to changes in fair value of derivative instruments which do not qualify for hedge accounting.

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 were 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 an after tax non-cash gain of $3 million was recorded in current earnings as a cumulative effect of accounting change.

Changes in other comprehensive income for the three years ended December 31, 2003 follow.

Based on commodity prices and foreign exchange rates as of December 31, 2003, the Company expects to reclassify losses of $26 million ($16 million after tax) to earnings from the balance in Accumulated Other Comprehensive Loss during the next twelve months. At December 31, 2003, the Company had derivative assets of $10 million and derivative liabilities of $50 million of which $7 million, $3 million and $33 million is included in Other Current Assets, Other Assets and Other Current Liabilities, respectively, on the Consolidated Balance Sheet.

In December 2003, the Company retired Canadian $100 million (U.S. $75 million) of 6.40% Notes. The Company has debt maturities of $500 million due in 2006, $466 million due in 2007 and $2,950 million due in 2010 and thereafter. The fair value of debt outstanding as of December 31, 2003 and 2002 was $4,483 million and $4,443 million, respectively.

Burlington Resources Capital Trust I, Burlington Resources Capital Trust II (collectively, the Trusts), BR and Burlington Resources Finance Company (BRFC) have a shelf registration of $1,500 million on file with the Securities and Exchange Commission (SEC). Pursuant to the 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 has credit commitments in the form of revolving credit facilities (Revolvers) as of December 31, 2003. The Revolvers are comprised of agreements for $600 million, $400 million and Canadian $390 million (U.S. $300 million). The $600 million Revolver expires in December 2006 and the $400 million and Canadian $390 million Revolvers expire in December 2004 unless renewed by mutual consent. The Company has the option to convert any remaining balances on the $400 million and Canadian $390 million Revolvers to one year and five-year plus one day term notes, respectively. The Revolvers are available to cover debt due within one year. Therefore, commercial paper, if any, credit facility notes and fixed-rate debt due within one year are generally classified as long-term debt. At December 31, 2003, there are no amounts outstanding under the Revolvers and no outstanding commercial paper.

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).

The Company has a closed deferred compensation plan funded by Company-owned life insurance policies that were entered into by LL&E prior to being acquired by BR. Outstanding borrowings of $148 million and $138 million as of December 31, 2003 and 2002, respectively, on these life insurance policies were reported as a reduction to the cash surrender value and are included as a component of Other Assets on the Company’s Consolidated Balance Sheet.

On January 1, 2003, the Company adopted SFAS No. 143, Asset Retirement Obligations. 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 costs included in the carrying amount of the related asset should be allocated to expense using a systematic and rational method. The majority of the Company’s asset retirement obligations relate to plugging and abandoning oil and gas wells and related equipment as well as dismantling plants. During the first quarter of 2003, the Company recorded a net-of-tax cumulative effect of change in accounting principle charge of $59 million ($95 million before tax), increased long-term liabilities $191 million, net properties $96 million and deferred tax assets $36 million in accordance with the provisions of SFAS No. 143. There was no impact on the Company’s cash flows as a result of adopting SFAS No. 143. The pro forma asset retirement obligations would have been $376 million at January 1, 2002 and $297 million at December 31, 2002 had the Company adopted SFAS No. 143 on January 1, 2002. The asset retirement obligations, which are included in the Consolidated Balance Sheet in Other Liabilities and Deferred Credits, were $442 million and $106 million at December 31, 2003 and 2002, respectively. Accretion expense for 2003 was $21 million and is included in Depreciation, Depletion and Amortization expense on the Company’s Consolidated Statement of Income.

The following table reflects the changes of the asset retirement obligations during the current year.

The following table shows the pro forma effect on the Company’s net income and earnings per share, had SFAS No. 143 been applied during prior periods.

In 2003, 2002 and 2001, approximately 49 percent, 43 percent and 42 percent, respectively, of the Company’s natural gas production was transported to direct sale customers through pipeline systems owned by two companies. The Company expects to continue to transport a substantial portion of its future natural gas production through these pipeline systems. See Note 14 of Notes to Consolidated Financial Statements for demand charges paid under firm and interruptible transportation capacity rights on pipeline systems.

Substantially all of the Company’s accounts receivable at December 31, 2003 and 2002 result from sales of natural gas, NGLs and crude oil as well as joint interest billings to third party companies. This concentration of customers and joint interest owners may impact the Company’s overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions.

The Company’s 2002 Stock Incentive Plan (the 2002 Plan) succeeds its 1993 Stock Incentive Plan (the 1993 Plan) which expired by its terms in April 2002 but remains in effect for options granted prior to April 2002. The 2002 Plan provides for the grant of stock options, restricted stock and stock appreciation rights (collectively, 2002 Awards).

Under the 2002 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. The total number of shares of the Company’s Common Stock for which 2002 Awards under the 2002 Plan may be granted is 7,500,000. At December 31, 2003, 6,574,900 shares were available for grant under the 2002 Plan.

In 1997, the Company adopted the 1997 Employee Stock Incentive Plan (the 1997 Plan) from which stock options and restricted stock (collectively, 1997 Awards) may be granted to employees who are not eligible to participate in the plans adopted for officers and key employees. The options are granted at fair market value on the grant date, generally vest ratably over a period of three years from the date of the grant and have a term of ten years. The 1997 Plan was amended during 2002 to limit the maximum number of shares of the Company’s Common Stock for which 1997 Awards under the 1997 Plan may be granted after April 2002 to 5,000,000 shares. At December 31, 2003, 2,097,709 shares were available for grant under the 1997 Plan, of which up to 150,000 shares annually may be restricted stock.

The Company issued 289,425, 257,025 and 256,700 shares of restricted stock in 2003, 2002 and 2001, respectively, from the 2002 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, 2003, 2002, and 2001 was approximately $42.08, $35.73 and $50.30, respectively. Related compensation expense of approximately $11 million, $9 million and $7 million was recognized for the years ended December 31, 2003, 2002 and 2001, respectively.

The Company’s 2000 Stock Option Plan (the 2000 Plan) for Non-Employee Directors provides for the annual grant of a nonqualified option for 2,000 shares of the Company’s Common Stock immediately following the Annual Meeting of Stockholders to each Director who is not a salaried officer 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 options vest immediately and have a term of 10 years. The exercise price per share with respect to each option is the fair market value, as defined in the 2000 Plan, of the Company’s 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 2000 Plan is 250,000. At December 31, 2003, 165,000 shares were available for grant under the 2000 Plan.

The following table summarizes information related to stock options outstanding and exercisable at December 31, 2003.

Exercisable stock options and weighted average exercise prices at December 31, 2002 and 2001 follow.

The Company is authorized to issue 75,000,000 shares of preferred stock, par value $.01 per share. 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.

The Company’s U.S. pension plans are non-contributory defined benefit plans covering all eligible U.S. employees. The benefits are based on years of credited service and final average compensation. Effective January 1, 2003, the Company amended its U.S. pension plan to provide cash balance benefits to new employees. U.S. employees hired before January 1, 2003, were given the choice to remain in the prior plan or accrue future benefits under the cash balance formula. 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 provides a charitable award benefit to Directors who were elected to serve on the Board of Directors prior to February 2003 and served for at least two years. Upon the death of a Director who qualifies for this benefit, the Company will donate $1 million to one or more educational institutions of higher learning or other charitable organizations, which may include private foundations, nominated by the Director. At December 31, 2003, a $7 million liability had been accrued for these benefits and is included in Other Liabilities and Deferred Credits on the Company’s Consolidated Balance Sheet.

The Company has a discretionary defined contribution plan (401(k) Plan). Under the 401(k) 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 $12,000 in 2003. The Company matches with cash, up to 6 or 8 percent of the employee’s eligible contributions based upon years of service. The Company contributed approximately $9 million, $9 million and $8 million to the 401(k) Plan for the years ended December 31, 2003, 2002 and 2001, respectively, to match eligible contributions by employees.

The following tables set forth the amounts recognized in the Consolidated Balance Sheet and Statement of Income.

The accumulated benefit obligation of the U.S. pension plans as of December 31, 2003 and December 31, 2002 was $159 million and $137 million, respectively. The measurement date is December 31. The Company expects to contribute $11 million to its U.S. pension plans in 2004.

The following table provides the target and actual asset allocations in the U.S. pension plan as of December 31,

The primary investment objective is to ensure, over the long-term life of the pension plans, an adequate pool of sufficiently liquid assets to support the benefit obligations to participants, retirees and beneficiaries. In meeting this objective, the pension plans seek to achieve a high level of investment return consistent with a prudent level of portfolio risk while maintaining asset allocations within 5 percent of the target allocation shown above.

To develop the expected long-term rate of return on assets assumption, the Company considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. Since the Company’s investment policy is to actively manage certain asset classes where the potential exists to outperform the broader market, the expected returns for those asset classes were adjusted to reflect the expected additional returns. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. This resulted in the selection of the 8 percent assumption.

A 10 percent annual rate of increase in the per capita cost of pre-age 65 covered health care benefits was assumed for 2004. The rate is assumed to decrease gradually to 5 percent for 2009 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 2011 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.

On December 8, 2003, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Act”) was signed into law. Benefit obligations and costs related to prescription drug coverage shown above do not reflect the

provisions of the Act because specific guidance on the accounting for the federal subsidy is pending and, when issued, could require the Company to change previously reported information.

The Company has entered into contracts which provide firm transportation capacity rights on pipeline systems. The remaining terms on these contracts range from 1 to 20 years and require the Company to pay transportation demand charges regardless of the amount of pipeline capacity utilized by the Company. The Company paid $179 million, $156 million and $128 million of demand charges for the years ended December 31, 2003, 2002 and 2001, respectively. All transportation costs including demand charges are included in transportation expense in the Consolidated Statement of Income.

The Company has operating leases for office space and other property and equipment. The Company incurred lease rental expense of $38 million, $29 million and $23 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Future minimum annual rental commitments under non-cancelable leases at December 31, 2003 follow.

During 1998, the Company entered into agreements to lease two deep water drilling rigs through 2004 with remaining commitments of $22 million. These commitments will be utilized by drilling exploration wells, partner participation or subletting to the extent possible. In addition, the Company has other drilling rig commitments of $5 million and $1 million for 2004 and 2005, respectively.

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 were consolidated during 1999 and 2000 for pre-trial proceedings by the United States Judicial Panel on Multidistrict Litigation 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 during the period of 1985 to the present. 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. The plaintiffs and the intervenor have not specified in their pleadings the amount of damages they seek from the Company. On December 5, 2003, the United States Judicial Panel on Multidistrict Litigation entered an order transferring the cases alleging claims of below-market prices, improper deductions, and transactions with affiliated companies for further pre-trial proceedings and trial in Wright v. AGIP, 5:03CV264, United States District Court for the Eastern District of Texas, Texarkana Division. The cases alleging improper measurement techniques remain pending in MDL-1293.

for alleged royalty underpayments, plus interest from the time such amounts were allegedly due. Plaintiffs additionally seek the recovery of punitive damages. The plaintiffs have not specified in their pleadings the amount of damages they seek from the Company. However, through pre-trial discovery, plaintiffs have provided defendants with alternative theories of recovery claiming monetary damages of up to $263.6 million in principal, plus interest, punitive damages and attorneys’ fees. The Company believes it has substantial defenses to these claims and is vigorously asserting such defenses. The Company and El Paso Natural Gas Company have asserted contractual claims for indemnity against each other. The court has certified the plaintiff classes of royalty and overriding royalty interest owners, and the parties are proceeding with pre-trial discovery. It is anticipated that this matter will be scheduled for trial during 2004. The Company currently does not believe that an unfavorable outcome is probable nor, in the event of an unfavorable outcome, is the Company reasonably able to estimate the possible loss, if any, or range of loss in these lawsuits. Accordingly, there has been no reserve established for this matter.

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 or results of operations of the Company, although cash flow could be significantly impacted in the reporting periods in which such matters are resolved.

The following is additional information concerning supplemental disclosures of cash payments.

(1) Capitalized interest was $25 million, $22 million and $9 million for the years ended December 31, 2003, 2002 and 2001, respectively.

At December 31, 2003, 2002 and 2001, capital expenditures included in Accounts Payable balance on the Consolidated Balance Sheet were $171 million, $290 million and $298 million, respectively.

As a result of this assessment in 2003, the Company recorded charges of $63 million related to the impairment of oil and gas properties due to performance related downward reserve adjustments associated with certain properties primarily in Canada. 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. These properties were sold during 2002.

The Company’s reportable segments are U.S., Canada and Other International. The Company is engaged principally in the exploration, development, production and marketing of natural gas, crude oil 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 $17 million and $157 million in 2002 and 2001, respectively. There were no intersegment sales in 2003.

The following is a reconciliation of segment income before income taxes and cumulative effect of change in accounting principle to consolidated income before income taxes and cumulative effect of change in accounting principle. For segment reporting purposes, corporate expenses, total interest expense and other expense (income)— net have been excluded from segment operations.

The following is a reconciliation of segment additions to properties to consolidated amounts.

The following is a reconciliation of segment net properties to consolidated amounts.

and gas companies, has included oil and gas mineral rights held under lease and other contractual arrangements representing the right to extract reserves as part of the oil and gas properties, even after SFAS No. 141 and No. 142 became effective.

On December 23, 2003, the FASB issued SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88, and 106. This statement revises employers’ disclosures about pension plans and other postretirement benefit plans. It does not change the measurement or recognition of those plans required by FASB Statements No. 87, Employers’ Accounting for Pensions, No. 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions. The new rules require additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. The new disclosures are effective for 2003 calendar year-end financial statements. The Company has adopted the revised disclosures as of December 31, 2003. See Note 13 of Notes to Consolidated Financial Statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS No. 150). SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of SFAS No. 150 and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The adoption of the provisions of SFAS No. 150 during 2003 did not impact the Company’s consolidated financial position or results of operations.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities (SFAS No. 149). SFAS No. 149 improves financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative, clarifies when a derivative contains a financing component, amends the definition of an “underlying” to conform it to language used in FIN No. 45 and amends certain other existing pronouncements. SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. In addition, with some exceptions, all provisions of SFAS No. 149 should be applied prospectively. The adoption of SFAS No. 149 did not have a material impact on the Company’s consolidated financial position or results of operations.

The management of the Company 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 controls and a program of internal auditing that provides management with reasonable assurance that the Company’s assets are protected and that its 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 BR’s independent auditors, financial management, counsel and internal audit. To ensure complete independence, the independent auditors and internal audit personnel 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 auditors 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.

In our opinion, 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, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 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. 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 provide a reasonable basis for our opinion.

Additionally, as discussed in Note 10 to the consolidated financial statements, on January 1, 2003, the Company changed its method of accounting for its asset retirement obligations in connection with its adoption of Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations.” Additionally, as discussed in Note 8 to the consolidated financial statements, on January 1, 2001, the Company changed its method of accounting for its derivative instruments and hedging activities in connection with its adoption of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended.

At your request, we reviewed the estimates of domestic and international proved reserves of oil, condensate, natural gas, and natural gas liquids (NGLs) that Burlington Resources Inc. (BR) attributes to its net interests in oil and gas properties as of December 31, 2003. BR’s estimates of proved reserves shown below are in accordance with the definitions contained in Securities and Exchange Commission Regulation S-X, Rule 4-10(a).

Based on our investigations and subject to the limitations described hereinafter, it is our judgment that (1) BR has an effective system for gathering data and documenting information required to estimate its proved reserves; (2) in making its estimates, BR uses appropriate engineering, geologic, and evaluation principles and techniques that are in accordance with practices generally accepted in the petroleum industry; and (3) the results of the estimates prepared by BR that we reviewed are, in the aggregate, reasonable.

Gas volumes were estimated at the appropriate pressure base and temperature base established for each well or field by the applicable sales contract or regulatory body. Total gas reserves were obtained by summing the reserves for all the individual properties and are therefore stated at a mixed pressure base.

In conducting our audit, we reviewed BR’s estimates of wet gas volumes prior to adjustment for impurities, shrinkage, and NGL recovery. We reviewed these wet gas volumes, along with the methods employed by BR, to convert these volumes to sales gas volumes and NGLs. In our judgment, the conversion methods used by BR to adjust the wet volumes to account for impurities, fuel use, shrinkage, and NGL recovery are appropriate and reasonable.

We reviewed approximately 82 percent of BR’s estimated proved reserves forecasts and either accepted their forecast or revised it as needed. We selected the sampling of properties for independent estimates and review. In general, those properties with the largest reserves were selected for review. We investigated the pertinent available engineering, geological, and accounting information to satisfy ourselves that BR’s reserve estimates are, in the aggregate, reasonable. In making our reserve estimates and comparing them with BR’s estimates, we used product prices and expenses provided by BR. The prices used were represented by BR as the actual prices received for oil, condensate, natural gas, and NGLs on December 31, 2003, and are in accordance with Securities and Exchange Commission guidelines.

These reserve estimates are based primarily on decline curve analysis, material balance calculations, volumetric calculations, analogies, or combinations of these methods. Reserve estimates from volumetric calculations and from analogies are often less certain than reserve estimates based on well performance obtained over a period during which a substantial portion of the reserves were produced.

In conducting these evaluations, we relied upon production histories, accounting data, and other financial, operating, engineering, geological and geophysical data supplied by BR. To a lesser extent, data existing in the files of Miller and Lents, Ltd. and data obtained from commercial services were used. We also relied, without independent verification, upon BR’s representation of its ownership interests for each property.

