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Washington, D.C. 20549

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FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2001

Commission File Number 1-7107

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Louisiana-Pacific Corporation
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, $1 par value		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange

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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 ý    No o

        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

        State the aggregate market value of the voting stock held by nonaffiliates of the registrant: $1,096,725,000 as of March 12, 2002.

        Indicate the number of shares outstanding of each of the registrant's classes of common stock: 104,566,500 of Common Stock, $1 par value, outstanding as of March 12, 2001.

Documents Incorporated by Reference
Definitive Proxy Statement for 2001 Annual Meeting: Part III

Except as otherwise specified and unless the context otherwise requires, references to "LP", the "Company", "we", "us", and "our" refer to Louisiana-Pacific Corporation and its subsidiaries.

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ABOUT FORWARD-LOOKING STATEMENTS

        Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their businesses and other matters as long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statements. This report contains, and other reports and documents filed by us with the Securities and Exchange Commission may contain, forward-looking statements. These statements are or will be based upon the beliefs and assumptions of, and on information available to our management.

        The following statements are or may constitute forward-looking statements: (1) statements preceded by, followed by or that include words like "may," "will," "could," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate," "potential," "continue" or "future" or the negative or other variations thereof and (2) other statements regarding matters that are not historical facts, including without limitation, plans for product development, forecasts of future costs and expenditures, possible outcomes of legal proceedings and the adequacy of reserves for loss contingencies.

        Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to the following:

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changes in general economic conditions;



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changes in the cost and availability of capital;



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changes in the level of home construction activity;



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changes in competitive conditions and prices for our products;



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changes in the relationship between supply of and demand for building products, including the effects of industry-wide increases in manufacturing capacity;



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changes in the relationship between supply of and demand for the raw materials, including wood fiber and resins, used in manufacturing our products;



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changes in other significant operating expenses;



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changes in exchange rates between the U.S. dollar and other currencies, particularly the Canadian dollar;



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changes in general and industry-specific environmental laws and regulations;



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unforeseen environmental liabilities or expenditures;



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the resolution of product-related litigation and other legal proceedings; and



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acts of God or public authorities, war, civil unrest, fire, floods, earthquakes and other matters beyond our control.

        In addition to the foregoing and any risks and uncertainties specifically identified in the text surrounding forward-looking statements, any statements in the reports and other documents filed by us with the Commission that warn of risks or uncertainties associated with future results, events or circumstances identify important factors that could cause actual results, events and circumstances to differ materially from those reflected in the forward-looking statements.

ABOUT THIRD PARTY INFORMATION

        In this report, we rely on and refer to information regarding industry data obtained from market research, publicly available information, industry publications, U.S. government sources and other third parties. Although we believe the information is reliable, we cannot guarantee the accuracy or completeness of the information and have not independently verified it.

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PART I

ITEM 1.    Business

General

        Our company, headquartered in Portland, Oregon, is a leading manufacturer and distributor of building materials. As of December 31, 2001, we had approximately 9,700 employees and operated 59 facilities in the U.S. and Canada, one facility in Chile and one facility in Ireland. We also own approximately 936,000 acres of timberland in the U.S., predominately in the south, and manage approximately 49 million acres of timberland in Canada. In 2001, our sales originating in the U.S. were $1.9 billion, representing approximately 79% of our total sales of $2.4 billion. Our focus is on delivering innovative, high-quality commodity and specialty building products to retail, wholesale, home building and industrial customers. With the exception of pulp, our products are used primarily in new home construction, repair and remodeling, and manufactured housing.

Business Segments

Structural Products Segment

        Our structural products segment manufactures and distributes structural panel products, including oriented strand board (OSB) and plywood; lumber; and engineered wood products (EWP), including I-joists and laminated veneer lumber (LVL). Our structural products segment also includes our timberlands. We believe that in North America we are the largest and one of the most efficient producers of OSB, the largest producer of stud lumber and one of the largest producers of EWP.

        Structural Panel Products.    Our structural panel products are primarily used in new residential construction and remodeling applications such as floor and wall sheathing and roof systems. According to the APA-The Engineered Wood Association, the total North American market for structural panel products, which includes OSB and plywood, was approximately 39 billion square feet in 2001. The OSB share of this market was approximately 55% in 2001, up from approximately 28% in 1991.

        OSB.    Oriented strand board (OSB) is an innovative, affordable and environmentally smart product made from wood strands arranged in layers and bonded with resin. OSB serves many of the same uses as unsanded plywood, including roof decking, sidewall sheathing and floor underlayment, but can be produced at a significantly lower cost. In the past decade, land use regulations and endangered species and environmental concerns have resulted in reduced supplies and higher costs for domestic timber, causing many plywood mills to close or divert their production to other uses. OSB has replaced most of the volume lost from these mills.

        Our strategy for our industry-leading OSB business is to: (1) reduce costs and improve throughput and recovery by continuing to focus on improving efficiency at each of our facilities; (2) improve net realizations relative to weighted-average OSB regional pricing; (3) expand capacity to meet growing OSB demand, but do so through selected acquisitions that meet specific corporate criteria and by building new, low-cost manufacturing facilities to serve particular markets; and (4) leverage our expertise in OSB to capitalize on new opportunities for revenue growth through new product lines.

        Plywood.    Plywood, which can be constructed of either softwood or hardwood veneer, was once the predominant structural panel in the building products market. While OSB has severely eroded the commodity side of the plywood business, the market for plywood used in specialty and industrial applications, such as sanded, marine-grade, concrete form and multi-ply plywood, has been less significantly impacted.

        We believe we are the fifth largest producer of plywood in the U.S. and enjoy strong relationships with do-it-yourself (DIY) retailers in the southeastern U.S. We are continuously striving to enhance our

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plywood profitability by improving our cost structure through (1) rationalizing our facilities and workforce, (2) reducing our log costs, and (3) increasing recovery. Our principal strategy for plywood is to focus our manufacturing and marketing efforts on such value-added specialty products as clear-faced, sanded, and stained products; concrete forms; siding; flooring; and veneer.

        Lumber.    We produce lumber in a variety of standard and specialty grades and sizes, and believe we are the largest North American producer of stud lumber. Stud lumber includes primarily 2" × 4" and 2" ×6" dimension lumber.

        Our strategy for lumber is to focus on studs and narrow dimension lumber. We believe we can leverage our strong presence in the DIY sector to drive growth and capture the premium prices paid by DIY's for premium grades of lumber. Additionally, we are committed to improving overall mill efficiency through selective, high return capital investments and the sale, closure, or curtailment of under performing mills. Since 1994, we have closed or sold 36 sawmills that did not meet our standards for returns and profitability. The final component of this strategy is to seek acquisitions of modern mills that meet or exceed our efficiency standards.

        Engineered Wood Products.    We believe that we are one of the largest North American manufacturers of EWP, including I-joists and LVL. We believe that our engineered I-joists, which are used primarily in residential and commercial flooring and roofing systems and other structural applications, are stronger, lighter and straighter than conventional lumber joists. Our LVL is a high-grade, value-added structural product used in applications where extra strength is required, such as headers and beams. It is also used, together with OSB and lumber, in the manufacture of engineered I-joists.

        Our strategy is to strengthen our brand name recognition in the EWP industry by enhancing our product mix and quality, providing superior technical support for our customers and leveraging our sales and marketing relationships to cross-sell our EWP products. Additionally, we are seeking to drive costs down by rationalizing production capacity across geographic areas and integrating company produced veneer into our EWP products. Our acquisition of certain of the assets of Evans Forest Products Ltd. is indicative of our commitment to growing our EWP business through selective capacity additions and targeted acquisitions.

        Wood Fiber Resources.    We obtain wood fiber for our mills from several sources: fee-owned timberland, timber deeds, cutting contracts with private and public landowners in the U.S., Canada and Ireland, and purchases from third parties. We own approximately 936,000 acres of timberland, primarily in the southern and southeastern U.S., which supplied approximately 11% of our overall timber needs in 2001. In Canada, we have long-term harvest rights, which on average have 20 years left under contract, to harvest timber on nearly 49 million acres of Canadian forestland.

Exterior Products Segment

        We manufacture exterior siding and other cladding products for the residential and commercial building markets. We are seeking to be the "one stop" supplier of choice for all segments of these markets: new home construction, repair and remodeling, and manufactured housing. Our strategy is to drive product innovation by combining our technological expertise in wood and wood composites with our proficiency in plastic and polymer composites. One example of our innovation in this segment is our "Norman Rockwell" vinyl siding, which is highly resistant to fading and allows us to offer siding in colors not typically available from other manufacturers. We intend to increase our product offering and production capacity of these types of higher margin, value-added products through the addition of lower cost plants or the conversion of some OSB plants from commodity structural panel production to OSB siding production.

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        Additionally, we are seeking to optimize our current capacity by extending the hardboard lifecycle through innovative new products and increasing vinyl sales through new products and greater penetration of adjacent markets.

        Our exterior product offerings are classified into four categories: (1) SmartSystem® siding products; (2) hardboard siding products; (3) vinyl siding products and (4) composite decking products. Our portfolio of products offers customers a variety of siding choices at various performance levels and prices.

        The SmartSystem® Products.    Our SmartSystem® products consist of a full line of OSB-based sidings, trim, soffit and fascia. These products have quality and performance characteristics similar to solid wood at more attractive prices due to lower raw material and production costs.

        Hardboard Siding Products.    Our hardboard siding product offerings include a number of lap and panel products in a variety of patterns and textures, as well as trim products.

        Vinyl Siding Products.    We also manufacture vinyl siding products and accessories. These products are available in various styles and colors.

        Composite Decking Products.    We manufacture wood composite decking and accessories. These products have better quality and performance characteristics relative to solid wood.

Industrial Panel Products Segment

        Our industrial panel product segment includes medium density fiberboard (MDF), particleboard and hardboard products. Part of our strategy in our industrial panel products segment is to focus on value-added specialty products that are complementary to our other product offerings. These value-added specialty product lines include flooring, shelving, door skins, door parts, decorative panels, paneling and other specialty applications. Currently, we are focused on the following products: laminated flooring; cut-to-size molding and millwork; and painted and coated parts. As with all our manufacturing facilities, we are continuously seeking to lower costs by reducing waste and improving efficiency, while maintaining quality.