Miller and Lents, Ltd. is an independent oil and gas consulting firm. No director, officer, or key employee of Miller and Lents, Ltd. has any financial ownership in Burlington Resources Inc. or any affiliated company. Our compensation for the required investigations and preparation of this report is not contingent on the results obtained and reported, and we have not performed other work that would affect our objectivity. Production of this report was supervised by an officer of the firm who is a professionally qualified and licensed Professional Engineer in the State of Texas with more than 20 years of relevant experience in the estimation, assessment, and evaluation of oil and gas reserves.

The evaluations presented in this report, with the exceptions of those parameters specified by others, reflect our informed judgments based on accepted standards of professional investigation but are subject to those generally recognized uncertainties associated with interpretation of geological, geophysical, and engineering information. Government policies and market conditions different from those employed in this study may cause the total quantity of oil or gas to be recovered, actual production rates, prices received, or operating and capital costs to vary from those reviewed for this report.


	Very truly yours,

	MILLER AND LENTS, LTD.


	By


	Christopher A. Butta
	Senior Vice President


Re:	Unqualified Audit Opinion of Burlington Resources Incorporated Canadian and Argentine Proved Reserves, as of December 31, 2003

At your request, we have examined the proved oil, natural gas liquids, and natural gas reserve estimates of Burlington Resources Incorporated (“Burlington”) Canadian and Argentine properties as of December 31, 2003. Our examination included such tests and procedures as we considered necessary under the circumstances to render the opinion set forth herein.

Tables 1 and 2 set forth Burlington’s estimates of proved oil, natural gas liquids and natural gas reserves, which are in accordance with the definitions contained in Securities and Exchange Commission Regulation S-X, Rule 4-10(a).

Summary of Burlington Resources Incorporated Canadian Proved Reserve Estimates

The volumes of natural gas liquids are comprised of ethane, propane, butane, condensate and pentanes plus. All volumes are reported net, after royalties.

Summary of Burlington Resources Incorporated Argentine Proved Reserve Estimates


*	In this table, the gas reserves shown are net marketable volumes after processing shrinkage and fuel losses. The volumes of condensate and pentanes plus have been included with the oil. All volumes are net, after royalties.

We are independent with respect to Burlington, as provided in the Standard Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information promulgated by the Society of Petroleum Engineers.

Our audit does not constitute a complete reserve study of the oil and gas properties of Burlington. In the conduct of our audit, we did not independently verify the accuracy and completeness of information and data furnished by Burlington with respect to ownership interests, oil and gas production, historical costs of operation and development, product prices (except for the Argentine properties, where prices were verified), agreements relating to current and future operations and sales of production, etc. Burlington’s Canadian reserve assignments were audited directly by tying into the PEEP reserve database over the Internet, and by reviewing available public data to determine if those assignments were reasonable. If in the course of our examination something came to our attention that brought into question the validity or sufficiency of any such information or data, we did not rely on such information or data until we had satisfactorily resolved our questions relating thereto or independently verified such information or data.

The proved developed producing reserves and production forecasts were estimated by production decline extrapolations, water-oil ratio trends, material balance, or by volumetric calculations. For some properties with insufficient performance history to establish trends, we estimated future production by analogy with other properties with similar characteristics. The past performance trends of many properties were influenced by production curtailments, workovers, waterfloods, and/or infill drilling. Actual future production may require that our estimated trends be significantly altered.

The estimated proved undeveloped reserves require significant capital expenditures for items such as the drilling, completion and tie-in of wells. The proved undeveloped reserve estimates for infill wells are based on analogies to similar infill wells in the same field and/or the production histories of offset wells in the same field.

Reserve estimates from volumetric calculations and from analogies are often less certain than reserve estimates based on well performance obtained over a period during which a substantial portion of the reserves was produced.

The reserve estimates presented in this report, with the exceptions of those parameters specified by others, reflect our informed judgements based on accepted standards of professional investigation, but are subject to those generally recognized uncertainties associated with interpretation of geological, geophysical and engineering information. Government policies and market conditions different from those employed in this review may cause the total quantity of oil or gas to be recovered, actual production rates, prices received, or operating and capital costs to vary from those estimated in this audit.

In our opinion, the estimates of Burlington’s proved reserves are, in the aggregate, reasonable and have been prepared in accordance with generally accepted petroleum engineering and evaluation principles as set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserve Information promulgated by the Society of Petroleum Engineers.

This letter is solely for the information of Burlington Resources Inc. and for the information and assistance of its independent public accountants in connection with their review of, and report upon, the financial statements of Burlington Resources Inc. This letter should not be used, circulated or quoted for any other purpose without the express written consent of the undersigned or except as required by law.

Our working papers are available for review upon request. If you have any questions regarding the above, or if we may be of further assistance, please call us.


	Sincerely,


	By



	Robert N. Johnson, P.Eng.
	Manager, Engineering


	By



	Kenneth H. Crowther, P.Eng.
	President


PERMIT TO PRACTICE SPROULE ASSOCIATES LIMITED

Signature


Date

PERMIT NUMBER: P 417
The Association of Professional Engineers,
Geologists and Geophysicists of Alberta

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.

The Company estimates that it will spend capital of approximately $440 million, $370 million and $385 million in 2004, 2005 and 2006, respectively, for the development of its proved undeveloped reserves.


(1)	Amounts are shown net of current year estimated cash flow revisions.

(2)	The amounts exclude deferred taxes of $902 million related to the Hunter acquisition.

(3)	The amount for Canada includes $858 million of unproved properties acquired with the Hunter acquisition.

Results of operations for natural gas, NGLs and crude oil producing activities, which exclude processing and other activities, corporate general and administrative expenses and fixed-rate depreciation expense, were as follow. Intersegment sales were $17 million and $157 million in 2002 and 2001, respectively. There were no intersegment sales in 2003.

The following table reflects estimated quantities of proved natural gas, NGLs and crude oil reserves. These reserves have been estimated by the Company’s petroleum engineers in accordance with the Securities and Exchange Commission’s regulations. 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.

Miller and Lents, Ltd. and Sproule Associates Limited, independent oil and gas consultants, have reviewed the estimates of proved reserves of natural gas, NGLs and crude oil that BR attributed to its net interests in oil and gas properties as of December 31, 2003. Miller and Lents, Ltd. reviewed the reserve estimates for the Company’s U.S. and international interests (excluding Canada and Argentina) and Sproule Associates Limited reviewed the Company’s interests in Canada and Argentina. Based on their review of more than 80 percent of the Company’s reserve estimates, it is their judgment that the estimates are reasonable in the aggregate.

A summary of the standardized measure of discounted future net cash flows relating to proved natural gas, NGLs and crude oil 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 natural gas, NGLs and crude oil reserves.

A summary of the changes in the standardized measure of discounted future net cash flows applicable to proved natural gas, NGLs and crude oil reserves follows.

Under the supervision and with the participation of certain members of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, the Company completed an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer believe that the disclosure controls and procedures were effective as of the end of the period covered by this report with respect to timely communicating to them and other members of management responsible for preparing periodic reports all material information required to be disclosed in this report as it relates to the Company and its consolidated subsidiaries.

The Company’s management does not expect that its disclosure controls and procedures or its internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some person or by collusion of two or more people. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Accordingly, the Company’s disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, the Company’s management has concluded, based on their evaluation as of the end of the period, that our disclosure controls and procedures were sufficiently effective to provide reasonable assurance that the objectives of our disclosure control system were met.

There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND EXECUTIVE COMPENSATION

A definitive proxy statement for the 2004 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,” “Executive Compensation” and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference. Certain information with respect to the executive officers of the Company is set forth under the caption “Executive Officers of the Registrant” in Part I of this report. Certain information with respect to the Audit Committee and Audit Committee financial experts is set forth under the caption “Corporate Governance” in the Proxy Statement and is incorporated herein by reference.

The Company has adopted a Code of Business Conduct and Ethics (Code of Conduct) that applies to directors, officers and employees, including the principal executive officer, principal financial officer and principal accounting officer or controller and has posted such code on its Web site at www.br-inc.com. Changes to and waivers granted with respect to the Company’s Code of Conduct related to the above named officers, other executive officers and Directors required to be disclosed pursuant to the applicable rules and regulations will also be posted on the Company’s Web site. The Company’s Code of Conduct, as well as its Corporate Governance Guidelines and its Audit, Compensation

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

Certain information required by this item is set forth under the caption “Stock Ownership of Management and Certain Other Holders” in the Proxy Statement and is incorporated herein by reference.


(1)	See Note 12 of Notes to Consolidated Financial Statements for a description of the Company’s 1997 Employee Stock Incentive Plan, which is the only compensation plan in effect that was adopted without the approval of the Company’s stockholders.

(2)	In connection with BR’s proposed 2-for-1 stock split in the form of a share distribution payable on June 1, 2004 to stockholders of record on May 5, 2004 and subject to stockholder approval of an amendment to BR’s Certificate of Incorporation increasing the number of authorized shares of BR’s Common Stock from 325 million to 650 million shares, the number of equity securities in the above table shall be adjusted by multiplying each relevant number by 2.

The information required by this item is set forth under the caption “Certain Relationships and Related Transactions” in the Proxy Statement and is incorporated herein by reference.

The information required by this item is set forth under the caption “Principal Accountant Fees and Services” in the Proxy Statement and is incorporated herein by reference.

On October 22, 2003, the Company furnished on Form 8-K, pursuant to Item 12, Results of Operations and Financial Condition, and Item 9, Regulation FD Disclosure, a press release announcing its earnings results for the third quarter of fiscal year 2003.

On November 17, 2003, the Company disclosed on Form 8-K, pursuant to Item 5, Other Events, a reduction in the Canadian federal income tax rate for companies in the natural resources sector.

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.


	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.


†	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.

80 EX-10.9 3 h11939exv10w9.txt 1991 DIRECTOR CHARITABLE AWARD PLAN EXHIBIT 10.9 AMENDMENT NO. 3 TO BURLINGTON RESOURCES INC. 1991 DIRECTOR CHARITABLE AWARD PLAN The Burlington Resources Inc. 1991 Director Charitable Award Plan (the "Plan") is hereby amended, effective as of December 17, 2003, as follows: 1. The first sentence of Section 1.2 of the Plan is amended to read in its entirety as follows: "The purpose of the Plan is to promote the mutual interest of the directors and the Company to support Institutions of Higher Learning and other worthy charitable organizations, and to enhance the positive image of the Company." 2. Subparagraph (e) of Article 2 of the Plan is amended to read in its entirety as follows: "(e) 'Committee' means the Compensation Committee of the Board of Directors." 3. Subparagraph (n) of Article 2 of the Plan is amended to read in its entirety as follows: "(n) 'Qualified Donee' means: (i) any Institution of Higher Learning which (A) qualifies for tax deductible contributions under Code Section 170(c)(2) or any successor statute, and (B) has not been denied status as a Qualified Donee by the Board of Directors pursuant to Section 5.2 herein; or (ii) any organization other than an Institution of Higher Learning (including without limitation a private foundation described in Code Section 509) which (A) qualifies for tax deductible contributions under Code Section 170(c)(2) or any successor statute, and (B) has been approved as a Qualified Donee by the Board of Directors pursuant to Section 5.2 herein." 4. Section 3.1 of the Plan is amended to read in its entirety as follows: "3.1. Committee. The Plan shall be administered by the Board of Directors and the Committee. The Committee shall interpret the Plan, prescribe, amend and rescind rules relating to it, select eligible Participants, and take all other actions necessary for its administration. No member of the Committee shall vote on any matter that pertains solely to himself or herself." 5. Section 5.2 of the Plan is amended to read in its entirety as follows: "5.2. Designation of Donees. Each Participant shall nominate eligible organizations (as described in subparagraph (n) of Article 2) to receive Charitable Awards by providing formal notice of such nominations to the Committee. Following the receipt of the nominations of organizations, the Committee will review each nomination. If the nominated organization is an Institution of Higher Learning, the Committee may, if it so determines, recommend to the Board of Directors that the nomination be denied. If the nominated organization is not an Institution of Higher Learning, the Committee will make a recommendation to the Board of Directors as to whether or not the nomination should be approved by the Board of Directors. The Board of Directors, by majority vote, shall have the authority to approve or deny status as a Qualified Donee to any organization nominated by a Participant. In the event that one or more Institutions of Higher Learning are nominated by a Participant for status as a Qualified Donee but that nomination is denied by the Board of Directors, the Participant may nominate additional eligible organizations to receive a Charitable Award, subject to approval or denial as described in this Section 5.2. In the event one or more organizations other than Institutions of Higher Learning are nominated by a Participant for status as a Qualified Donee but are not approved for such status by the Board of Directors, the Participant may nominate additional eligible organizations to receive a Charitable Award, subject to approval or denial as described in this Section 5.2. "All nominations of organizations to receive Charitable Awards shall be made on a Charitable Award Nomination Form, which shall specify the following: (i) the name of the nominated organization; (ii) the amount desired by the Participant to be donated to the organization; (iii) the name under which the -2- donation is to be made; and (iv) any other terms and provisions deemed necessary by the Board of Directors or the Committee. Each completed Charitable Award Nomination Form shall be submitted to the Corporate Secretary of the Company." 6. The first and second sentences of Section 5.3 of the Plan are amended to read in their entirety as follows: "Participants may, at any time, nominate an alternative eligible organization (as described in subparagraph (n) of Article 2) to receive a Charitable Award (subject to approval or denial as described in Section 5.2 herein). In addition, Participants may, at any time, request a change in the amount of money to be donated to each such Qualified Donee, or a change in the name under which the donation is to be made, subject to approval or denial as described in Section 5.2 herein." -3- EX-10.14 4 h11939exv10w14.txt AMENDMENT TO 1993 STOCK INCENTIVE PLAN EXHIBIT 10.14 AMENDMENT TO 1993 BURLINGTON RESOURCES INC. STOCK INCENTIVE PLAN The 1993 Burlington Resources Inc. Stock Incentive Plan (the "Plan") is hereby amended in the following respects: 1. The last sentence of Section 9.2 of the Plan is amended to read in its entirety as follows: "If the Plan Administrator determines that any shares of Restricted Stock granted or to be granted under the Plan will be represented by the issuance of certificates, the Plan Administrator may require, under such terms and conditions as it deems appropriate or desirable, that the certificates for such Restricted Stock may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the Restriction Period (as defined in Section 9.3) expires or until restrictions thereon otherwise lapse, and may require, as a condition of any receipt of Restricted Stock, that the Participant shall have delivered a stock power endorsed in blank relating to the shares of Restricted Stock." 2. Section 9.8 of the Plan is amended to read in its entirety as follows: "9.8 The Plan Administrator shall in its discretion determine whether any shares of Restricted Stock granted or to be granted under the Plan will be represented by the issuance of a certificate for such shares registered in the name of the Participant (subject to Section 9.2) or will be represented by a book entry reflecting the grant to the Participant." 3. The first sentence of Section 11.2 of the Plan is amended to read in its entirety as follows: "All certificates for shares issued in respect of Restricted Stock awards or in respect of the exercise of Stock Purchase Rights shall be subject to such stop-transfer orders and other restrictions as the Plan Administrator may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Common Stock is then listed and any applicable federal or state securities laws, and the Plan Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions." Adopted by the Compensation Committee of the Board of Directors of Burlington Resources Inc. on December 17, 2003. EX-10.17 5 h11939exv10w17.txt $400 MILLION SHORT-TERM REVOLVING CREDIT AGREEMENT EXHIBIT 10.17 $400,000,000 SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998, as Amended and Restated as of December 7, 2001, as Amended on April 25, 2002, as Amended and Restated as of December 5, 2002, and as further Amended and Restated as of December 4, 2003 among BURLINGTON RESOURCES INC., THE LENDERS LISTED HEREIN, JPMORGAN CHASE BANK, as Administrative Agent and Auction Administrative Agent CITIBANK, N.A. FLEET NATIONAL BANK, as Co-Syndication Agents and BANK OF AMERICA, N.A. THE BANK OF NOVA SCOTIA, as Co-Documentation Agents i TABLE OF CONTENTS