Other Products Segment

        Our other products segment includes value-added products such as plastic molding products, our distribution and wholesale business, wood chips and our OSB mills in Chile and Ireland. In August 2000, we contributed our Cocoon™ cellulose insulation business to US GreenFiber, LLC, a joint venture with Casella Waste Systems in which we own a 50% interest. Cocoon™ insulation is produced from recycled newspaper and has higher insulation efficiency performance levels and superior sound-deadening qualities compared to conventional fiberglass insulation of comparable thickness.

        We own 82.5% of a joint venture in Chile that has a newly constructed OSB mill that commenced operations in 2001. We also own 65% of a joint venture in Ireland that has an OSB mill, the output of which is distributed primarily in Ireland, the United Kingdom and Western Europe. These mills are included in our other products segment because they do not sell primarily to North American customers.

Pulp Segment

        During 2001, we continued our plan to exit the pulp business through the indefinite closure of our Chetwynd, British Columbia pulp mill (see Note 7 of the Notes to the financial statements in item 8 of this report), and the sale of our controlling interest in a pulp mill located in Samoa, California (see Note 11 of the Notes to the financial statements in item 8 of this report). Pulp accounted for approximately 2% of our net sales in 2001.

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Sales, Marketing and Distribution

        Our sales and marketing efforts are primarily focused on third-party wholesale buying groups, professional dealers, home centers and other retailers. The wholesale distribution channel includes a variety of specialized and broad-line wholesale distributors and dealers focused primarily on the supply of products for use by professional builders and contractors. The retail distribution channel includes large retail chains catering to the do-it-yourself and repair and remodeling markets as well as smaller and independent retailers.

Customers

        We seek to maintain a broad customer base and a balanced approach to national distribution through both wholesale and retail channels. In 2001, our top 10 customers accounted for approximately 31% of our revenues, with the largest customer accounting for no more than 7% of our revenues. Because most of our products, including OSB, plywood and lumber, are commodity products sold primarily on the basis of price and availability, we are not dependent on any one customer. Our principal customers include the following:

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Wholesale distribution companies, which supply building materials to retailers on a regional, state or local basis;



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Building materials professional dealers, which specialize in sales to professional builders, remodeling firms, and trade contractors that are involved in residential home construction and light commercial building;



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Retail home centers, which provide access to consumer markets with a broad selection of home improvement materials and increasingly serve professional builders, remodelers and trade contractors;



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Manufactured housing producers, which design, construct and distribute prefabricated residential and light commercial structures, including fully manufactured, modular and panelized structures, for consumer and professional markets; and



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Industrial manufacturers, which produce residential, ready-to-assemble, office and institutional furniture; cabinets, displays and fixtures; windows and doors; molding and millwork; laminated flooring; packaging; transportation equipment; and numerous specialty products.

Competitors

        The building products industry is highly competitive. We compete internationally with several thousand forest and building products firms, ranging from very large, fully integrated firms to smaller firms that may manufacture only one or a few items. We also compete less directly with firms that manufacture substitutes for wood building products. Some competitors have substantially greater financial and other resources than we do that, in some instances, could give them a competitive advantage over us.

Raw Materials

        Wood fiber is the primary raw material used in our operations, and the primary source of wood fiber is timber. The primary end-markets for timber harvested in the U.S. are manufacturers who supply: (1) the housing market; where it is used in the construction of new housing and the repair and remodeling of existing housing; (2) the pulp and paper market; and (3) export markets. The supply of timber is limited by access to timber and by the availability of timberlands. The availability of timberlands, in turn, is limited by several factors, including government forest management policies, alternate uses of land, and loss to urban or suburban real estate development.

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        Our 936,000 acres of timberlands, primarily in the southern U.S., provided approximately 11% of our domestic wood fiber requirements in 2001 and an average of approximately 13% of our domestic wood fiber requirements over the past five years. In addition to our fee-owned timberlands, we have timber-cutting rights under long-term contracts (five years or longer) on approximately 42,000 acres, and under shorter term contracts on approximately 195,000 acres, on government and privately owned timberlands in the U.S. In Canada, we harvest enough timber annually under long-term harvest rights with the Canadian government and other third parties to fully support our twelve Canadian production facilities. The average remaining life of our Canadian timber rights is 20 years with provisions for renewal.

        We purchase more than 68% of our wood fiber requirements on the open market, including from domestic private timber owners. Because wood fiber is subject to commodity pricing, the cost of various types of timber that we purchase in the market has at times fluctuated greatly due to economic or industry conditions. However, our mills are generally located in areas that are in close proximity to large and diverse supplies of timber. Therefore, in areas where we do not own a significant amount of timberlands, our mills generally have the ability to procure wood fiber at competitive prices from third-party sources. We satisfy a portion of our wood fiber requirements by purchasing certain by-products, including wood chips, wood shavings and sawdust, from third parties. These by-products account for an insignificant portion of our wood fiber requirements.

        In addition to wood fiber, we use a significant quantity of various resins in the manufacturing processes for our structural and industrial panel products, as well as certain of our vinyl products. Resin product costs are influenced by changes in the prices of raw materials used to produce resin, primarily petroleum products, as well as demand for resin products.

        While the majority of our energy requirements are generated at our plants through the conversion of wood waste, we also purchase substantial amounts of energy in our operations, primarily electricity and natural gas. Energy prices have experienced significant volatility in recent years, particularly in deregulated markets. We attempt to control our exposure to energy price changes through the use of long-term supply contracts that range in term from one to seven years. See Notes 1 and 7 of the Notes to the financial statements included in item 8 of this report for a discussion of the accounting treatment of several of these contracts.

Environmental Compliance

        Our operations are subject to many environmental laws and regulations governing, among other things, the restoration and reforestation of timberlands, discharges of pollutants and other emissions on or into land, water and air, the disposal of hazardous substances or other contaminants and the remediation of contamination. In addition, certain environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. Compliance with environmental laws and regulations can significantly increase the costs of our operations and otherwise result in significant costs and expenses. In some cases, plant closures can result in more onerous compliance requirements becoming applicable to a facility or a site. Violations of environmental laws and regulations can subject us to additional costs and expenses, including defense costs and expenses and civil and criminal penalties. We cannot assure you that the environmental laws and regulations to which we are subject will not become more stringent, or be more stringently implemented or enforced, in the future.

        Our policy is to comply fully with all applicable environmental laws and regulations. In recent years, we have devoted increasing management attention to achieving this goal. In addition, from time to time, we undertake construction projects for environmental control facilities or incur other environmental costs that extend an asset's useful life, improve efficiency or improve the marketability of

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certain properties. We believe that our capital expenditures for environmental control facilities in 2002 and 2003 will not be material.

        Additional information concerning environmental matters is set forth under Item 3, Legal proceedings, and in Note 8 of the Notes to financial statements in item 8 contained in this report.

Employees

        We employ approximately 9,700 people, approximately 1,800 of who are members of unions. We consider our relationship with our employees generally to be good. Five union contracts at our Canadian OSB facilities are subject to negotiation and renewal in 2002. Discussions have begun on these contracts and progress is being made. One of our OSB facilities has experienced a work stoppage and there can be no assurance that further work stoppages will not occur.

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Segment and Price Trend Data

        The following table sets forth, for each of the last five years, (1) our consolidated net sales by business segment, (2) our consolidated profit (loss) by business segment, (3) production volumes, (4) the average wholesale price of selected building products in the United States, and (5) logs used in production by source. This information should be read in conjunction with the consolidated financial statements (including the notes thereto) and the other information contained in this report.

Product Information Summary
For Years Ended December 31

			2001					2000					1999					1998					1997
			(Dollar Amounts in Millions, Except Per Unit)
SALES BY BUSINESS SEGMENT
Structural products			$	1,520		65	%	$	1,817		62	%	$	1,876		61	%	$	1,307		53	%	$	1,223		48	%
Exterior products				359		15			329		11			276		9			116		5			112		4
Industrial panel products				198		8			287		10			300		10			192		8			199		8
Other products				235		10			348		12			477		16			731		30			861		34
Building products				2,312		98			2,781		95			2,929		95			2,346		96			2,395		93
Pulp				48		2			152		5			143		5			105		4			169		7
	Total sales		$	2,360		100		$	2,933		100		$	3,072		100		$	2,451		100		$	2,564		100
PROFIT (LOSS) BY BUSINESS SEGMENT
Structural products			$	(1	)			$	176				$	440				$	198				$	21
Exterior products				16					19					53					22					9
Industrial panel products				(19	)				2					13					6					13
Other products				(2	)				(12	)				(11	)				(20	)				(24	)
Building products				(6	)				185					495					206					19
Pulp				(27	)				13					(15	)				(38	)				(29	)
Other operating credits and charges, net				(67	)				(71	)				(8	)				(48	)				(32	)
Loss related to assets and liabilities transferred under contractual arrangement				(43	)				—					—					—					—
General corporate and other expense, net				(86	)				(99	)				(103	)				(94	)				(80	)
Interest, net				(60	)				(43	)				(12	)				(13	)				(29	)
Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate			$	(289	)			$	(15	)			$	357				$	13				$	(151	)
PRODUCTION VOLUMES
OSB, 3/8" basis, million square feet				5,240					5,396					4,406					3,934					3,762
Softwood plywood, 3/8" basis, million square feet				809					1,046					943					983					1,221
Lumber, million board feet				966					993					1,029					1,110					1,240
Wood-based siding, 3/8" basis, million square feet				733					651					678					383					238
Industrial panel products (particleboard, medium density fiberboard and hardboard), 3/4" basis, million square feet				488					637					621					575					589
Engineered I-Joists, million lineal feet				71					70					87					86					73
Laminated veneer lumber, thousand cubic feet				6,923					7,008					6,300					7,100					5,800
Pulp, thousand short tons				62					373					374					286					377
INDUSTRY PRODUCT PRICE TRENDS(1)
OSB, MSF, 7/16" - 24/16" span rating (North Central price			$	159				$	206				$	260				$	205				$	142
Southern pine plywood, MSF, 1/2" CDX (3 ply)				268					229					329					284					265
Framing lumber, composite prices, MBF				312					323					401					349					417
Industrial particleboard, 3/4" basis, MSF				251					284					273					259					262
% LOGS BY SOURCES(2)
Fee owned lands				11					10					11					12					19
Private cutting contracts				13					14					16					14					14
Government contracts				21					17					17					13					7
Purchased logs				55					59					56					61					60
Total volumes—million board feet				2,541					3,352					2,324					1,997					2,398

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(1)

Prices represent yearly averages stated in dollars per thousand board feet (MBF) or thousand square feet (MSF). Source: Random Lengths.