iii

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 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 New York Counsel for Borrower Exhibit J Form of Designation Agreement SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of February 25, 1998, as amended and restated as of December 7, 2001, as amended by Amendment No. 1 dated as of April 25, 2002, as amended and restated as of December 5, 2002, and as further Amended and Restated as of December 4, 2003 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 THE BANK OF NOVA SCOTIA, as co-documentation agents, agree as follows: ARTICLE I Definitions and Accounting Terms SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "A ADVANCE" means an advance by a Lender to the Borrower as part of an A Borrowing, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a "TYPE" of A Advance). "A BORROWING" means a borrowing consisting of A Advances of the same Type made on the same day by the Lenders pursuant to Section 2.01 and, in the case of Eurodollar Rate Advances, having Interest Periods of the same duration, it being understood that there may be more than one A Borrowing on a particular day. "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. 5 "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 Amended and Restated 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 6 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. "CANADIAN CREDIT AGREEMENT" means the Canadian Credit Agreement dated as of March 31, 2000, as amended and restated through the date hereof, among Burlington Resources Canada Ltd. and Burlington Resources Canada (Hunter) Ltd. (f/k/a Canadian Hunter Exploration Ltd.), as the borrowers, Burlington Resources Inc., as parent, the financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as administrative agent for such financial institutions, Citibank, N.A., Canadian branch, and Fleet National Bank, as co-syndication agents, and Bank of America, N.A., Canada Branch and The Bank of Nova Scotia as co-documentation agents, as the same may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time. "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 7 cumulative amount by which such common stockholders' equity of the Borrower 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, supplemented, extended, replaced 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). "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. 8 "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. "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. 9 "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 4, 2003. "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 10 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 rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "Eurodollar Rate" with respect to such A Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "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 G and shall be delivered to the Administrative Agent in writing. 11 "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. "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. 12 "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). 13 "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 through the date hereof, 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, as the same may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time. "MAJORITY LENDERS" means i) for purposes of acceleration of the Advances and other amounts outstanding under Article 6 hereof, Lenders holding at least 51% of the then aggregate unpaid principal amount of the Advances held by Lenders or (ii) for all other purposes of this Agreement, 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. 14 "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, supplemented, extended, replaced 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 15 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 (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; 16 (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 (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 17 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). "REGISTER" has the meaning specified in Section 8.07(c). "RELATED PERSON" means, with respect to any member of the group comprised of a particular Business Entity and its Affiliates and the respective directors, officers, employees or agents of such Business Entity and its Affiliates, each other member of such group. "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 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 2, 2004, 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. 18 "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. 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. Except as otherwise expressly provided herein, all terms of an accounting or financial nature used herein or in any determination of compliance with any covenant or other provision hereof shall be construed in accordance with generally accepted accounting principles referred to in Section 1.03 of the Long-Term Revolving Credit Agreement as such agreement is in effect on the date hereof. "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. 19 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 II 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). (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. 20 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, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras, 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. (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. 21 (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 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. 22 (c) TERM A ADVANCE PREMIUM FEE. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a premium fee of 0.25% per annum on the average daily amount of the outstanding principal amount of such Lender's Term A Advances hereunder, payable quarterly in arrears on the last day of each March, June, September and December and on the date on which the last of such Lender's Term A Advances shall be repaid. (d) 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. (e) 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 23 Interest Period plus the Eurodollar Rate Margin 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 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 and under Section 2.03(c) 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, plus, in the case of a Term A Advance, any additional interest payable pursuant to Section 2.06(a)(iii). 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 24 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 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, if any, the applicable interest rate under Section 2.06(a)(iii). (b) 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. (c) 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. (d) 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 25 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 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 26 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. 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 27 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. 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 28 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, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras, 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 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. 29 (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 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 30 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 31 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 32 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 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 33 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 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 34 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 B Borrowing, upon receipt, that the Administrative Agent has received forms of documents appearing to fulfill the 35 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). 36 (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 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. 37 (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 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 38 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. (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 39 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 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 40 of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III 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; (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, 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. 41 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 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 42 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 IV Representations and Warranties SECTION 4.01. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows: (a) The Borrower is a Business Entity duly formed, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly organized, validly existing and in good standing in the jurisdiction of its formation. The Borrower and each Material Subsidiary possess all applicable Business Entity 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 applicable Business Entity powers, have been duly authorized by all necessary applicable Business Entity action, and do not contravene (i) the Borrower's organizational documents 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 43 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, 2002 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, 2003 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, 2002, and September 30, 2003, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 2003 statements to normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied (except as disclosed therein). From September 30, 2003 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. 44 (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. (n) The proceeds of the Advances will not be used in any way which would violate the provisions of Regulation U or X of the Board of Governors of the Federal Reserve System. 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 V 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: 45 (a) PRESERVATION OF 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) applied consistently with those referred to in Section 1.03 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 46 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, notwithstanding the provisions of Section 1.03, any change referred to in clause (ii) or (iii) above would result in a covenant contained in Section 5.01 or 5.02 being calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with the provisions of Section 1.03, the Administrative Agent, the Lenders and the Borrower agree, upon request by the Borrower to the Administrative Agent or by the Administrative Agent to the Borrower, 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 definitions and accounting principles applicable to the Borrower and its consolidated Subsidiaries which do meet the standards set forth in 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 47 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; (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, 48 (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 maturing within one year and evidenced by instruments commonly known as commercial paper or Canadian variable demand notes (other than Debt incurred pursuant to this Agreement, the Long-Term Revolving Credit Agreement, the Canadian Credit Agreement or any other liquidity, working capital or acquisition financing facility with banks or other financial institutions 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 49 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 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. 50 (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 then in effect 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 then in effect, (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, (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 and (v) if the financial statements for such quarter shall reflect any change in generally accepted accounting principles from those referred to in Section 1.03 that shall have the effect of changing the information presented in the financial statements accompanying such certificate from what such information would have been if presented in accordance with the generally accepted accounting principles referred to in Section 1.03, a statement describing 51 the nature of such change; provided that no such statement shall be required to the extent (A) such description is set forth in such financial statements or the notes thereto or (B) a statement with respect to such change shall have been delivered in connection with the delivery of, or disclosed in, financial statements under Section 5.03 (a), (b) or (e) for any prior fiscal period; (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 then in effect 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 (which letter may be limited in form, scope and substance to the extent required by applicable accounting rules or guidelines in effect from time to time); (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, (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 and (iv) if the financial statements for such fiscal year shall reflect any change in generally accepted accounting principles from those referred to in Section 1.03 that shall have the effect of changing the information presented in the financial statements accompanying such certificate from what such information would have been if presented in accordance with the generally accepted accounting principles referred to in Section 1.03, a statement describing the nature of such change; provided that no such statement shall be required to the extent (A) such description is set forth in such financial statements or the notes thereto or (B) a statement with respect to such change shall have been delivered in connection with the delivery of, or disclosed in, financial statements under Section 5.03 (a), (b) or (e) for any prior fiscal period; (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; 52 (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 after the Borrower has had a reasonable opportunity to preliminarily evaluate the same, written 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, which notice may be effected by delivery, in accordance with applicable securities laws, of reports and statements referred to in clause (a), (b) or (e) above; (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 53 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 VI Events of Default SECTION 6.01. Events of Default. If any of the following events ("EVENTS OF DEFAULT") shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any 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 54 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 (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 55 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 56 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 VII 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 57 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 58 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 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 59 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 VIII 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, waive or otherwise change 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. (a) 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 60 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, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras, Telefax: (713) 427-6307, 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, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras, Telefax: (713) 427-6307; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. (b) All such notices and communications shall be effective, (i) in the case of any notice or communication given by certified mail, when receipted for, (ii) 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, (iii) in the case of any notice or communication delivered by hand or courier, when so delivered and (iv) in the case of any report, notice or information referred to in Section 8.02(c), when posted with posting confirmed by electronic correspondence, or otherwise deemed delivered pursuant to procedures approved by the Administrative Agent, 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. (c) Reports, notices, and information required to be delivered pursuant to Section 5.03 shall be deemed to have been delivered if such reports, notices, and information (or, in the case of any information, one or more annual or quarterly reports containing such information) shall have been posted by the Administrative Agent on an IntraLinks or similar site to which the Lenders have been granted access or shall be available on the website of the Securities and Exchange Commission at http://www.sec.gov (and, in each case, a confirming electronic correspondence shall have been delivered or caused to be delivered providing notice of such posting or availability); provided that the Borrower shall deliver paper copies of such information to any Lender that requests such delivery. Reports, notices and information required to be delivered pursuant to Section 5.03 may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent. Categories of reports, notices and information approved by the Administrative Agent may be given by e-mail pursuant to procedures approved by the Administrative Agent. 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 61 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(d) 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 AND EACH LENDER AND THEIR RESPECTIVE RELATED PERSONS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") 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 ANY INDEMNIFIED PARTY IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT SUCH INDEMNIFIED PARTY 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 62 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 SUCH INDEMNIFIED PARTY OR ANY OF ITS RELATED PERSONS, OR BY REASON OF ANY USE OR DISCLOSURE BY SUCH INDEMNIFIED PARTY OR ANY OF ITS RELATED PERSONS OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR PROPOSED ACQUISITION OR ANY SUCH USE OR PROPOSED USE OF THE ADVANCES). 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 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 63 $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 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 64 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 recording in the Register, a 65 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 66 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. (a) 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 67 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. (b) Notwithstanding anything herein to the contrary, any party subject to confidentiality obligations hereunder (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, such party's U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated hereby relating to such party and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, no disclosure of any information relating to such tax treatment or tax structure may be made to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws. 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. 68 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. SECTION 8.13. Entire Agreement, Etc. This Agreement, together with any other documents executed in connection herewith, express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 8.01. 69 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BURLINGTON RESOURCES INC. By: /s/ DANIEL D. HAWK ------------------------------------- Name: Daniel D. Hawk Title: Vice President & Treasurer JPMORGAN CHASE BANK, in its individual capacity and as Administrative Agent and Auction Administrative Agent, By: /s/ RUSSELL A. JOHNSON ------------------------------------- Name: Russell A. Johnson Title: Vice President Name of Institution: ABN AMRO BANK N.V. By: /s/ JOHN D. REED ------------------------------------- Name: John D. Reed Title: Vice President By: /s/ QUANDRA L. KELLEY ------------------------------------- Name: Quandra L. Kelley Title: Assistant Vice President Name of Institution: BANK OF AMERICA, NA By: /s/ RICHARD L. STEIN ------------------------------------- Name: Richard L. Stein Title: Principal Name of Institution: THE BANK OF NEW YORK By: /s/ CRAIG ANDERSON ------------------------------------- Name: Craig Anderson Title: Vice President Name of Institution: THE BANK OF NOVIA SCOTIA By: /s/ N. BELL ------------------------------------- Name: N. Bell Title: Senior Manager Name of Institution: THE BANK OF TOKYO - MITSUBISHI, LTD. By: /s/ JOHN W. MCGHEE ------------------------------------- Name: John W. McGhee Title: V.P. & Manager SIGNATURE PAGE TO BURLINGTON RESOURCES INC. SHORT-TERM REVOLVING CREDIT AGREEMENT DATED AS OF DECEMBER 4, 2003 Name of Institution: BANK ONE, NA By: /s/ JANE BEKKEIL ------------------------------------- Name: Jane Bekkeil Title: Director Name of Institution: BARCLAYS BANK PLC By: /s/ NICHOLAS A. BELL ------------------------------------- Name: Nicholas A. Bell Title: Director-Loan Transaction Management Name of Institution: BMO NESBITT BURNS FINANCING, INC. By: /s/ JAMES V. DUCOTE ------------------------------------- Name: James V. Ducote Title: Vice President Name of Institution: BNP PARIBAS By: /s/ DOUGLAS R. LIFTMAN ------------------------------------- Name: Douglas R. Liftman Title: Managing Director By: /s/ BETSY JOCHER ------------------------------------- Name: Betsy Jocher Title: Vice President Name of Institution: CITIBANK, NA By: /s/ AMY K. PINCU ------------------------------------- Name: Amy K. Pincu Title: Attorney-in-Fact Name of Institution: CREDIT SUISSE FIRST BOSTON acting through its Cayman Islands Branch By: /s/ JAMES P. MORAN ------------------------------------- Name: James P. Moran Title: Director By: /s/ DAVID J. DODD ------------------------------------- Name: David J. Dodd Title: Associate Name of Institution: DEUTSCHE BANK AG NEW YORK BRANCH By: /s/ PHILIPPE SANDMEIER ------------------------------------- Name: Philippe Sandmeier Title: Director By: /s/ OLIVER RIEDINGER ------------------------------------- Name: Oliver Riedinger Title: Vice President Name of Institution: FLEET NATIONAL BANK By: /s/ TERRENCE RONAN ------------------------------------- Name: Terrence Ronan Title: Managing Director Name of Institution: MELLON BANK, N.A. By: /s/ ROGER E. HOWARD ------------------------------------- Name: Roger E. Howard Title: Vice President Name of Institution: MERRILL LYNCH BANK USA By: /s/ LOUIS ALDER ------------------------------------- Name: Louis Alder Title: Vice President Name of Institution: MORGAN STANLEY BANK By: /s/ JAAP L. TONCKENS ------------------------------------- Name: Jaap L. Tonckens Title: Vice President Name of Institution: ROYAL BANK OF CANADA By: /s/ LINDA M. STEPHENS ------------------------------------- Name: Linda M. Stephens Title: Authorized Signatory Name of Institution: ROYAL BANK OF SCOTLAND plc By: /s/ KEITH JOHNSON ------------------------------------- Name: Keith Johnson Title: Senior Vice President Name of Institution: SOCIETE GENERALE By: /s/ J. DOUGLAS MCMURRAY, JR. ------------------------------------- Name: J. Douglas McMurray, Jr. Title: Managing Director Name of Institution: SUNTRUST BANK By: /s/ JAMES M. WARREN ------------------------------------- Name: James M. Warren Title: Director Name of Institution: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ DAVID HUMPHREYS ------------------------------------- Name: David Humphreys Title: Vice President Name of Institution: WELLS FARGO BANK, N.A. By: /s/ PAUL A. SQUIRES ------------------------------------- Name: Paul A. Squires Title: Vice President SCHEDULE I MATERIAL SUBSIDIARIES Burlington Resources Canada Ltd. Burlington Resources Canada (Hunter) Ltd. The Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company LP BROG GP Inc. BROG LP Inc. Burlington Resources Canada Partnership SCHEDULE II PRICING GRID

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). SCHEDULE III The Initial Lenders (US Tranche)