(2)

Stated as a percentage of total log volume.

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        For additional information regarding our business segments and information regarding our geographic segments, see Note 12 of the Notes to the financial statements in item 8 of this report.

Executive Officers of Louisiana-Pacific Corporation

        Information regarding each of our executive officers as of March 1, 2002 (including certain executives whose duties may cause them to be classified as executive officers under applicable SEC rules), including employment history for the past five years, is set forth below.

        Mark A. Suwyn, age 59, has been Chairman and Chief Executive Officer since January 1996. Before joining LP, Mr. Suwyn was Executive Vice President of International Paper Company from 1992 through 1995. Mr. Suwyn is also a director of LP.

        F. Jeff Duncan, Jr., age 47, has been Chief Information Officer of LP since October 1998 and Vice President since March 2001 and additionally, Director of Technology since February 2002. Mr. Duncan had been Director of Information Technology of LP since September 1996. He was previously employed by E.I. du Pont de Nemours & Co. for 19 years in a variety of positions, most recently as Systems Manager—New Business Development.

        Richard W. Frost, age 50, joined LP in May 1996 as Vice President, Timberlands and Procurement. Mr. Frost was Vice President and Operational Manager for S.D. Warren Company from 1992 to 1996.

        M. Ward Hubbell, age 41, has been Director, Corporate Affairs since September 1997 and Vice President since March 2001. Before joining LP, Mr. Hubbell was employed by International Paper Company beginning in October 1992, first as Communications Director and then as Federal Affairs Manager.

        Joseph B. Kastelic, age 38, has been Vice President, Specialty Products since November 2000 and Vice President, Sales and Specialty Products since January 2001. He previously served as Director, Specialty Building Products from January 1999 to November 2000. From March 1997 to December 1998, Mr. Kastelic was Business Director, Siding/Exterior Products, and from September 1996 to March 1997 served as Marketing Development Manager for new construction and siding. Before joining LP in September 1996, Mr. Kastelic was the Marketing Development Manager at PPG Industries in Pittsburgh, Pennsylvania.

        W. Lee Kuhre, age 55, joined LP in September 2001 as Vice President, Environmental Affairs. Mr. Kuhre was an Assistant Vice President for Science Applications International from 1997 to 2001.

        J. Keith Matheney, age 53, has been Vice President, OSB and Engineered Wood Products since November 2000. He previously served as Vice President, Core Businesses from June 1998 to November 2000, as Vice President, Sales and Marketing from January 1997 to June 1998, as General Manager—Western Division from February 1996 to January 1997, and General Manager—Weather-Seal Division from May 1994 to February 1996.

        Curtis M. Stevens, age 49, has been Vice President, Treasurer and Chief Financial Officer since September 1997. Before joining LP, Mr. Stevens spent 13 years as the senior financial executive of Planar Systems, Inc., a leading manufacturer and supplier of electroluminescent flat panel displays, where he was named Executive Vice President and General Manager in 1996. He also served on the Board of Directors for Planar Systems.

        Michael J. Tull, age 56, has been Vice President, Human Resources since May 1996. Before joining LP, Mr. Tull was employed by Sharp HealthCare, a regional system of hospitals and related facilities in San Diego, California, for more than 10 years, most recently as Corporate Vice President of Employee Quality and Development beginning in 1991.

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        Walter M. Wirfs, age 54, has been Vice President, Lumber and Plywood since November 2000, and as Vice President, Manufacturing from March 1999 to November 2000. From January 1998 to March 1999, Mr. Wirfs served as President of Western Wood Products Association. Mr. Wirfs was employed by Willamette Industries, Inc., a forest products company headquartered in Portland, Oregon, for 23 years until December 1997, most recently as Vice President of its Southern and Atlantic Regions.

        Executive officers are elected from time to time by the Board of Directors. Each officer's term of office runs until the meeting of the Board of Directors following the next annual meeting of the stockholders and until his or her successor is elected and qualified, or until his or her earlier resignation or removal.

ITEM 2.    Properties

        Information regarding our principal properties and facilities is set forth in the following tables. Information regarding production capacities is based on normal operating rates and normal production mixes under current market conditions, taking into account known constraints such as log supply. Market conditions, fluctuations in log supply, and the nature of current orders may cause actual production rates and mixes to vary significantly from the production rates and mixes shown.

Structural Products Segment:

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Exterior Products Segment:

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(1)

A square is defined as 100 square feet of material with an average weight of 32 pounds.

Industrial Panel Products Segment:

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(a)

Our finishing and tileboard plant in Toledo, Ohio takes production from the Alpena, MI plant to produce decorative panels and finished tileboard.

(b)

The East River, Nova Scotia, plant produces both hardboard panel products and hardboard siding products.

Other Products Segment:

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Timber Fee Holdings:

        In addition to fee-owned timberlands, we have timber cutting rights under long-term contracts (five years and longer) on approximately 42,000 acres, and under shorter term contracts on approximately 195,000 acres, on government and privately owned timberlands in the United States in the vicinities of certain of our manufacturing facilities.

        Our Canadian subsidiaries have arrangements with four Canadian provincial governments which give our subsidiaries the right to harvest a volume of wood off public land from defined forest areas under supply and forest management agreements, long-term pulpwood agreements, and various other timber licenses. These subsidiaries also obtain wood from private parties in certain cases where the provincial governments require us to obtain logs from private parties prior to harvesting from the licenses to meet raw materials needs.

ITEM 3.    Legal Proceedings

        Certain environmental matters and legal proceedings are discussed below.

ENVIRONMENTAL MATTERS

        In November 2000, our subsidiary Ketchikan Pulp Company ("KPC") finalized a consent decree with the federal government to complete remediation activities at KPC's former pulp mill site and of Ward Cove, a body of water adjacent to the mill site. Total costs for the investigation and remediation of Ward Cove are estimated to cost approximately $7.5 million (of which approximately $5.7 million had been spent at December 31, 2001).

        In connection with the clean up of KPC's former log transfer facilities; the United States Forest Service (the "USFS") has asserted that KPC is obligated to adhere to more stringent remediation

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standards than those imposed by the Alaska Department of Environmental Conservation. The USFS has also asserted that previously closed-out facilities may need to be re-evaluated. We dispute the authority of the USFS to require KPC to adhere to the more stringent standards, or to re-evaluate closed-out facilities. Adherence to the more stringent standards and/or re-evaluation of closed-out facilities, if ultimately required, could substantially increase the cost of the remediation.

        We are also involved in a number of other environmental proceedings and activities, and may be wholly or partially responsible for known or unknown contamination existing at a number of other sites at which we have conducted operations or disposed of wastes. Based on the information currently available, management believes that any fines, penalties or other costs or losses resulting from these matters will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity.

COLORADO CRIMINAL PROCEEDINGS

        In June 1995, a federal grand jury returned an indictment in the U.S. District Court for the District of Colorado against us in connection with alleged environmental violations, as well as alleged fraud in connection with the submission of unrepresentative oriented strand board (OSB) product samples to an industry product certification agency, by our Montrose (Olathe), Colorado OSB plant. Pursuant to a guilty plea to certain criminal violations entered in May 1998, (i) we paid penalties of $37 million (of which $12 million was paid in 1998 and the balance was paid in the second quarter of 1999), and we were sentenced to five years of probation and (ii) all remaining charges against us were dismissed. The terms of our probation require, among other things, that we not violate any federal, state or local law.

        In December 1995, we received a notice of suspension from the EPA stating that, because of the criminal proceedings pending against us in Colorado, the Montrose facility would be prohibited from purchasing timber directly from the USFS. In April 1998, we signed a Settlement and Compliance Agreement with the EPA. This agreement formally lifted the 1995 suspension imposed on the Montrose facility. The agreement has a term of five years and obligates us to (i) develop and implement certain corporate policies and programs, including a policy of cooperation with the EPA, an employee disclosure program and a policy of nonretaliation against employees, (ii) conduct our business to the best of our ability in accordance with federal laws and regulations and local and state environmental laws, (iii) report significant violations of law to the EPA, and (iv) conduct at least two audits of our compliance with the agreement.

OSB SIDING MATTERS

        In 1994 and 1995, we were named as a defendant in numerous class action and nonclass action proceedings brought on behalf of various persons or purported classes of persons (including nationwide classes in the United States and Canada) who own or purchased or used OSB siding manufactured by us. In general, the plaintiffs in these actions alleged unfair business practices, breach of warranty, misrepresentation, conspiracy to defraud and other theories related to alleged defects, deterioration or failure of OSB siding products.

        In June 1996, the U.S. District Court for the District of Oregon approved a settlement between us and a nationwide class composed of all persons who own, have owned, or acquire property on which our OSB siding was installed prior to January 1, 1996, excluding persons who timely opted out of the settlement and persons who are members of the settlement class in the Florida litigation described below. Under the settlement agreement, an eligible claimant whose claim is filed prior to January 1, 2003 (or earlier in certain cases) and is approved by an independent claims administrator is entitled to receive from the settlement fund established under the agreement a payment equal to the replacement cost (determined by a third-party construction cost estimator and currently estimated to be in the range

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of $2.20 to $6.40 per square foot depending on the type of product and geographic location) of damaged siding, reduced by a specific adjustment (of up to 65%) based on the age of the siding. Class members who previously submitted or resolved claims under any other warranty or claims program of ours may be entitled to receive the difference between the amount payable under the settlement agreement and the amount previously paid. The extent of damage to OSB siding at each claimant's property is determined by an independent adjuster in accordance with a specified protocol. Settlement payments are not subject to adjustment for improper maintenance or installation.