EX-10.18 6 h11939exv10w18.txt $600 MILLION LONG-TERM REVOLVING CREDIT AGREEMENT EXHIBIT 10.18 AMENDMENT NO. 3, dated as of December 4, 2003 (this "Amendment No. 3" or this "Amendment"), in respect of the LONG-TERM REVOLVING CREDIT AGREEMENT dated as of February 25, 1998, as amended and restated as of December 7, 2001, and as amended through the date hereof (the "Credit Agreement"), among BURLINGTON RESOURCES INC., a Delaware corporation (the "Borrower"), the financial institutions (the "Lenders") listed on the signature pages thereof, JPMorgan Chase Bank, as administrative agent (the "Administrative Agent") and as auction administrative agent, 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. The Borrower has requested that the Credit Agreement be amended as set forth in Section 1 below, and the other parties hereto are willing so to amend the Credit Agreement. Each capitalized term used but not defined herein and defined in the Credit Agreement has the meaning assigned thereto in the Credit Agreement. In consideration of the premises and the agreements and provisions herein contained, the parties hereto hereby agree, on the terms and subject to the conditions set forth herein, as follows: SECTION 1. Amendment. Pursuant to Section 8.01 of the Credit Agreement and upon the effectiveness of this Amendment No. 3 as provided in Section 3 below, the Credit Agreement shall be amended as follows: (a) Amendments of Section 1.01. Section 1.01 is amended as follows: (i) The following definition is added to Section 1.01 in its appropriate alphabetical location: "'RELATED PERSON' means, with respect to any member of the group comprised of a particular Business Entity and its Affiliates and the respective directors, officers, employees or agents of such Business Entity and its Affiliates, each other member of such group." (ii) The definition of "Capitalization" is amended by replacing the phrase "Consolidated Tangible Net Worth" with the following: "such common stockholders' equity of the Borrower"; (iii) The definition of "Canadian Credit Agreement" is amended to read as follows: "'CANADIAN CREDIT AGREEMENT' means the Canadian Credit Agreement dated as of March 31, 2000, as amended and restated through the date hereof, among Burlington Resources Canada Ltd. and Burlington Resources Canada (Hunter) Ltd. (f/k/a Canadian Hunter Exploration Ltd.), as the borrowers, Burlington Resources Inc., as parent, the financial institutions party thereto, JPMorgan Chase Bank, Toronto Branch, as administrative agent for such financial institutions, Citibank, N.A., Canadian branch, and Fleet National Bank, as co- 2 syndication agents, and Bank of America, N.A., Canada Branch and The Bank of Nova Scotia as co-documentation agents, as the same may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time."; (iv) The definition of "Clam Credit Agreement" is amended by replacing the clauses after "refinancing such Amended and Restated Credit Agreement," with the following: "in each case, as amended, restated, supplemented, extended, replaced or otherwise modified from time to time."; (v) The definition of "Eurodollar Rate" is amended to read as follows: "'EURODOLLAR RATE' means, for any Interest Period for each Eurodollar Rate Advance comprising part of the same A Borrowing, the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "Eurodollar Rate" with respect to such A Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period."; (vi) The definition of "Morgan Gold Loans" is amended by inserting after "restated," the clause "supplemented," and after "extended" the following: ",replaced"; (vii) The definition of "Reference Banks" is amended by deleting the definition; and (viii) The definition of "Short-Term Revolving Credit Agreement" is amended to read as follows: "'SHORT-TERM REVOLVING CREDIT AGREEMENT' means the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated through the date hereof, 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 The Bank of Nova Scotia, as co-documentation agents, as the same may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time." (b) Amendment of Section 1.03. Section 1.03 is amended to read as follows: "Section 1.03. Accounting and Other Terms. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with generally accepted accounting principles as in effect and as applied at December 31, 2002. 3 "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." (c) Amendment of Section 2.02. Section 2.02(a) is amended by replacing "JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna" with the following: "JPMorgan Chase Bank, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras". (d) Amendments of Section 2.08. (i) Section 2.08 is amended by deleting paragraphs (a) and (c) and redesignating paragraphs (d), (e) and (f) as (b), (c) and (d) respectively; and (ii) Section 2.08(b) is redesignated as paragraph (a) and is amended to read as follows: "(a) 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)." (e) Amendment of Section 2.14. Section 2.14(a) is amended by replacing "JPMorgan Chase Bank, Agency Services, One Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Muniram Appanna" with the following: "JPMorgan Chase Bank, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras". (f) Amendment of Section 4.01. Section 4.01(e) is amended by inserting after the phrase "generally accepted accounting principles consistently applied" the following: "(except as disclosed therein)". (g) Amendment of Section 5.01. Section 5.01(d) is amended to read as follows: "(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) applied consistently with those referred to in Section 1.03 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, notwithstanding the provisions 4 of Section 1.03, any change referred to in clause (ii) or (iii) above would result in a covenant contained in Section 5.01 or 5.02 being calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with the provisions of Section 1.03, the Administrative Agent, the Lenders and the Borrower agree, upon request by the Borrower to the Administrative Agent or by the Administrative Agent to the Borrower, 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 definitions and accounting principles applicable to the Borrower and its consolidated Subsidiaries which do meet the standards set forth in Section 1.03 shall be applied to determine whether or not the Borrower is in compliance with such covenants." (h) Amendment of Section 5.02. Section 5.02(b) is amended to have clause (1) read as follows: "(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 maturing within one year and evidenced by instruments commonly known as commercial paper or Canadian variable demand notes (other than Debt incurred pursuant to this Agreement, the Short-Term Revolving Credit Agreement, the Canadian Credit Agreement or any other liquidity, working capital or acquisition financing facility with banks or other financial institutions 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"; (i) Amendments of Section 5.03. (i) Section 5.03(a) is amended by inserting after the phrase "generally accepted accounting principles" wherever it appears the words "then in effect"; (ii) Section 5.03(a) is amended by deleting the word "and" in front of (iv) and inserting after clause (iv) thereof: "and (v) if the financial statements for such quarter shall reflect any change in generally accepted accounting principles from those referred to in Section 1.03 that shall have the effect of changing the information presented in the financial statements accompanying such certificate from what such information would have been if presented in accordance with the generally accepted accounting principles referred to in Section 1.03, a statement describing the nature of such change; provided that no such statement shall be required to the extent (A) such description is set forth in such financial statements or the notes thereto or (B) a statement with respect to such change shall have been delivered in connection with the delivery of, or disclosed in, financial statements under Section 5.03 (a), (b) or (e) for any prior fiscal period;"; 5 (iii) Section 5.03(b) is amended by inserting the after the phrase "generally accepted accounting principles" the words "then in effect"; (iv) Section 5.03(c) is amended by replacing the word "and" in front of (iii) with a comma and inserting after clause (iii) thereof: "and (iv) if the financial statements for such fiscal year shall reflect any change in generally accepted accounting principles from those referred to in Section 1.03 that shall have the effect of changing the information presented in the financial statements accompanying such certificate from what such information would have been if presented in accordance with the generally accepted accounting principles referred to in Section 1.03, a statement describing the nature of such change; provided that no such statement shall be required to the extent (A) such description is set forth in such financial statements or the notes thereto or (B) a statement with respect to such change shall have been delivered in connection with the delivery of, or disclosed in, financial statements under Section 5.03 (a), (b) or (e) for any prior fiscal period;"; and (v) Section 5.03(f) is amended to read as follows: "(f) promptly after the Borrower has had a reasonable opportunity to preliminarily evaluate the same, written 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, which notice may be effected by delivery, in accordance with applicable securities laws, of reports and statements referred to in clause (a), (b) or (e) above;". (j) Amendment of Section 8.02. Section 8.02 is amended to read as follows: "SECTION 8.02 Notices, Etc. (a) 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, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras, Telefax: (713) 427-6307, 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, Loan and Agency Services, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention: Karla Contreras, Telefax: (713) 427-6307; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. 6 (b) All such notices and communications shall be effective, (i) in the case of any notice or communication given by certified mail, when receipted for, (ii) 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, (iii) in the case of any notice or communication delivered by hand or courier, when so delivered and (iv) in the case of any report, notice or information referred to in Section 8.02(c), when posted with posting confirmed by electronic correspondence, or otherwise deemed delivered pursuant to procedures approved by the Administrative Agent, 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. (c) Reports, notices, and information required to be delivered pursuant to Section 5.03 shall be deemed to have been delivered if such reports, notices, and information (or, in the case of any information, one or more annual or quarterly reports containing such information) shall have been posted by the Administrative Agent on an IntraLinks or similar site to which the Lenders have been granted access or shall be available on the website of the Securities and Exchange Commission at http://www.sec.gov (and, in each case, a confirming electronic correspondence shall have been delivered or caused to be delivered providing notice of such posting or availability); provided that the Borrower shall deliver paper copies of such information to any Lender that requests such delivery. Reports, notices and information required to be delivered pursuant to Section 5.03 may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent. Categories of reports, notices and information approved by the Administrative Agent may be given by e-mail pursuant to procedures approved by the Administrative Agent." (k) Amendments of Section 8.04. (i) Section 8.04(b) is amended by replacing the reference to Section 2.08(f) with a reference to Section 2.08(d); and (ii) Section 8.04(c) is amended to read as follows: "(c) THE BORROWER AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT AND EACH LENDER AND THEIR RESPECTIVE RELATED PERSONS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") 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 ANY INDEMNIFIED PARTY IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT SUCH INDEMNIFIED PARTY 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 7 REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR ANY OF ITS RELATED PERSONS, OR BY REASON OF ANY USE OR DISCLOSURE BY SUCH INDEMNIFIED PARTY OR ANY OF ITS RELATED PERSONS OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR PROPOSED ACQUISITION OR ANY SUCH USE OR PROPOSED USE OF THE ADVANCES)." (l) Amendment of Section 8.08. Section 8.08 is amended by inserting "(a)" before the first paragraph thereof, and by inserting therein a new paragraph (b), as follows: "(b) Notwithstanding anything herein to the contrary, any party subject to confidentiality obligations hereunder (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, such party's U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated hereby relating to such party and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, no disclosure of any information relating to such tax treatment or tax structure may be made to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws." SECTION 2. Representations and Warranties. The Borrower represents and warrants as of the effective date of this Amendment to each of the Lenders that: (a) Immediately before and immediately after giving effect to this Amendment, the representations and warranties set forth in the Credit Agreement are true and correct in all material respects with the same effect as if made on the effective date hereof, except to the extent such representations and warranties expressly relate to an earlier date or period. (b) Immediately before and immediately after giving effect to this Amendment, no Event of Default or Default has occurred and is continuing. SECTION 3. Conditions to Effectiveness. This Amendment No. 3 shall become effective as of the date hereof when the Administrative Agent shall have received counterparts of this Amendment No. 3 that, when taken together, bear the signatures of the Borrower, the Administrative Agent, and the Majority Lenders. SECTION 4. Agreement. Except as specifically stated herein, the provisions of the Credit Agreement are and shall remain in full force and effect. As used therein, the terms "Credit Agreement", "herein", "hereunder", "hereinafter", "hereto", "hereof" and words of similar import shall, unless the context otherwise requires, refer to the Credit Agreement as amended hereby. SECTION 5. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 8 SECTION 6. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. SECTION 7. Expenses. The Borrower agrees to reimburse the Administrative Agent for all out-of-pocket expenses incurred by it in connection with this Amendment, including the reasonable fees, charges and disbursements of Cravath, Swaine & Moore LLP, counsel for the Administrative Agent. [The remainder of this page intentionally left blank] 9 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first written above. BURLINGTON RESOURCES INC. By: /s/ DANIEL D. HAWK --------------------------- Name: Daniel D. Hawk Title: Vice President and Treasurer 10 Signature page to the BURLINGTON RESOURCES INC. Amendment No. 3 dated as of December 4, 2003 to the Long Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 and as amended through the date hereof JPMORGAN CHASE BANK, individually and as Administrative Agent and Auction Administrative Agent By: /s/ RUSSELL A. JOHNSON ----------------------------- Name: Russell A. Johnson Title: Vice President 11 Signature page to the BURLINGTON RESOURCES INC. Amendment No. 3 dated as of December 4, 2003 to the Long Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 and as amended through the date hereof CITIBANK, N.A., individually and as Co-Syndication Agent By: /s/ AMY K. PINCU ----------------------------- Name: Amy K. Pincu Title: Attorney-in-Fact 12 Signature page to the BURLINGTON RESOURCES INC. Amendment No. 3 dated as of December 4, 2003 to the Long Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 and as amended through the date hereof FLEET NATIONAL BANK, individually and as Co-Syndication Agent By: /s/ TERRENCE RONAN --------------------------------------- Name: Terrence Ronan Title: Managing Director 13 Signature page to the BURLINGTON RESOURCES INC. Amendment No. 3 dated as of December 4, 2003 to the Long Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 and as amended through the date hereof BANK OF AMERICA, N.A., individually and as Co-Documentation Agent By: /s/ RICHARD L. STEIN -------------------------------------- Name: Richard L. Stein Title: Principal 14 Signature page to the BURLINGTON RESOURCES INC. Amendment No. 3 dated as of December 4, 2003 to the Long Term Revolving Credit Agreement dated as of February 25, 1998 as amended and restated as of December 7, 2001 and as amended through the date hereof Name of Institution: ABN AMRO BANK N.V. By: /s/ JOHN D. REED ------------------------------------- Name: John D. Reed Title: Vice President By: /s/ QUANDRA L. KELLEY ------------------------------------- Name: Quandra L. Kelley Title: Assistant Vice President Name of Institution: THE BANK OF NEW YORK By: /s/ CRAIG ANDERSON ------------------------------------- Name: Craig Anderson Title: Vice-President Name of Institution: THE BANK OF NOVIA SCOTIA By: /s/ N. BELL ------------------------------------- Name: N. Bell Title: Senior Manager Name of Institution: THE BANK OF TOKYO-MITSUBISHI, LTD. By: /s/ JOHN W. MCGHEE ------------------------------------- Name: John W. McGhee Title: V.P. & Manager Name of Institution: BANK ONE, NA By: /s/ JANE BEKKEIL ------------------------------------- Name: Jane Bekkeil Title: Director Name of Institution: BARCLAYS BANK Plc By: /s/ NICHOLAS A. BELL ------------------------------------- Name: Nicholas A. Bell Title: Director-Loan Transaction Management Name of Institution: BMO NESBITT BURNS FINANCING, INC. By: /s/ JAMES V. DUCOTE ------------------------------------- Name: James V. Ducote Title: Vice President Name of Institution: CREDIT SUISSE FIRST-BOSTON, acting through its Cayman Islands Branch By: /s/ JAMES P. MORAN ------------------------------------- Name: James P. Moran Title: Director By: /s/ DAVID J. DODD ------------------------------------- Name: David J. Dodd Title: Associate Name of Institution: FLEET NATIONAL BANK By: /s/ ------------------------------------- Name: Title: Name of Institution: MELLON BANK, N.A. By: /s/ ROGER E. HOWARD ------------------------------------- Name: Roger E. Howard Title: Vice President Name of Institution: ROYAL BANK OF CANADA By: /s/ LINDA M. STEPHENS ------------------------------------- Name: Linda M. Stephens Title: Authorized Signatory Name of Institution: ROYAL BANK OF SCOTLAND plc By: /s/ KEITH JOHNSON ------------------------------------- Name: Keith Johnson Title: Senior Vice President Name of Institution: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ DAVID HUMPHREYS ------------------------------------- Name: David Humphreys Title: Vice President Name of Institution: WELLS FARGO BANK, N.A. By: /s/ PAUL A. SQUIRES ------------------------------------- Name: Paul A. Squires Title: Vice President EX-10.28 7 h11939exv10w28.txt CANADIAN CREDIT AGREEMENT EXHIBIT 10.28 Cdn.$389,880,000 CANADIAN CREDIT AGREEMENT Dated as of March 31, 2000, as Amended and Restated as of December 7, 2001, as Amended on April 25, 2002, as Amended and Restated as of December 5, 2002, and as further Amended and Restated as of December 4, 2003 among BURLINGTON RESOURCES CANADA LTD., BURLINGTON RESOURCES CANADA (HUNTER) LTD., BURLINGTON RESOURCES INC., THE LENDERS LISTED HEREIN, JPMORGAN CHASE BANK, TORONTO BRANCH, as Administrative Agent CITIBANK, N.A., CANADIAN BRANCH FLEET NATIONAL BANK, as Co-Syndication Agents and BANK OF AMERICA, N.A., CANADA BRANCH THE BANK OF NOVA SCOTIA, as Co-Documentation Agents TABLE OF CONTENTS

3 ARTICLE 4 REPRESENTATIONS AND WARRANTIES Section 4.01 Representations and Warranties of the Borrowers.................................................... 54 ARTICLE 5 COVENANTS Section 5.01 Affirmative Covenants.............................................................................. 57 Section 5.02 Negative Covenants................................................................................. 58 Section 5.03 Reporting Requirements............................................................................. 62 ARTICLE 6 EVENTS OF DEFAULT Section 6.01 Events of Default.................................................................................. 64 ARTICLE 7 THE ADMINISTRATIVE AGENT Section 7.01 Authorization and Action........................................................................... 68 Section 7.02 Administrative Agent's Reliance, Etc............................................................... 68 Section 7.03 Administrative Agent and Affiliates................................................................ 69 Section 7.04 Lender Credit Decision............................................................................. 69 Section 7.05 Indemnification.................................................................................... 69 Section 7.06 Successor Administrative Agent..................................................................... 70 ARTICLE 8 GUARANTY ARTICLE 9 MISCELLANEOUS Section 9.01 Amendments, Etc.................................................................................... 73 Section 9.02 Notices, Etc....................................................................................... 74 Section 9.03 No Waiver; Remedies................................................................................ 75 Section 9.04 Costs and Expenses; Indemnity...................................................................... 75 Section 9.05 Right of Set-off................................................................................... 77 Section 9.06 Binding Effect..................................................................................... 77 Section 9.07 Assignments and Participations..................................................................... 77 Section 9.08 Confidentiality.................................................................................... 80 Section 9.09 Consent to Jurisdiction............................................................................ 80 Section 9.10 Governing Law...................................................................................... 81 Section 9.11 Execution in Counterparts.......................................................................... 81 Section 9.12 Waiver of Jury Trial............................................................................... 82 Section 9.13 Entire Agreement, Etc.............................................................................. 82

4 Schedule I -- Material Subsidiaries of Parent Schedule II -- Pricing Grid Schedule III -- Initial Commitments Exhibit A Form of Canadian Short-Term Revolving Credit Agreement Note Exhibit B Form of Notice of Borrowing/Continuation/Rollover Exhibit C Form of Notice of Repayment Exhibit D Form of Assignment and Acceptance Exhibit E Form of New Lender Agreement Exhibit F Form of Commitment Increase Agreement Exhibit G Form of Extension Request Exhibit H-1 Form of Opinion of Vice President and General Counsel for Parent Exhibit H-2 Form of Opinion of Joanne Alexander, Alberta Internal Counsel for Borrowers Exhibit I Form of Opinion of Bennett Jones LLP, Alberta Counsel for Borrowers

5 CANADIAN SHORT-TERM REVOLVING CREDIT AGREEMENT Dated as of March 31, 2000, as amended and restated as of December 7, 2001, as amended by Amendment No. 1 dated as of April 25, 2002, as amended and restated as of December 5, 2002, and as further Amended and Restated as of December 4, 2003 BURLINGTON RESOURCES CANADA LTD., currently an Alberta corporation (together with its permitted successors and assigns, "BRCL" and a "Borrower"), BURLINGTON RESOURCES CANADA (HUNTER) LTD. (f/k/a CANADIAN HUNTER EXPLORATION LTD.) (together with its permitted successors and assigns, "Canadian Hunter" and a "Borrower", and together with BRCL, the "BORROWERS"), 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, JPMORGAN CHASE BANK, TORONTO BRANCH, as administrative agent for the Lenders hereunder (in such capacity, the "ADMINISTRATIVE AGENT"), CITIBANK, N.A., CANADIAN BRANCH and FLEET NATIONAL BANK, as co-syndication agents, and BANK OF AMERICA, N.A., CANADA BRANCH and THE BANK OF NOVA SCOTIA, 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 applicable 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 Borrowers) duly completed by such Lender. "ADVANCE" means an advance by a Lender to either Borrower as part of a Borrowing, and refers to a Prime Rate Advance, a Base Rate Advance, a Cdn. Dollar 6 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 a Borrower or Parent, in such capacity, shall be deemed, for purposes of this Agreement, an Affiliate. "AGREEMENT" means this Amended and Restated 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 Borrowers 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). 7 "BANKERS' ACCEPTANCE" and "B/A" mean a non-interest bearing instrument denominated in Cdn. Dollars, drawn by the applicable 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). "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" AND "BORROWERS" have the meanings 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. "BRCL" has the meaning specified in the introduction to this Agreement. "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 HUNTER" has the meaning specified in the introduction to this Agreement. 8 "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 such common stockholders' equity of the Parent 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 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 rate appearing on Page 3740 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Canadian dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for Canadian dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "Cdn. Dollar Eurodollar Rate" with respect to such Borrowing for such Interest Period shall be the rate at which Canadian dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "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 9 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 (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, supplemented, extended, replaced 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. 10 "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 applicable 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 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 Borrowers 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 either 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. 11 "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. "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 Borrowers and the Lenders in writing, and which date shall be no earlier than December 4, 2003. "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. 12 "ELIGIBLE ASSIGNEE" means, with respect to any particular assignment under Section 9.07, any bank or other entity approved in writing by the Borrowers 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 Borrowers' 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 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 each 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. 13 "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 either 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. 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. "GUARANTOR" means each of (i) the Parent, in its capacity as guarantor of the Obligations of BRCL and Canadian Hunter, (ii) BRCL, in its capacity as guarantor of the Obligations of Canadian Hunter, and (iii) Canadian Hunter, in its capacity as guarantor of the Obligations of BRCL and "GUARANTORS" means, collectively, all of the foregoing. "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 Borrowers, 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 Borrowers, 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 Borrowers, 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 14 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 Borrowers, 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. "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 applicable 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 applicable 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 applicable Borrower may select; provided, however, that: 15 (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 JPMorgan Chase Bank, Toronto Branch. "JUDGMENT CURRENCY" has the meaning specified in Section 2.23. "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. 16 "MAJORITY LENDERS" means i) for purposes of acceleration of the Advances and other amounts outstanding under Article 6 hereof, Lenders holding at least 51% of the then aggregate unpaid principal amount of the Advances held by Lenders or (ii) for all other purposes of this Agreement, 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 each of the Borrowers and their successors. "MOODY'S" means Moody's Investors Service, Inc. "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, supplemented, extended, replaced 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 Borrowers, 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. 17 "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 a Borrower payable to the order of any Lender, in substantially the form of Exhibit A hereto, evidencing the aggregate indebtedness of such 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 obligations of each Borrower in respect of the due and punctual payment of (i) the principal of and interest on the Advances made to it and the Notes executed by it 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 either Borrower under this Agreement or any other Financing Document and (b) all other obligations, monetary or otherwise, of either 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. "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 18 and (iv) Equity Interests in any and all Business Entities that are or become Subsidiaries of a 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 either 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 either 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 such Person'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 either Borrower, Parent or any of their respective Subsidiaries entered into in the ordinary course of business on reasonable terms to secure undertakings of either 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 either 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 either 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 such 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 19 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, either 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). "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, either 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 a 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 20 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, N.A., Canadian branch and Bank of America, N.A., Canada Branch. "REGISTER" has the meaning specified in Section 9.07(c). "RELATED PERSON" means, with respect to any member of the group comprised of a particular Business Entity and its Affiliates and the respective directors, officers, employees or agents of such Business Entity and its Affiliates, each other member of such group. "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 2, 2004, or, at the option of the Borrowers, 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). "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 Borrowers 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, N.A., Canadian branch and Bank of America, N.A., Canada Branch or such other Schedule II chartered banks under the Bank Act (Canada) or 21 Schedule III Banks as are mutually agreed upon by the Administrative Agent and the Borrowers. "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 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). 22 "TRANSACTIONS" means the execution, delivery and performance by the Borrowers 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 rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the "U.S. Dollar Eurodollar Rate" with respect to such Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "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 through the date hereof, among the Borrower, 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, as the same may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time. "U.S. SHORT-TERM REVOLVING CREDIT AGREEMENT' means the Short-Term Revolving Credit Agreement dated as of February 25, 1998, as amended and restated through the date hereof, among the Borrower, 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 The Bank of Nova Scotia, as co-documentation agents, as the same may be amended, restated, supplemented, extended, replaced or otherwise modified from time to time. "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 23 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. Except as otherwise expressly provided herein, all terms of an accounting or financial nature used herein or in any determination of compliance with any covenant or other provision hereof shall be construed in accordance with generally accepted accounting principles referred to in Section 1.03 of the U.S. Long-Term Revolving Credit Agreement as such agreement is in effect on the date hereof. "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. 24 ARTICLE 2 AMOUNTS AND TERMS OF THE ADVANCES SECTION 2.01 REVOLVING ADVANCES. (a) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Advances to the Borrowers 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 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 Borrowers 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 to the applicable Borrower 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 applicable 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 applicable Borrower shall have elected otherwise by delivery of a Notice of Continuation. In accordance with Section 2.08, the applicable 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, 25 may elect Interest Periods or Contract Periods therefor; provided that the Borrowers 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) Each Borrowing shall be made on notice by the applicable Borrower to the Administrative Agent (a "NOTICE OF BORROWING") received by the Administrative Agent: (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 applicable Borrower at the Payment Office of the Administrative Agent, or at any account of the applicable Borrower maintained by the Administrative Agent (or any successor Administrative Agent) designated by the applicable Borrower and agreed to by the Administrative Agent (or such successor Administrative Agent), in same day funds. 26 (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 applicable 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 applicable 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 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 applicable 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 applicable 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 applicable 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 applicable 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 Borrowers agree 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. 27 (b) UTILIZATION FEE. Each 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 to such Borrower 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 to such Borrower 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) TERM ADVANCE PREMIUM FEE. Each Borrower agrees to pay to the Administrative Agent for the account of each Lender a premium fee of 0.25% per annum on the average daily amount of the outstanding principal amount of such Lender's Term Advances to such Borrower hereunder, payable quarterly in arrears on the last day of each March, June, September and December and on the date on which the last of such Lender's Term Advances shall be repaid. (d) AGENCY FEE. Each 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 Borrowers 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 Borrowers 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) Each Borrower shall repay to each Lender on the Final Maturity Date the aggregate principal amount of the Advances made to it, together with accrued interest thereon, then owing to such Lender. (b) Subject to Section 2.05(c), after the Revolving Commitment Termination Date, the applicable Borrower shall repay the principal amount of the Advances made to it 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 made to it 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 made to it outstanding on the Final Maturity Date. 28 (c) Subject to Article 6, but notwithstanding any other provision of this Agreement, neither Borrower shall 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 Borrowers 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. Each Borrower shall pay interest on the unpaid principal amount of each Advance made to it and 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 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 applicable 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 29 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 applicable 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 applicable 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). (v) ADDITIONAL INTEREST. In addition to amounts payable under clause (i), (ii), (iii) or (iv) above and under Section 2.03(c) in respect of any Advance following the Revolving Commitment Termination Date, each 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 made to it 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 made to such Borrower 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. Each Borrower shall pay interest on the unpaid principal amount of each Advance made to it 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 30 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, plus, in the case of a Term Advance, any additional interest payable pursuant to Section 2.06(a)(iii). (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 a 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: (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 or Discount Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. (b) 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 31 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 Borrowers and the Lenders of the applicable interest rate determined by the Administrative Agent for purposes of Section 2.06(a)(i), (ii) or (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, 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 Borrowers 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 Borrowers and the Lenders that the circumstances causing such suspension no longer exist. (e) If a 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 such 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 a 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 such Borrower and the Lenders and such B/A Advances will be automatically Continued as B/A Advances with a Contract Period of one month. (f) 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 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 32 Advances, and on and after such date the right of the applicable 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 applicable 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 applicable 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 applicable 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. Each 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 to such Borrower 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 applicable Borrower may prepay the Revolving Advances or the Term Advances made to it, provided however that a Borrower may not prepay any Bankers' Acceptances or B/A Loans; provided, however, that a 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. A Borrower may, upon (i) in the case of Eurodollar Rate Advances, at 33 least three Business Days notice or (ii) in the case of Prime Rate Advances or Base Rate Advances, telephonic notice not 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 such 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 applicable 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 such 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 each Borrower of such occurrence and the Borrowers 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, each 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, each 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. Each Borrower recognizes and agrees that all B/As signed and/or endorsed by a Lender on behalf of such Borrower shall bind such Borrower as fully and effectually as if signed in the handwriting of and duly issued by the proper 34 signing officers of such 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 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 either Borrower, a Lender shall cancel all forms of B/As which have been pre-signed or pre-endorsed on behalf of such Borrower and that are held by such Lender and are not required to be issued in accordance with such Borrower's irrevocable notice. Alternatively, each Borrower agrees that, at the request of the Administrative Agent, such 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 a 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 a 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 applicable 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) Each 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 such 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 such Borrower. The Acceptance Fee payable by each 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 a 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 35 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 against delivery to each Lender of the applicable discount proceeds, but if it does not do so, such 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 applicable 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 applicable 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 applicable 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 such 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 applicable Borrower fails to notify the Administrative Agent of its intention to issue B/As on such last day of the Contract Period, such 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 applicable 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) Each 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 36 B/A being held, at the maturity thereof, by such Lender in its own right, and each Borrower agrees not to claim any days of grace if such Lender, as holder, sues such Borrower on the B/A for payment of the amount payable by the applicable 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 applicable 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 applicable 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 a 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 applicable 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 Borrowers 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 Borrowers 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 Borrowers of any increased costs pursuant to this Section 2.12, the Borrowers 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 a 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 Borrowers under 37 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 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 Borrowers 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 Borrowers and the Administrative Agent, each 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 applicable 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). 38 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 Borrowers 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 applicable 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 Borrowers 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 Borrowers and the Administrative Agent by such Lender shall, in the absence of manifest error, be conclusive and binding for all purposes. 39 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 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 Borrowers and the Administrative Agent, suspend the right of the Borrowers 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 Borrowers 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) Each 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 Borrowers from the Administrative Agent and agreed to by the Borrowers, in same day funds. Each such payment made by a 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 such 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 40 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 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 a Borrower prior to the date on which any payment is due to the Lenders hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such 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 such 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 each 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, 41 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 either Borrower is required to withhold or deduct Canadian Taxes by law or by the interpretation or administration thereof. If either 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, such 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 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 applicable 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 Borrowers and the Parent from any Canadian Taxes, penalties, interest and other expenses, costs and losses incurred or payable by either Borrower or the Parent as a result of the failure of the Borrowers 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. Each 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 either Borrower to the extent either 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 42 this Agreement or under the Notes being herein referred to as "NON-CANADIAN TAXES" and, together with Canadian Taxes, "TAXES"). If the Parent (or either 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 applicable 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 applicable Borrower (in the case of payments by it) 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 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 either Borrower or the Parent, it shall promptly notify such Borrower or the Parent of such net credit or refund and shall promptly pay such net credit or refund to the applicable Borrower or the Parent, provided that the applicable Borrower or the Parent, as applicable, 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 applicable 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 applicable 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 43 such Indemnified Party to provide any form or certificate that it was required to provide either to the Borrowers 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 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 Borrowers or the Parent, hereunder or under the Notes (the "CANADIAN CERTIFICATION REQUIREMENTS"), then such Indemnified Party shall provide the Parent, the Borrowers 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 Borrowers and the Administrative Agent such additional duly completed and signed copies of one or 44 the other of such forms, certificates or other documentation as may be notified by the Parent or by the Borrowers 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 Borrowers 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 Borrowers and the Administrative Agent of such fact. The Borrowers and the Parent 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 Borrowers 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 Borrowers and the Parent hereunder, the agreements and obligations of the Borrowers, 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. 45 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. Each 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 such 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 each 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 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 each 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 obligations of the applicable Borrower to repay the Advances made to it 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, each 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 each such Note and interest thereon shall at all times (including after assignment 46 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 Borrowers and their Subsidiaries and of Parent and any of its other Subsidiaries, including for acquisitions and for payment of commercial paper issued by either 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 Borrowers 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 Borrowers may, in their 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 Borrowers select 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 Borrowers 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 Cdn.$5,000,000. (c) Any Lender that accepts an offer to it by the Borrowers to increase its Commitment pursuant to this Section 2.20 shall, in each case, execute a Commitment Increase Agreement with the Borrowers 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 Borrowers and legal opinions of counsel to the Borrowers as the Administrative Agent shall reasonably request with respect thereto, in each case, in form and substance satisfactory to the Administrative Agent. 47 (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 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. $116,964,000. (g) Each Borrower shall execute and deliver a Note to each new bank or other financial institution becoming a Lender that requests one. 48 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 Borrowers 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 Borrowers 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 Borrowers 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 Borrowers of any extension of the Revolving Commitment Termination Date pursuant to this Section 2.21 and shall promptly notify the Borrowers 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 Borrowers shall be entitled to choose any of the following options prior to the Revolving Commitment Termination Date, provided that if the Borrowers do not make an election prior to such date, the Borrowers shall be deemed to have irrevocably elected to exercise the option in clause (iii)(y) below: (i) the Borrowers 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 Borrowers 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 Borrowers 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 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 49 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 Borrowers may, at their own expense and in their 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 Borrowers shall so determine in their 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 Borrowers, 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 applicable 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. 50 SECTION 2.22 REPLACEMENT OF LENDERS. If any Lender requests compensation under Sections 2.11 or 2.13 or if either 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 Borrowers 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 Borrowers may, at their 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 Borrowers shall so determine in their sole discretion, the U.S. Long-Term Revolving Credit Agreement and/or the U.S. Short-Term Revolving Credit Agreement, as the Borrowers may determine in their 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 Borrowers 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 hereunder and, if the Borrowers 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 Borrowers 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 applicable 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 Borrowers to require such assignment and delegation cease to apply. 51 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 applicable 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 applicable 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 Exchange Rate as of such Calculation Date and (ii) give notice thereof to the Borrowers 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 Borrowers and each Lender that shall have requested such information of the aggregate outstanding Advances, based on information provided by each Borrower after giving effect to all Advances and all repayments and prepayments to occur on such date. 52 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 Borrowers, Parent and the Administrative Agent, (ii) the Administrative Agent and the Borrowers 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 Borrowers 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 Borrowers 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 Borrowers 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 the U.S. Short-Term Revolving Credit Agreement; (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 BRCL and Canadian Hunter, in substantially the form of Exhibit H-2 hereto; (g) A favorable opinion of Bennett Jones LLP, Alberta counsel to the Borrowers, 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 Borrowers hereunder. 53 The Borrowers 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 applicable Borrower of the applicable Notice of Borrowing and the acceptance by such 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 Boards of Directors of Parent and of each Borrower. ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. Each of the Borrowers and Parent represents and warrants as follows: (a) Each Borrower is a Business Entity duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization. The Parent is a Business Entity duly formed, validly existing and in good standing under the laws of the State of Delaware. Each Material Subsidiary is duly organized, validly existing and in good standing in the jurisdiction of its formation. Parent and each Material Subsidiary possess all applicable Business Entity 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. 54 (b) The Transactions are within the Business Entity powers of the Borrowers and Parent (as applicable), have been duly authorized by all necessary applicable Business Entity action, and do not contravene (i) the organizational documents (as applicable) of the Borrowers or the Parent (as applicable) or (ii) law or any contractual restriction binding on or affecting the Borrowers or the Parent. This Agreement, the Notes, if any, and the other Financing Documents, if any, have been duly executed and delivered by the Borrowers 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 Borrowers 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 Borrowers 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 Borrowers 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, 2002 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, 2003 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 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, 2002, and September 30, 2003, respectively, and the consolidated results of their operations for such fiscal periods, subject in the case of the September 30, 2003 statements to normal year-end adjustments, all in accordance with generally accepted accounting principles consistently applied (except as disclosed therein). From September 30, 2003 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 Borrowers 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 Borrowers 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, 55 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 Parent 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). (l) None of Parent nor either 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) None of Parent nor either 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. (n) The proceeds of the Advances will not be used in any way which would violate the provisions of Regulation U or X of the Board of Governors of the Federal Reserve System. All representations and warranties made by the Borrowers 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. 56 ARTICLE 5 COVENANTS SECTION 5.01 AFFIRMATIVE COVENANTS. So long as any Advance, Note or other amount payable either 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 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 and may change its jurisdiction of organization, provided further that in the case of any such change by a Borrower, its jurisdiction of organization remains in Canada, and in connection with any such change by a Borrower, such 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 such Borrower continues to be bound by, or has assumed by instrument or by operation of law, all of such 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 each Borrower and to discuss the affairs, finances, accounts and mineral reserve performance of Parent and any of its Subsidiaries with officers of the Borrowers 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 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 Borrowers or their Subsidiaries, of the Borrowers), 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. 