        A claimant who is dissatisfied with the amount to be paid under the settlement may elect to pursue claims against us in a binding arbitration seeking compensatory damages without regard to the amount of payment calculated under the settlement protocol. A claimant who elects to pursue an arbitration claim must prove his entitlement to damages under any available legal theory, and we may assert any available defense, including defenses that otherwise had been waived under the settlement agreement.

        The settlement requires us to contribute $275 million to the settlement fund. Approximately $273 million of that obligation had been satisfied at December 31, 2001 through cash payments on a discounted basis of approximately $263 million. Our remaining mandatory contributions to the settlement fund are due in June 2002 (approximately $2 million). In addition to our mandatory contributions, at December 31, 2001, we had paid, on a discounted basis, approximately $97 million of the two $50 million optional contributions, at a cost of approximately $68 million, and we have committed to the court that we will make the balance of these two optional contributions when they become due in August 2002. We were entitled to make our mandatory and optional contributions to the settlement fund on a discounted basis as a result of a court-approved early payment program (the "Early Payment Program").

        During 2000, we offered eligible claimants the opportunity to receive a pro rata share of a court approved second settlement fund (the "Second Settlement Fund") in satisfaction of their claims. Pursuant to this offer, we paid approximately $115 million from the Second Settlement Fund in satisfaction of approximately $319 million in claims. All of the payments under the Second Settlement Fund have been completed. Claimants who accepted payment from the Second Settlement Fund may not file additional claims under the settlement. Claimants who elected not to participate in the Second Settlement Fund remain bound by the terms of the original settlement.

        At December 31, 2001, the estimated amount of approved but unpaid claims under the settlement agreement exceeded the sum of the then-current balance of the settlement fund and our remaining mandatory and committed optional contributions to the settlement fund by approximately $117 million. Approximately 8,700 new claims were filed during 2001.

        Based upon the payments that we have made and committed to make, the settlement will continue in effect until at least August 2003. Within 60 days after June 7, 2003, the Claims Administrator shall notify us of the dollar value of all remaining unfunded and approved claims. We shall then have 60 days to notify the Claims Administrator whether we elect to fund all such remaining claims. If we elect to fund those claims, then we will pay by the end of the next 12-month period (2004) the greater of: (i) 50% of the aggregate sum of those claims (with the remaining 50% to be paid by 12 months thereafter in 2005); or (ii) 100% of the aggregate sum of those claims, up to a maximum of $50 million (with all remaining claims paid 12 months thereafter in 2005). If we elect not to pay the unpaid claims pursuant to the settlement, the settlement will terminate with respect to such unpaid claims and all unpaid claimants will be free to pursue their individual remedies from and after the date of our election.

        If we make all contributions to the original settlement fund required under the settlement agreement, including all additional optional contributions as described in the immediately preceding paragraph, class members will be deemed to have released us from all claims for damaged OSB siding,

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except for claims arising under their existing 25-year limited warranty after termination of the settlement agreement. The settlement agreement does not cover consequential damages resulting from damage to OSB Inner-Seal siding or damage to utility grade OSB siding (sold without any express warranty), either of which could create additional claims. In addition to payments to the settlement fund, we were required to pay fees of class counsel in the amount of $26.25 million, as well as expenses of administering the settlement fund and inspecting properties for damage and certain other costs.

        A settlement of a related class action in Florida was approved by the Circuit Court for Lake County, Florida, on October 4, 1995. Under the settlement, we established a claims procedure pursuant to which members of the settlement class could report problems with our OSB siding and have their properties inspected by an independent adjuster, who would measure the amount of damage and also determine the extent to which improper design, construction, installation, finishing, painting, and maintenance may have contributed to any damage. The maximum payment for damaged siding was $3.40 per square foot for lap siding and $2.82 per square foot for panel siding, subject to reduction by up to 75 percent for damage resulting from improper design, construction, installation, finishing, painting, or maintenance, and also subject to reduction for age of siding more than three years old. We agreed that the deduction from the payment to a member of the Florida class would not be greater than the deduction computed for a similar claimant under the national settlement agreement described above. Class members were entitled to make claims until October 4, 2000. By December 31, 2001, approximately 27,000 Florida class action claims had been paid. No further claims will be accepted or paid under this settlement.

        Throughout the period the above described settlements have been in effect, we have recorded accruals which represent management's best estimates of amounts to be paid based on available information. The unusual nature of the settlements and the various alternatives available to us makes the process of estimating these accruals difficult. In connection with national settlement, the liability recorded at December 31, 2001 represents management's best estimate of the future liability related to the estimated siding claims based upon the most current information available. There can be no assurance that the ultimate liability will not significantly exceed the recorded liability.