57 (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) applied consistently with those referred to in Section 1.03 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 that if, notwithstanding the provisions of Section 1.03, any change referred to in clause (ii) or (iii) above would result in a covenant contained in Section 5.01 or 5.02 being calculated or construed in a materially different manner or with materially different results than if such covenant were calculated or construed in accordance with the provisions of Section 1.03, the Administrative Agent, the Lenders, the Borrowers and Parent agree, upon request by Parent to the Administrative Agent or by the Administrative Agent to Parent, 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 each 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 definitions and accounting principles applicable to Parent and its consolidated Subsidiaries which do meet the standards set forth in Section 1.03 shall be applied to determine whether or not each 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. SECTION 5.02 NEGATIVE COVENANTS. So long as any Advance, Note or other amount payable by either 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 58 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 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 maturing within one year 59 and evidenced by instruments commonly known as commercial paper or Canadian variable demand notes (other than Debt incurred pursuant to this Agreement, the U.S. Short-Term Revolving Credit Agreement, the U.S. Long-Term Revolving Credit Agreement or any other liquidity, working capital or acquisition financing facility with banks or other financial institutions 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 a 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 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: 60 (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) either Borrower or Parent, provided that (A) if such Subsidiary merges, amalgamates or consolidates with (or liquidates into) either Borrower or Parent, either (i) the survivor or successor is a Borrower or Parent, as applicable, or (ii) in the case of an amalgamation involving either 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 such 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 such 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 either 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) each Borrower, Parent or any Material Subsidiary may merge, amalgamate or consolidate with any other Business Entity (that is, in addition to the Borrowers, Parent or any other Subsidiary of Parent), provided that (A) if either Borrower or Parent merges, amalgamates or consolidates with any such other Business Entity(ies), either the survivor or successor Business Entity is a 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 a 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 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 61 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 Borrowers 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 then in effect 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 then in effect, (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, (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 and (v) if the financial statements for such quarter shall reflect any change in generally accepted accounting principles from those referred to in Section 1.03 that shall have the effect of changing the information presented in the financial statements accompanying such certificate from what such information would have been if presented in accordance with the generally accepted accounting principles referred to in Section 1.03, a statement describing the nature of such change; provided that no such statement shall be required to the extent (A) such description is set forth in such financial statements or the notes thereto or (B) a statement with respect to such change shall have been delivered in connection with the delivery of, or disclosed in, financial statements under Section 5.03 (a), (b) or (e) for any prior fiscal period; (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 then in effect 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 (which letter may be limited in form, scope and substance to the extent required by applicable accounting rules or guidelines in effect from time to time); (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 62 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, (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 and (iv) if the financial statements for such fiscal year shall reflect any change in generally accepted accounting principles from those referred to in Section 1.03 that shall have the effect of changing the information presented in the financial statements accompanying such certificate from what such information would have been if presented in accordance with the generally accepted accounting principles referred to in Section 1.03, a statement describing the nature of such change; provided that no such statement shall be required to the extent (A) such description is set forth in such financial statements or the notes thereto or (B) a statement with respect to such change shall have been delivered in connection with the delivery of, or disclosed in, financial statements under Section 5.03 (a), (b) or (e) for any prior fiscal period; (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 either 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 after Parent has had a reasonable opportunity to preliminarily evaluate the same, written 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, which notice may be effected by delivery, in accordance with applicable securities laws, of reports and statements referred to in clause (a), (b) or (e) above; (g) within three Business Days after an executive officer of either 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 such Borrower or Parent of the steps being taken by such 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 63 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; (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) Either 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 either Borrower or Parent herein or by either 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 64 (c) Either 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 Borrowers 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 either Borrower, Parent or such Subsidiary (as the case may 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 either 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) either 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 65 (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 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 Parent 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 66 (k) Either 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, either 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 Borrowers or Parent receive 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 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 Borrowers 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 Borrowers 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 Borrowers and Parent. 67 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 Borrowers 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 assignee, as provided in Section 9.07; (ii) may consult with legal counsel (including counsel for the Borrowers 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 Borrowers and Parent or to inspect the property (including the books and records) of the Borrowers 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. 68 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 Borrowers, any of their Subsidiaries, and any Person who may do business with or own securities of Parent, the Borrowers 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 BORROWERS 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 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 69 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 Borrowers 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 Borrowers 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. ARTICLE 8 GUARANTY In order to induce the Lenders to extend credit hereunder, (i) each of Parent and BRCL hereby irrevocably and unconditionally guarantees the Obligations of Canadian Hunter, and (ii) each of Parent and Canadian Hunter hereby irrevocably and unconditionally guarantees the Obligations of BRCL. Each Guarantor agrees that the Guaranteed Parties may make a claim under its 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 either Borrower under Section 6.01(e) (except clause (i)(A) thereof)) following the making of a demand on the applicable Borrower for payment or performance, as applicable, without any obligation to first seek any other remedy or take any other action against such Borrower. Each Guarantor 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. 70 Each Guarantor waives presentment to, demand of payment from and protest to the applicable Borrower of any of the Obligations of such Borrower, and also waives notice of acceptance of its obligations and notice of protest for nonpayment. The obligations of each Guarantor 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 any 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 any Guarantor or otherwise operate as a discharge of any Guarantor as a matter of law or equity or which would impair or eliminate any right of any Guarantor to subrogation. Each Guarantor 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 the applicable Borrower or any other Person. The obligations of the Guarantors 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. Each Guarantor 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 the applicable 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 any Guarantor by virtue hereof, upon the failure of the applicable 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 and (a) BRCL (in the event such Obligation is due and payable by Canadian Hunter) or (b) Canadian Hunter (in the event such Obligation is due and payable by BRCL), hereby, in their respective capacity as Guarantor, promise 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. Each Guarantor, as applicable, 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, 71 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, each Guarantor, as applicable, 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 a Guarantor of any Obligation of the applicable Borrower, each Lender shall, in a reasonable manner, assign the amount of such Obligation owed to it and so paid to such Guarantor, such assignment to be pro tanto to the extent to which the Obligation in question was discharged by such Guarantor, or make such disposition thereof as such Guarantor, as applicable, shall direct (all without recourse to any Guaranteed Party and without any representation or warranty by any Guaranteed Party). Upon payment by any Guarantor of any sums as provided above, all rights of such Guarantor against the applicable 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 such Borrower to the Guaranteed Parties. Nothing shall discharge or satisfy the liability of any Guarantor 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. 72 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 Borrowers therefrom, shall be effective against the Lenders and all holders of the Notes if, but 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, waive or otherwise change 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. 73 SECTION 9.02 NOTICES, ETC. (a) 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 BRCL, 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 Canadian Hunter, 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 (Hunter) 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 JPMorgan Chase Bank, Toronto Branch, 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. (b) All such notices and communications shall be effective, (i) in the case of any notice or communication given by certified mail, when receipted for, (ii) 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, (iii) in the case of any notice or communication delivered by hand or courier, when so delivered and (iv) in the case of any report, notice or information referred to in Section 9.02(c), when posted with posting confirmed by electronic correspondence, or otherwise deemed delivered pursuant to procedures approved by the Administrative Agent, 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(a)(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. 74 (c) Reports, notices, and information required to be delivered pursuant to Section 5.03 shall be deemed to have been delivered if such reports, notices, and information (or, in the case of any information, one or more annual or quarterly reports containing such information) shall have been posted by the Administrative Agent on an IntraLinks or similar site to which the Lenders have been granted access or shall be available on the website of the Securities and Exchange Commission at http://www.sec.gov (and, in each case, a confirming electronic correspondence shall have been delivered or caused to be delivered providing notice of such posting or availability); provided that the Borrower shall deliver paper copies of such information to any Lender that requests such delivery. Reports, notices and information required to be delivered pursuant to Section 5.03 may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent. Categories of reports, notices and information approved by the Administrative Agent may be given by e-mail pursuant to procedures approved by the Administrative Agent. 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) Each 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 either 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 either Borrower, or if either Borrower shall fail to borrow, Continue or prepay any Eurodollar Rate Advance on the date specified in any notice delivered pursuant hereto, the applicable Borrower shall, 75 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 either 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 either Borrower shall fail to borrow, Continue or prepay any B/A Advance on the date specified in any notice delivered pursuant hereto, the applicable 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 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 BRCL, CANADIAN HUNTER AND PARENT AGREES TO INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT AND EACH LENDER AND THEIR RESPECTIVE RELATED PERSONS (COLLECTIVELY, THE "INDEMNIFIED PARTIES") 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 ANY INDEMNIFIED PARTY IN CONNECTION WITH OR ARISING OUT OF ANY INVESTIGATION, LITIGATION, OR PROCEEDING (WHETHER OR NOT SUCH INDEMNIFIED PARTY IS PARTY THERETO) RELATED TO ANY ACQUISITION OR PROPOSED ACQUISITION BY EITHER BORROWER, OR BY ANY SUBSIDIARY OF EITHER 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 EITHER BORROWER (EXCLUDING ANY CLAIMS, DAMAGES, LIABILITIES OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY OR ANY OF ITS RELATED PERSONS, OR BY REASON OF ANY USE OR DISCLOSURE BY SUCH INDEMNIFIED PARTY OR ANY OF ITS RELATED PERSONS OF INFORMATION RELATING TO ANY SUCH ACQUISITION OR PROPOSED ACQUISITION OR ANY SUCH USE OR PROPOSED USE OF THE ADVANCES). 76 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 either Borrower against any and all of the obligations of such 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 applicable 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 Borrowers, Parent, the Administrative Agent, the Arranger and each Lender and their respective successors and assigns, except that none of Parent or the Borrowers shall have the right to assign their rights and obligations hereunder or any interest herein without the prior written consent of all of the Lenders; provided that notwithstanding the foregoing either 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 political subdivision thereof and (ii) the Borrowers guarantee the obligations of any new Borrower on substantially the terms set forth in Article 8, at which time BRCL and/or Canadian Hunter, as applicable, 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 under such guarantee and Article 8. Any merger, amalgamation or consolidation in compliance with Section 5.02(d) of (i) either 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 Borrowers 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 77 amount of such assigning Lender's "Commitment" (unless the Borrowers 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 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 Borrowers or Parent or the performance or observance by the Borrowers or Parent of any of their respective 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 Borrowers 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. 78 (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 Borrowers, 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 either 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 Borrowers. Within five Business Days after its receipt of such notice and its receipt of an executed counterpart of such Assignment and Acceptance, the applicable Borrower, at its own expense, shall execute and deliver to the Administrative Agent in exchange for any surrendered Note or Notes new Notes evidencing Advances made to such Borrower to the order of such Eligible Assignee and, if the assigning Lender has retained a Commitment hereunder, new Notes 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 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 Borrowers 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 Borrowers, 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 Borrowers 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. 79 (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 Borrowers furnished to such Lender by or on behalf of the Borrowers; 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 Borrowers to preserve the confidentiality of any confidential information relating to the Borrowers 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. (a) 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 Borrowers (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 Borrowers 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 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 Borrowers containing provisions substantially similar to those contained in this Section 9.08; provided, however, that the Borrowers 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. (b) Notwithstanding anything herein to the contrary, any party subject to confidentiality obligations hereunder (and any employee, representative or other agent of such party) may disclose to any and all persons, without limitation of any kind, such party's U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated hereby relating to such party and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, no disclosure of any information relating to such tax treatment or tax structure may be made to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws. SECTION 9.09 CONSENT TO JURISDICTION. 80 (a) Each 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 Borrower and Parent hereby irrevocably agrees that all Permitted Claims may be heard and determined in Alberta. Each 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 Borrowers 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 Borrower and Parent by courier and by registered mail (return receipt requested), fees and postage prepaid at the address of each 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 Borrowers. Each 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 Borrowers, 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 Borrowers, 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 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. 81 SECTION 9.12 WAIVER OF JURY TRIAL. EACH 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. SECTION 9.13 ENTIRE AGREEMENT, ETC.. This Agreement, together with any other documents executed in connection herewith, express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 9.01. 82 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: /s/ DANIEL D. HAWK ---------------------------------------- Name: Daniel D. Hawk Title: Treasurer BURLINGTON RESOURCES CANADA (HUNTER) LTD. By: /s/ DANIEL D. HAWK ---------------------------------------- Name: Daniel D. Hawk Title: Treasurer BURLINGTON RESOURCES INC. By: /s/ DANIEL D. HAWK ---------------------------------------- Name: Daniel D. Hawk Title: Vice President & Treasurer 83 JPMORGAN CHASE BANK, TORONTO BRANCH, as Administrative Agent By: /s/ CHRISTINE CHAN --------------------------------------- Name: Christine Chan Title: Vice President JPMORGAN CHASE BANK, TORONTO BRANCH, as Lender By: /s/ CHRISTINE CHAN --------------------------------------- Name: Christine Chan Title: Vice President 84 SIGNATURE PAGE TO BURLINGTON RESOURCES CANADA LTD., BURLINGTON RESOURCES CANADA (HUNTER) LTD. AND BURLINGTON RESOURCES INC. CANADIAN CREDIT AGREEMENT DATED AS OF DECEMBER 4, 2003 Name of Institution: BANK OF AMERICA, N.A. ------------------------ CANADA BRANCH By: /s/ MEDINA SALES DE ANDRADE --------------------------------- Name: Medina Sales de Andrade Title: Assistant Vice President Name of Institution: The Bank of New York By: /s/ CRAIG ANDERSON -------------------------------------- Name: Craig Anderson Title: Vice President Name of Institution: ABN AMRO BANK N.V., Canada Branch By: /s/ LAWRENCE J. MALONEY -------------------------------------- Name: Lawrence J. Maloney Title: Managing Director By: /s/ DAVID MOORE -------------------------------------- Name: David Moore Title: Director Name of Institution: The Bank of Nova Scotia By: /s/ DAN W. LINDQUIST -------------------------------------- Name: Dan W. Lindquist Title: Director Name of Institution: The Bank of Tokyo-Mitsubishi, Ltd. By: /s/ JOHN W. MCGHEE -------------------------------------- Name: John W. McGhee Title: V.P. and Manager Name of Institution: The Bank of Montreal By: /s/ JAMES V. DUCOTE -------------------------------------- Name: James V. Ducote Title: Director Name of Institution: BANK ONE, NA, CANADA BRANCH By: /s/ JANE BEKKEIL -------------------------------------- Name: Jane Bekkeil Title: Director Name of Institution: BNP PARIBAS (CANADA) By: /s/ EDWARD PAK -------------------------------------- Name: Edward Pak Title: Assistant Vice President Energy & Project Finance By: /s/ CHARLES RITCHIE -------------------------------------- Name: Charles Ritchie Title: Vice President Energy & Project Finance Name of Institution: BARCLAYS BANK PLC By: /s/ NICHOLAS A. BELL -------------------------------------- Name: Nicholas A. Bell Title: Director - Loan Transaction Management Name of Institution: CITIBANK, N.A. CANADIAN BRANCH By: /s/ ADAM SHEPHERD -------------------------------------- Name: Adam Shepherd Title: Authorized Signer Name of Institution: CREDIT SUISSE FIRST BOSTON TORONTO BRANCH By: /s/ ALAIN DAOUST By: /s/ PETER CHAUVIN -------------------------------------- ------------------------------- Name: Alain Daoust Name: Peter Chauvin Title: Director Title: Vice President Name of Institution: DEUTSCHE BANK AG, CANADA BRANCH By: /s/ ROBERT JOHNSTON -------------------------------------- Name: Robert Johnston Title: Vice President By: /s/ ROD O'HARA -------------------------------------- Name: Rod O'Hara Title: Director Name of Institution: FLEET NATIONAL BANK By: /s/ -------------------------------------- Name: Title: Name of Institution: MELLON BANK, N.A. By: /s/ JOHN P. REHOB -------------------------------------- Name: John P. Rehob Title: Chief Administrative Officer Name of Institution: Merrill Lynch Capital CANADA INC. By: /s/ SUSAN RIMMER -------------------------------------- Name: Susan Rimmer Title: Officer Name of Institution: MORGAN STANLEY SENIOR FUNDING (NOVA SCOTIA) By: /s/ JAAP L. TONCKENS -------------------------------------- Name: Jaap L. Tonckens Title: Vice President Name of Institution: ROYAL BANK OF CANADA By: /s/ LINDA M. STEPHENS -------------------------------------- Name: Linda M. Stephens Title: Authorized Signatory Name of Institution: THE ROYAL BANK OF SCOTLAND PLC By: /s/ KEITH JOHNSON -------------------------------------- Name: Keith Johnson Title: Senior Vice President Name of Institution: Societe Generale By: /s/ J. DOUGLAS MCMURRAY, JR. -------------------------------------- Name: J. Douglas McMurray, Jr. Title: Manager Director Name of Institution: SUN TRUST BANK By: /s/ JAMES M. WARREN -------------------------------------- Name: James M. Warren Title: Director Name of Institution: WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ DAVID HUMPHREYS -------------------------------------- Name: David Humphreys Title: Vice President Name of Institution: WELLS FARGO BANK, N.A. By: /s/ PAUL A. SQUIRES -------------------------------------- Name: Paul A. Squires Title: Vice President SCHEDULE I MATERIAL SUBSIDIARIES OF PARENT Burlington Resources Canada Ltd. Burlington Resources Canada (Hunter) Ltd. The Louisiana Land and Exploration Company Burlington Resources Oil & Gas Company LP BROG GP Inc. BROG LP Inc. Burlington Resources Canada Partnership SCHEDULE II PRICING GRID
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI Basis for If the Parent's If the If the Parent's If the Parent's If the Parent's If Levels I-V Pricing senior Parent's senior senior senior do not apply. unsecured senior unsecured long unsecured unsecured long long term unsecured term debt is long term term debt is debt is rated long term rated at least debt is rated rated at least at least A by debt is rated BBB+ by S&P at least BBB BBB- by S&P S&P or A2 at least A- or Baa1 by by S&P or or Baa3 by by Moody's. by S&P or Moody's. Baa2 by Moody's. A3 by Moody's. Moody's. Facility Fee .080% .100% .125% .150% .200% .250% Percentage Applicable .270% .300% .375% .450% .650% .750% 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 Parent. 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 The Initial Lenders (Canadian Tranche)
Investor Title Commitment - ------------------------------------------------- ---------------------- ------------------ JPMorgan Chase Bank Administrative Agent CAD$26,734,628.57 Citibank, N.A. Co-Syndication Agent 26,734,628.57 Fleet National Bank Co-Syndication Agent 26,734,628.57 Bank of America, N.A. Co-Documentation Agent 26,734,628.57 Bank of Nova Scotia (The) Co-Documentation Agent 26,734,628.57 Bank of Tokyo-Mitsubishi, Ltd. Co-Agent 19,494,000.00 Barclays Bank plc Co-Agent 19,494,000.00 BNP Paribas Co-Agent 19,494,000.00 Royal Bank of Scotland plc (The) Co-Agent 19,494,000.00 Wachovia Bank, National Association Co-Agent 19,494,000.00 Merrill Lynch Capital Canada Inc. Co-Agent 19,494,000.00 Morgan Stanley Senior Funding (Nova Scotia) Co-Agent 19,494,000.00 ABN Amro Bank, N.V. Participant 11,139,428.57 Deutsche Bank Participant 11,139,428.57 Bank One, NA Participant 11,139,428.57 Royal Bank of Canada Participant 11,139,428.57 Societe Generale Participant 11,139,428.57 SunTrust Banks Participant 11,139,428.57 Wells Fargo Bank Participant 11,139,428.57 Bank of Montreal Participant 11,139,428.57 Bank of New York (The) Participant 11,139,428.57 Credit Suisse First Boston, Toronto Branch Participant 11,139,428.57 Mellon Bank, N.A. Participant 8,354,571.43 TOTAL: CAD$389,880,000.00
EX-10.29 8 h11939exv10w29.txt 2002 STOCK INCENTIVE PLAN EXHIBIT 10.29 AMENDMENT NO. 1 TO BURLINGTON RESOURCES INC. 2002 STOCK INCENTIVE PLAN The Burlington Resources Inc. 2002 Stock Incentive Plan (the "Plan") is hereby amended in the following respects: 1. The last sentence of Section 8.2 of the Plan is amended to read in its entirety as follows: "If the Plan Administrator determines that any shares of Restricted Stock granted or to be granted under the Plan will be represented by the issuance of certificates, the Plan Administrator may require, under such terms and conditions as it deems appropriate or desirable, that the certificates for such Restricted Stock may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the Restriction Period (as defined in Section 8.3) expires or until restrictions thereon otherwise lapse, and may require, as a condition of any receipt of Restricted Stock, that the Participant shall have delivered a stock power endorsed in blank relating to the shares of Restricted Stock." 2. Section 8.8 of the Plan is amended to read in its entirety as follows: "8.8 The Plan Administrator shall in its discretion determine whether any shares of Restricted Stock granted or to be granted under the Plan will be represented by the issuance of a certificate for such shares registered in the name of the Participant (subject to Section 8.2) or will be represented by a book entry reflecting the grant to the Participant." 3. The first sentence of Section 9.2 of the Plan is amended to read in its entirety as follows: "All certificates for shares issued in respect of Restricted Stock awards shall be subject to such stop-transfer orders and other restrictions as the Plan Administrator may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which Common Stock is then listed and any applicable federal or state securities laws, and the Plan Administrator may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions." Adopted by the Compensation Committee of the Board of Directors of Burlington Resources Inc. on December 17, 2003. AMENDMENT NO. 2 TO BURLINGTON RESOURCES INC. 2002 STOCK INCENTIVE PLAN The Burlington Resources Inc. 2002 Stock Incentive Plan is hereby amended as follows: Section 3 is amended by adding the following new Section 3.5 at the end thereof: "3.5. Notwithstanding anything in the Plan to the contrary, the Plan Administrator may at any time in its sole discretion accelerate the vesting and exercisability of all or any portion of any granted but unvested awards granted under the Plan, including without limitation stock options, stock appreciation rights and restricted stock, in connection with the termination of a Participant's employment with the Company or any of its Subsidiaries, and also may at any time in its sole discretion delegate the decision to accelerate such vesting and exercisability to the Company's Chief Executive Officer." The date of adoption of this amendment by the Board of Directors of the Corporation is December 17, 2003. EX-10.30 9 h11939exv10w30.txt 1997 EMPLOYEE STOCK INCENTIVE PLAN EXHIBIT 10.30 AMENDMENT TO BURLINGTON RESOURCES INC. 1997 EMPLOYEE STOCK INCENTIVE PLAN The Burlington Resources Inc. 1997 Employee Stock Incentive Plan (the "Plan") is hereby amended in the following respects: 1. Section 2.7 is amended to read in its entirety as follows: "2.7 COMMITTEE "The Compensation Committee of the Board of Directors." 2. The last sentence of Section 7.2 of the Plan is amended to read in its entirety as follows: "If the Committee determines that any shares of Restricted Stock granted or to be granted under the Plan will be represented by the issuance of certificates, the Committee may require, under such terms and conditions as it deems appropriate or desirable, that the certificates for such Restricted Stock may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the Restriction Period (as defined in Section 7.3) expires or until restrictions thereon otherwise lapse, and may require, as a condition of any receipt of Restricted Stock, that the Participant shall have delivered a stock power endorsed in blank relating to the shares of Restricted Stock." 3. A new Section 7.9 is added to the Plan to read in its entirety as follows: "7.9 The Committee shall in its discretion determine whether any shares of Restricted Stock granted or to be granted under the Plan will be represented by the issuance of a certificate for such shares registered in the name of the Participant (subject to Section 7.2) or will be represented by a book entry reflecting the grant to the Participant." Adopted by the Compensation Committee of the Board of Directors of Burlington Resources Inc. on December 17, 2003. EX-21.1 10 h11939exv21w1.txt SUBSIDIARIES FO 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% Burlington Resources Canada (Hunter) 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 11 h11939exv23w1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS 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, 333-60081 and 333-90906) and on Form S-3 Registration Nos. (33-54477, 333-24999, 333-52213, 333-83163, 333-36032, 333-61600 and 333-87170) of Burlington Resources Inc. of our report dated February 25, 2004 relating to the financial statements, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLP Houston, Texas February 26, 2004 EX-23.2 12 h11939exv23w2.txt CONSENT OF MILLER & LENTS, LTD. EXHIBIT 23.2 (MILLER AND LENTS, LTD. LETTERHEAD) CONSENT We hereby consent to the reference to our firm name and our review of the estimates of proved reserves of natural gas, oil and natural gas liquids that Burlington Resources Inc. attributed to its net interests in oil and gas properties located in the U.S. and internationally (excluding Canada and Argentina) as of December 31, 2003, as set forth in our audit letter dated January 14, 2004, which appears in this Form 10-K. In addition, 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, 333-60081 and 333-90906) and on Form S-3 Registration Nos. (33-54477, 333-24999, 333-52213, 333-83163, 333-36032, 333-61600 and 333-87170) of Burlington Resources Inc. to the reference to our firm name and our review of the estimates of proved reserves of natural gas, oil and natural gas liquids that Burlington Resources Inc. attributed to its net interests in oil and gas properties located in the U.S. and internationally (excluding Canada and Argentina) as of December 31, 2003, as set forth in our audit letter dated January 14, 2004, which appears in this Form 10-K. MILLER AND LENTS, LTD. By /s/ CHRISTOPHER A. BUTTA ------------------------ Christopher A. Butta Senior Vice President Houston, Texas February 26, 2004 EX-23.3 13 h11939exv23w3.txt CONSENT OF SPROULE ASSOCIATES LIMITED EXHIBIT 23.3 (SPROULE ASSOCIATES LIMITED LETTERHEAD) February 26, 2004 Burlington Resources Inc. 5051 Westheimer, Suite 1400 Houston, Texas 77056 RE: CONSENT We hereby consent to the reference to our firm name and our review of the estimates of proved reserves of natural gas, oil and natural gas liquids that Burlington Resources Inc. attributed to its net interests in oil and gas properties located in Canada and Argentina as of December 31, 2003, as set forth in our letter report dated January 15, 2003, which appears in this Form 10-K. In addition, 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, 333-60081 and 333-90906), and on Form S-3 Registration Nos. (33-54477, 333-24999, 333-52213, 333-83163, 333-36032, 333-61600 and 333-87170) of Burlington Resources Inc. of the reference to our firm name and our review of the estimates of proved reserves of natural gas, oil and natural gas liquids that Burlington Resources Inc. attributed to its net interests in oil and gas properties located in Canada and Argentina as of December 31, 2003, as set forth in our letter report dated January 15, 2003, which appears in this Form 10-K. SPROULE ASSOCIATES LIMITED /s/ KEN H. CROWTHER, P. ENG. ---------------------------------- Ken H. Crowther, P. Eng. President EX-31.1 14 h11939exv31w1.txt CERT.OF BOBBY S. SHACKOUTS PURSUANT TO SECTION 302 Exhibit 31.1 CERTIFICATIONS I, Bobby S. Shackouls, certify that: 1. I have reviewed this report on Form 10-K of Burlington Resources Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 26, 2004 /S/ BOBBY S. SHACKOULS -------------------------------------------- Bobby S. Shackouls Chairman of the Board, President and Chief Executive Officer EX-31.2 15 h11939exv31w2.txt CERT.OF STEVEN J. SHAPIRO PURSUANT TO SECTION 302 Exhibit 31.2 CERTIFICATIONS I, Steven J. Shapiro, certify that: 1. I have reviewed this report on Form 10-K of Burlington Resources Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 26, 2004 /S/ STEVEN J. SHAPIRO -------------------------------------- Steven J. Shapiro Office of the Chairman, Executive Vice President and Chief Financial Officer EX-32.1 16 h11939exv32w1.txt SECTION 1350 CERTIFICATION Exhibit 32.1 Section 1350 Certification The undersigned, Bobby S. Shackouls, Chairman of the Board, President and Chief Executive Officer of Burlington Resources Inc. ("Company"), hereby certifies that the Annual Report of the Company on Form 10-K for the period ended December 31, 2003 (the "Report") (1) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company. /S/ BOBBY S. SHACKOULS ------------------------------------------ Dated: February 26, 2004 Bobby S. Shackouls Chairman of the Board, President and Chief Executive Officer This certification shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Burlington Resources Inc. and will be retained by Burlington Resources Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 17 h11939exv32w2.txt SECTION 1350 CERTIFICATION Exhibit 32.2 Section 1350 Certification The undersigned, Steven J. Shapiro, Executive Vice President and Chief Financial Officer of the Company, hereby certifies that the Annual Report of the Company on Form 10-K for the period ended December 31, 2003 (the "Report") (1) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and the results of operations of the Company. /S/ STEVEN J. SHAPIRO -------------------------------------- Dated: February 26, 2004 Steven J. Shapiro Office of the Chairman, Executive Vice President and Chief Financial Officer This certification shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Burlington Resources Inc. and will be retained by Burlington Resources Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 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PART I
	ITEMS ONE AND TWO
		BUSINESS AND PROPERTIES
		Employees
		Web Site Access to Reports
	ITEM THREE
		LEGAL PROCEEDINGS
	ITEM FOUR
		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
		EXECUTIVE OFFICERS OF THE REGISTRANT
PART II
	ITEM FIVE
		MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
	ITEM SIX
		SELECTED FINANCIAL DATA
	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
		Safe Harbor Cautionary Disclosure on Forward-Looking Statements
	ITEM EIGHT
		FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL INFORMATION
	ITEM NINE
		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	ITEM NINE A
		CONTROLS AND PROCEDURES
PART III
	ITEMS TEN AND ELEVEN
		DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND EXECUTIVE COMPENSATION
	ITEM TWELVE
		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
	ITEM THIRTEEN
		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
	ITEM FOURTEEN
		PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
	ITEM FIFTEEN
		EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1991 Director Charitable Award Plan
Amendment to 1993 Stock Incentive Plan
$400 Million Short-term Revolving Credit Agreement
$600 Million Long-term Revolving Credit Agreement
Canadian Credit Agreement
2002 Stock Incentive Plan
1997 Employee Stock Incentive Plan
Subsidiaries fo the Registrant
Consent of PricewaterhouseCoopers LLP
Consent of Miller & Lents, Ltd.
Consent of Sproule Associates Limited
Cert.of Bobby S. Shackouts Pursuant to Section 302
Cert.of Steven j. Shapiro Pursuant to Section 302
Section 1350 Certification
Section 1350 Certification


Bbls		Barrels
BCF		Billion Cubic Feet
BCFE		Billion Cubic Feet of Gas Equivalent
DD&A		Depreciation, Depletion and Amortization
MBbls		Thousands of Barrels
MCF		Thousand Cubic Feet
MCFE		Thousand Cubic Feet of Gas Equivalent
MMBbls		Millions of Barrels
MMBTU		Million British Thermal Units
MMCF		Million Cubic Feet
MMCFE		Million Cubic Feet of Gas Equivalent
NGLs		Natural Gas Liquids
TCF		Trillion Cubic Feet
TCFE		Trillion Cubic Feet of Gas Equivalent


								% of					% of
Year Ended December 31, 2003				Worldwide		U.S.		Worldwide			Canada		Worldwide



				($ In Millions)


	Oil and gas capital expenditures
		Development		$	1,056	$	378		36	%	$	446		42	%
		Exploration			301		52		17			214		71
		Acquisitions — proved			228		110		48			19		8

			Total oil and gas capital expenditures	$	1,585	$	540		34	%	$	679		43	%

	Production
		Natural gas (MMCF per day)			1,899		865		46	%		867		46	%
		NGLs (MBbls per day)			64.8		37.4		58			27.4		42
		Crude oil (MBbls per day)			46.5		29.3		63	%		5.1		11	%

December 31, 2003

	Proved reserves (TCFE)				11.8		7.6		64	%		2.8		24	%


						Other		% of
Year Ended December 31, 2003				Worldwide		International		Worldwide



				($ In Millions)


	Oil and gas capital expenditures
		Development		$	1,056	$	232		22	%
		Exploration			301		35		12
		Acquisitions — proved			228		99		44

			Total oil and gas capital expenditures	$	1,585	$	366		23	%

	Production
		Natural gas (MMCF per day)			1,899		167		8	%
		NGLs (MBbls per day)			64.8		—		—
		Crude oil (MBbls per day)			46.5		12.1		26	%

December 31, 2003

	Proved reserves (TCFE)				11.8		1.4		12	%


Year Ended December 31, 2003				Gross		Net


North America
	U.S.
		Crude oil			2,695		1,366
		Natural gas			10,990		6,382
	Canada
		Crude oil			1,158		521
		Natural gas			5,257		4,255
Other International
		Crude oil			120		37
		Natural gas			147		56
Worldwide
		Crude oil			3,973		1,924
		Natural gas			16,394		10,693

			Total Wells		20,367		12,617


Incorporated in the State of Delaware		Employer Identification No. 91-1413284


Year Ended December 31,					2003		2002		2001


North America
	U.S.
		Productive
			Exploratory			0.9		4.5		6.0
			Development			399.0		158.6		271.0
		Dry
			Exploratory			2.5		6.3		8.5
			Development			5.3		2.1		10.1

				Total Net Wells—U.S.		407.7		171.5		295.6

	Canada
		Productive
			Exploratory			102.5		73.3		22.9
			Development			384.4		320.8		158.8
		Dry
			Exploratory			48.6		44.7		13.4
			Development			57.6		46.2		48.3

				Total Net Wells— Canada		593.1		485.0		243.4

Other International
		Productive
			Exploratory			0.7		0.1		2.1
			Development			10.9		1.5		5.8
		Dry
			Exploratory			1.8		2.0		3.1
			Development			1.0		0.1		0.1

				Total Net Wells— Other International		14.4		3.7		11.1

Worldwide
		Productive
			Exploratory			104.1		77.9		31.0
			Development			794.3		480.9		435.6
		Dry
			Exploratory			52.9		53.0		25.0
			Development			63.9		48.4		58.5

				Total Net Wells— Worldwide		1,015.2		660.2		550.1


				Proved		Proved		Total Proved
December 31, 2003				Developed		Undeveloped		Reserves


North America
	U.S.
		Natural gas (BCF)			3,715		1,137		4,852
		NGLs (MMBbls)			188.6		81.0		269.6
		Crude oil (MMBbls)			176.5		6.3		182.8
			Total U.S. (BCFE)		5,906		1,660		7,566
	Canada
		Natural gas (BCF)			1,837		517		2,354
		NGLs (MMBbls)			50.8		10.5		61.3
		Crude oil (MMBbls)			13.1		2.6		15.7
			Total Canada (BCFE)		2,220		596		2,816
Other International
		Natural gas (BCF)			322		546		868
		Crude oil (MMBbls)			50.8		32.8		83.6
			Total Other International (BCFE)		627		743		1,370
Worldwide
		Natural gas (BCF)			5,874		2,200		8,074
		NGLs (MMBbls)			239.4		91.5		330.9
		Crude oil (MMBbls)			240.4		41.7		282.1
			Total Worldwide (BCFE)		8,753		2,999		11,752


(1)	Includes the Canadian Hunter Exploration Ltd. (Hunter) acquisition.



		Payments Due by Period


				Less than						After
Contractual Obligation		Total		1 Year		1-3 Years		4-5 Years		5 Years



		(In Millions)


Total debt(1)		$	3,916	$	—	$	500	$	466	$	2,950
Transportation demand charges(2)			933		160		317		131		325
Non-cancellable operating leases(2)			291		36		81		51		123
Pension funding(3)			11		11		—		—		—
Drilling rig commitments(2)			28		27		1		—		—

	Total Contractual Obligations	$	5,179	$	234	$	899	$	648	$	3,398



									2003 vs. 2002						2003 vs. 2001

												(%)						(%)
									Increase			Increase			Increase			Increase
Year Ended December 31,			2003		2002		2001		(Decrease)			(Decrease)			(Decrease)			(Decrease)



			($ In Millions)


Oil and gas
	Development		$	1,056	$	779	$	826	$	277			36	%	$	230			28	%
	Exploration			301		218		259		83			38			42			16
	Acquisitions			228		604		1,997		(376	)		(62	)		(1,769	)		(89	)

		Total oil and gas		1,585		1,601		3,082		(16	)		(1	)		(1,497	)		(49	)

Plants and pipelines				163		193		346		(30	)		(16	)		(183	)		(53	)
Administrative and other				40		43		26		(3	)		(7	)		14			54

		Total capital expenditures	$	1,788	$	1,837	$	3,454	$	(49	)		(3	)%	$	(1,666	)		(48	)%



									2002 vs. 2001

												%
									Increase			Increase			Increase
Year Ended December 31,			2002		2001		2000		(Decrease)			(Decrease)			(Decrease)



			(In Millions)


Price Variance

	Natural gas sales prices (per MCF)		$	3.20	$	4.03	$	3.42	$	(0.83	)		(21	)%	$	(580	)
	NGLs sales prices (per Bbl)			14.46		16.79		19.51		(2.33	)		(14	)		(51	)
	Crude oil sales prices (per Bbl)		$	24.11	$	23.45	$	25.44	$	0.66			3	%		12

		Total price variance													$	(619	)

Volume Variance

	Natural gas sales volumes (MMCF per day)			1,916		1,724		1,724		192			11	%	$	282
	NGLs sales volumes (MBbls per day)			60.1		47.1		47.2		13.0			28			80
	Crude oil sales volumes (MBbls per day)			49.1		63.2		73.7		(14.1	)		(22	)%		(121	)

		Total volume variance													$	241


December 31,				2003			2002



(In Millions, Except Share Data)


ASSETS

	Current Assets
		Cash and Cash Equivalents		$	757		$	443
		Accounts Receivable			605			515
		Inventories			73			48
		Other Current Assets			82			55

					1,517			1,061

	Oil and Gas Properties (Successful Efforts Method)				15,962			12,716
	Other Properties				1,381			1,140

					17,343			13,856
	Accumulated Depreciation, Depletion and Amortization				7,032			5,353

		Properties—Net			10,311			8,503

	Goodwill				982			803

	Other Assets				185			278

			Total Assets	$	12,995		$	10,645

LIABILITIES

	Current Liabilities
		Accounts Payable		$	714		$	809
		Taxes Payable			43			44
		Accrued Interest			61			61
		Dividends Payable			30			—
		Other Current Liabilities			43			45
		Current Maturities of Long-term Debt			—			63

					891			1,022

	Long-term Debt				3,873			3,853

	Deferred Income Taxes				1,948			1,436

	Commodity Hedging Contracts and Other Derivatives				17			33

	Other Liabilities and Deferred Credits				745			469

	Commitments and Contingent Liabilities (Note 14)

STOCKHOLDERS’ EQUITY

	Preferred Stock, Par Value $.01 per Share (Authorized 75,000,000 Shares; No Shares Issued)				—			—
	Common Stock, Par Value $.01 per Share (Authorized 325,000,000 Shares; Issued 241,188,688 Shares for both 2003 and 2002)				2			2
	Paid-in Capital				3,946			3,941
	Retained Earnings				2,761			1,675
	Deferred Compensation—Restricted Stock				(10	)		(9	)
	Accumulated Other Comprehensive Income (Loss)				655			(164	)
	Cost of Treasury Stock (43,539,885 and 39,749,431 Shares for 2003 and 2002, respectively)				(1,833	)		(1,613	)

	Stockholders’ Equity				5,521			3,832

			Total Liabilities and Stockholders’ Equity	$	12,995		$	10,645


														Accumulated
											Deferred			Other			Cost of
			Common		Paid-in			Retained			Compensation—			Comprehensive			Treasury			Stockholders’
			Stock		Capital			Earnings			Restricted Stock			Income (Loss)			Stock			Equity


			(In Millions, Except Share Data)


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 Declared ($0.55 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

December 31, 2001				2		3,944			1,332			(9	)		(106	)		(1,638	)		3,525

Comprehensive Income (Loss)
	Net Income								454												454
	Foreign Currency Translation														34						34
	Hedging Activities														(86	)					(86	)
	Minimum Pension Liability														(6	)					(6	)

		Comprehensive Income (Loss)							454						(58	)					396

Cash Dividends Declared ($0.55 per Share)									(111	)											(111	)
Stock Option Activity						(3	)											16			13
Issuance of Restricted Stock												(9	)					9			—
Amortization of Restricted Stock												9									9

December 31, 2002				2		3,941			1,675			(9	)		(164	)		(1,613	)		3,832

Comprehensive Income
	Net Income								1,201												1,201
	Foreign Currency Translation														802						802
	Hedging Activities														11						11
	Minimum Pension Liability														6						6

		Comprehensive Income							1,201						819						2,020

Cash Dividends Declared ($0.58 per Share)									(115	)											(115	)
Common Stock Purchases (7,414,990 Shares)																		(361	)		(361	)
Stock Option Activity						5												129			134
Issuance of Restricted Stock												(12	)					12			—
Amortization of Restricted Stock												11									11

December 31, 2003				$2		$3,946		$	2,761		$	(10	)	$	655			$(1,833	)		$5,521


Year Ended December 31, 2001		(In Millions, Except per Share Amounts)


Revenues		$3,902
Net income		696
Basic earnings per common share		3.36
Diluted earnings per common share		$ 3.34


December 31, 2003			Gross		Net


North America
	U.S.
		Developed Acres		4,540,807		2,572,817
		Undeveloped Acres		10,028,439		8,476,943
	Canada
		Developed Acres		3,164,084		2,140,589
		Undeveloped Acres		6,726,455		4,827,171
Other International
		Developed Acres		603,839		186,090
		Undeveloped Acres		16,670,502		8,117,222
Worldwide
		Developed Acres		8,308,730		4,899,496
		Undeveloped Acres		33,425,396		21,421,336


	(In Millions)


December 31, 2002	$	803
Changes in foreign exchange rates during the period		179

December 31, 2003	$	982


		Depreciable
December 31,		Life-Years		2003		2002



				(In Millions)


Plants and pipeline systems			10-20	$	1,018	$	804
Land, buildings, improvements and furniture and fixtures			0-40		128		111
Data processing and telecommunications equipment			3-7		159		152
Other			3-15		76		73

					1,381		1,140
Accumulated depreciation					362		276

	Other properties — net			$	1,019	$	864



				Notional Amount				Fair Value
						Average		Asset
Settlement		Derivative	Hedge	Gas	Oil	Underlying		(Liability)
Period		Instrument	Strategy	(MMBTU)	(Barrels)	Prices		(In Millions)


	2004	Swap	Cash flow	18,050,390		$	3.59	$	(22	)
		Purchased put	Cash flow	73,681,845			4.35		12
		Purchased put	Not designated	11,351,257			3.16		—
		Written call	Cash flow	73,681,845			6.47		(15	)
		Written put	Not designated	11,351,257			3.16		—
		Purchased put	Cash flow		2,275,000		26.60		1
		Purchased put	Not designated		455,000		20.00		—
		Written call	Cash flow		2,275,000		33.40		(3	)
		Written put	Not designated		455,000		20.00		—
		Swap	Fair value	2,641,800			3.18		5
		N/A	Fair value (obligation)	2,641,800			3.21		(4	)

	2005	Swap	Cash flow	10,511,522			3.20		(12	)
		Swap	Fair value	1,579,200			2.82		2
		N/A	Fair value (obligation)	1,579,200			2.83		(2	)

	2006	Swap	Cash flow	912,000			3.06		(1	)

	2007	Swap	Cash flow	760,000			3.06		(1	)

								$	(40	)


				Notional
				Amount					Fair Value
						Average			Asset
Settlement		Derivative	Hedge	U.S. $		Underlying		Average	(Liability)
Period		Instrument	Strategy	(In Millions)		Rate		Floating Rate	(In Millions)


	2004	Swap	Foreign currency	$	8		1.43		$	1
		Interest rate swap	Fair value		50		5.6%	LIBOR + 3.36%		—

	2005	Interest rate swap	Fair value		50		5.6%	LIBOR + 3.36%		—

	2006	Interest rate swap	Fair value	$	50		5.6%	LIBOR + 3.36%		(1	)

									$	—


		(In Millions)


Carrying amount of asset retirement obligations as of January 1, 2003		$	297
	Liabilities incurred during the period		102
	Liabilities settled during the period		(11	)
	Current year accretion expense		21
	Revisions in estimated cash flows		33

Carrying amount of asset retirement obligations as of December 31, 2003		$	442



		Number of Shares

		Issued			Treasury			Outstanding


December 31, 2000			241,188,698			(25,619,893	)		215,568,805
	Adjustment of 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

December 31, 2001			241,188,688			(40,395,695	)		200,792,993
	Shares issued under compensation plans, net of forfeitures					242,216			242,216
	Option exercises					404,048			404,048

December 31, 2002			241,188,688			(39,749,431	)		201,439,257
	Treasury shares purchased					(7,414,990	)		(7,414,990	)
	Shares issued under compensation plans, net of forfeitures					238,084			238,084
	Option exercises					3,386,452			3,386,452

December 31, 2003			241,188,688			(43,539,885	)		197,648,803


					Weighted Average
		Options			Exercise Price


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

December 31, 2001			6,864,258			42.93
	Granted		1,008,850			35.64
	Exercised		(404,048	)		31.80
	Cancelled		(304,846	)		45.11

December 31, 2002			7,164,214			42.44
	Granted		1,977,890			42.11
	Exercised		(3,386,452	)		38.88
	Cancelled		(281,112	)		47.10

December 31, 2003			5,474,540		$	44.28


						Weighted
						Average
		Range of		Weighted		Remaining				Weighted
Options		Exercise		Average		Contractual		Options		Average
Outstanding		Prices		Exercise Price		Life		Exercisable		Exercise Price


	411,209	$	23.32–$34.89	$	31.06		3.1		411,209	$	31.06
	2,860,244		35.38– 44.00		41.28		7.8		1,015,954		39.94
	2,203,087		45.25– 52.03		50.65		5.0		1,971,765		50.65

	5,474,540	$	23.32–$52.03	$	44.28		6.3		3,398,928	$	45.08



		Pension						Postretirement
		Benefits						Benefits


Year Ended December 31,		2003			2002			2003			2002



		(In Millions)


Change in benefit obligation
	Benefit obligation at beginning of year	$	187		$	181		$	42		$	41
	Service cost		9			9			—			—
	Interest cost		13			12			3			3
	Actuarial loss		24			2			7			1
	Currency exchange		4			—			—			—
	Participant contributions		—			—			1			2
	Benefits paid		(15	)		(17	)		(7	)		(5	)

	Benefit obligation at end of year		222			187			46			42

Change in plan assets
	Fair value of plan assets at beginning of year		138			155			—			—
	Actual return on plan assets		31			(12	)		—			—
	Currency exchange		4			—			—			—
	Employer contribution		22			12			6			3
	Participant contributions		—			—			1			2
	Benefits paid		(15	)		(17	)		(7	)		(5	)

	Fair value of plan assets at end of year		180			138			—			—

Funded status			(42	)		(49	)		(46	)		(42	)
Unrecognized net actuarial loss			51			48			23			17
Unrecognized prior service cost (benefit)			2			1			(5	)		(6	)

Net prepaid (accrued) benefit cost			11			—			(28	)		(31	)
Minimum pension liability			—			(13	)		—			—
Intangible asset			—			3			—			—
Accumulated other comprehensive loss			—			10			—			—

Net prepaid (accrued) benefit cost		$	11		$	—		$	(28	)	$	(31	)



			Pension Benefits									Postretirement Benefits


Year Ended December 31,			2003			2002			2001			2003		2002		2001



			(In Millions)


Benefit cost for the plans includes the following components
	Service cost		$	9		$	9		$	9		$	—	$	—	$	—
	Interest cost			13			12			11			3		3		3
	Expected return on plan assets			(13	)		(14	)		(14	)		—		—		—
	Recognized net actuarial loss			4			1			—			—		—		—

		Net benefit cost	$	13		$	8		$	6		$	3	$	3	$	3


Asset Category	Target			2003			2002


Equity		65	%		68	%		64	%
Fixed income		35			30			34
Other		—			2			2

Total		100	%		100	%		100	%


	1-Percentage
	Point		1-Percentage
	Increase		Point Decrease



	(In Thousands)


Effect on total service and interest cost	$	244	$	(211	)
Effect on postretirement benefit obligation	$	4,577	$	(3,920	)



	North America
					Other
Year Ended December 31, 2002	U.S.		Canada		International			Total



	(In Millions)


Revenues	$	1,642	$	1,165	$	161		$	2,968
Depreciation, depletion and amortization		350		382		78			810
Income (loss) before income taxes		817		278		(99	)		996
Properties—net		3,433		4,008		961			8,402
Goodwill		—		803		—			803
Capital expenditures	$	491	$	876	$	435		$	1,802


/s/ STEVEN J. SHAPIRO Steven J. Shapiro Executive Vice President and Chief Financial Officer				/s/ JOSEPH P. MCCOY Joseph P. McCoy Vice President, Controller and Chief Accounting Officer



	Proved Reserves

	Developed		Undeveloped		Total


Oil, Condensate, and NGLs, Million Barrels		415.6		119.7		535.3
Gas, Billions of Cubic Feet		3,993.5		1,579.4		5,572.9



		Crude Oil (MMBbls)



		North America
								Other
		U.S.			Canada			International			Worldwide


Proved Developed and Undeveloped Reserves
December 31, 2000			204.2			57.5			70.0			331.7
	Revisions of previous estimates		(10.7	)		(0.6	)		0.4			(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		0.4			1.2			0.8			2.4
	Sales of reserves in place		(0.2	)		(0.1	)		—			(0.3	)

December 31, 2001			244.3			56.6			71.0			371.9
	Revisions of previous estimates		(2.0	)		(1.4	)		(1.6	)		(5.0	)
	Extensions, discoveries and other additions		2.8			5.3			6.3			14.4
	Production		(13.0	)		(2.8	)		(2.1	)		(17.9	)
	Purchase of reserves in place		1.2			—			19.9			21.1
	Sales of reserves in place		(46.1	)		(43.3	)		(7.2	)		(96.6	)

December 31, 2002			187.2			14.4			86.3			287.9
	Revisions of previous estimates		(4.9	)		0.4			1.7			(2.8	)
	Extensions, discoveries and other additions		11.0			2.8			—			13.8
	Production		(10.7	)		(1.9	)		(4.4	)		(17.0	)
	Purchase of reserves in place		0.5			0.1			—			0.6
	Sales of reserves in place		(0.3	)		(0.1	)		—			(0.4	)

December 31, 2003			182.8			15.7			83.6			282.1

Proved Developed Reserves
	December 31, 2000		169.7			43.0			10.4			223.1
	December 31, 2001		163.7			38.4			8.8			210.9
	December 31, 2002		155.2			12.9			12.9			181.0
	December 31, 2003		176.5			13.1			50.8			240.4



NGLs (MMBbls)									Natural Gas (BCF)



North America									North America												Total
															Other						Equivalent
U.S.			Canada			Worldwide			U.S.			Canada			International			Worldwide			(BCFE)


	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
	9.8			14.7			24.5			(14	)		(140	)		(11	)		(165	)		(48	)
	15.7			9.2			24.9			350			341			85			776			1,012
	(11.9	)		(10.0	)		(21.9	)		(346	)		(293	)		(60	)		(699	)		(938	)
	—			0.2			0.2			153			268			—			421			549
	(0.9	)		(2.0	)		(2.9	)		(282	)		(16	)		(70	)		(368	)		(965	)

	240.4			59.8			300.2			4,753			2,296			841			7,890			11,418
	19.8			(0.7	)		19.1			(88	)		(57	)		(45	)		(190	)		(91	)
	22.9			12.0			34.9			425			427			54			906			1,198
	(13.6	)		(10.0	)		(23.6	)		(315	)		(317	)		(61	)		(693	)		(937	)
	0.6			0.3			0.9			131			9			79			219			228
	(0.5	)		(0.1	)		(0.6	)		(54	)		(4	)		—			(58	)		(64	)

	269.6			61.3			330.9			4,852			2,354			868			8,074			11,752

	177.6			35.5			213.1			3,903			960			251			5,114			7,731
	175.5			39.3			214.8			3,771			1,758			384			5,913			8,467
	179.2			53.1			232.3			3,617			1,836			263			5,716			8,196
	188.6			50.8			239.4			3,715			1,837			322			5,874			8,753



		2003								2002


		4th		3rd		2nd		1st		4th		3rd		2nd		1st



		(In Millions, Except per Share Amounts)


Revenues		$	1,065	$	1,059	$	1,059	$	1,128	$	830	$	652	$	783	$	703
Income before income taxes and cumulative effect of change in accounting principle(a)			299		396		376		499		234		67		207		61
Income before cumulative effect of change in accounting principle			387		267		278		328		157		79		170		48
Net income(b)			387		267		278		269		157		79		170		48
Basic earnings per common share before cumulative effect of change in accounting principle			1.96		1.34		1.39		1.63		0.78		0.39		0.84		0.24
	Net income		1.96		1.34		1.39		1.34		0.78		0.39		0.84		0.24
Diluted earnings per common share before cumulative effect of change in accounting principle			1.95		1.33		1.38		1.62		0.78		0.39		0.84		0.24
	Net income(b)		1.95		1.33		1.38		1.33		0.78		0.39		0.84		0.24
Cash dividends declared per common share			0.15		0.15		0.14		0.14		0.14		0.13		0.14		0.14
Common stock price range
	High		57.45		54.07		55.95		48.07		43.67		39.65		45.34		41.60
	Low	$	46.95	$	45.04	$	45.83	$	40.75	$	34.76	$	32.00	$	36.90	$	32.30


(a)		During the second and fourth quarters of 2003, the Company recognized non-cash, pretax charges of $30 million and $33 million, respectively, related to the impairment of oil and gas properties.

(b)		Fourth quarter 2003 includes a tax benefit of $203 million or $1.03 per diluted share related to the Canadian federal income tax reduction.


		Page


Financial Statements and Supplementary Financial Information
	Consolidated Statement of Income		33
	Consolidated Balance Sheet		34
	Consolidated Statement of Cash Flows		35
	Consolidated Statement of Stockholders’ Equity		36
	Notes to Consolidated Financial Statements		37
	Report of Independent Auditors		62
	Reports of Independent Oil and Gas Consultants		63
	Supplemental Oil and Gas Disclosures—Unaudited		68
	Quarterly Financial Data—Unaudited		73
Amended Exhibit Index			78