ABT HARDBOARD SIDING MATTERS

        ABT Building Products Corporation ("ABT"), ABTco, Inc., a wholly owned subsidiary of ABT ("ABTco" and, together with ABT, the "ABT Entities"), Abitibi- Price Corporation ("Abitibi"), a predecessor of ABT, and certain affiliates of Abitibi (the "Abitibi Affiliates" and, together with Abitibi, the "Abitibi Entities") have been named as defendants in a conditionally certified class action filed in the Circuit Court of Choctaw County, Alabama, on December 21, 1995 and in nine other putative class action proceedings filed in the following courts on the following dates: the Court of Common Pleas of Allegheny County, Pennsylvania on August 8, 1995; the Superior Court of Forsyth County, North Carolina on December 27, 1996; the Superior Court of Onslow County, North Carolina on January 21, 1997; the Court of Common Pleas of Berkeley County, South Carolina on September 25, 1997; the Circuit Court of Bay County, Florida on March 11, 1998; and the Superior Court of Dekalb County, Georgia on September 25, 1998. ABT and Abitibi have also been named as defendants in a putative class action proceeding filed in the Circuit Court of Jasper County, Texas on October 5, 1999. These actions were brought on behalf of various persons or purported classes of persons (including nationwide classes) who own or have purchased or installed hardboard siding manufactured or sold by the defendants. In general, the plaintiffs in these actions have claimed unfair business practices, breach of warranty, fraud, misrepresentation, negligence, and other theories related to alleged defects, deterioration, or other failure of such hardboard siding, and seek unspecified compensatory, punitive, and other damages (including consequential damage to the structures on which the siding was installed), attorneys' fees and other relief.

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        We, the ABT Entities and the Abitibi Entities have also been named as defendants in a putative class action proceeding filed in the Circuit Court of Jackson County, Missouri on April 22, 1999, and we, the ABT Entities and Abitibi have been named as defendants in a putative class action proceeding filed in the District Court of Johnson County, Kansas on July 14, 1999. These actions were brought on behalf of purported classes of persons in Missouri and Kansas, respectively, who own or have purchased hardboard siding manufactured by the defendants. In general, the plaintiffs in these proceedings have claimed breaches of warranty, fraud, misrepresentation, negligence, strict liability and other theories related to alleged defects, deterioration or other failure of such hardboard siding, and seek unspecified compensatory, punitive and other damages (including consequential damage to the structures on which the siding was installed), attorneys' fees and other relief.

        We acquired ABT in February 1999 and ABT was merged into LP in January of 2001.

        On September 21, 2000, the Circuit Court of Choctaw County, Alabama, under the caption Foster, et al. v. ABTco, Inc., ABT Building Products Corporation, Abitibi-Price, Inc. and Abitibi-Price Corporation (No. CV95-151-M), approved a settlement agreement among the defendants and attorneys representing a nationwide class composed of all persons who own or formerly owned homes or, subject to limited exceptions, other buildings or structures on which hardboard siding manufactured by the defendants was installed between May 15, 1975 and May 15, 2000. Except for approximately 30 persons who timely opted out, the settlement includes and binds all members of the settlement class and resolves all claims asserted in the various proceedings described above. Under the settlement agreement, class members who had previously made a warranty claim or had already repaired or replaced their siding had until May 15, 2001 to file a claim; class members whose siding was installed between May 15, 1975 and May 15, 1976 had at least nine months following the date on which the settlement became final and nonappealable to file their claims; and all other class members will have twenty-five years after their siding was installed to file a claim.

        Under the settlement agreement, the defendants will be entitled to elect to make an offer of settlement to an eligible claimant based on the information set forth in the claim submitted by such claimant, and such claimant will be entitled to accept or reject the offer. If an eligible claimant declines the offer, or if no offer is made, such claimant will be entitled to a payment based on an independent inspection. Such payments will be based on a specified dollar amount (calculated on the basis of statewide averages and ranging from $2.65 to $6.21, depending upon the state) per square foot of covered siding that has experienced specified types of damage, subject to reduction based on the age of the damaged siding and any failure to paint the damaged siding within stated intervals (except in the case of damaged siding installed on mobile homes, as to which a uniform 50% reduction will apply in all circumstances). If applicable, payments under the settlement will also be subject to reduction to reflect any warranty payments or certain other payments previously recovered by a claimant on account of the damaged siding. Under the settlement agreement, LP (as successor to ABT) will be required to pay the expenses of administering the settlement and certain other costs.

        ABT and Abitibi were parties to an agreement of an allocation of liability with respect to claims related to siding sold prior to October 22, 1992. On June 13, 2001, in exchange for a cash payment from Abitibi of approximately $19 million which was received in July 2001, Louisiana-Pacific Canada Ltd. (LPC), a wholly owned subsidiary of LP, agreed to accept a transfer of all of Abitibi's rights and obligations under the settlement agreement and the allocation agreement; and we and LPC agreed to indemnify and hold harmless Abitibi from any cost of liability arising from its sale of hardboard siding in the United States. From the date of the agreement, Abitibi has no further rights, obligations or liabilities under either the class action settlement agreement or the allocation agreement. All of such rights, obligations and liabilities have been assigned to and accepted and assumed by LPC.

        Based on the information currently available and previously recorded reserves, management believes that the resolution of the foregoing ABT hardboard siding matters will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity.

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NATURE GUARD CEMENT SHAKES MATTERS

        We have been named in three putative class action proceedings filed in California in the following courts on the following dates: Superior Court of California, County of Stanislaus, on January 9, 2001 captioned Virgina L. Davis v. Louisiana-Pacific Corporation; Superior Court of California, County of San Francisco, on July 30, 2001 captioned Mahleon R. Oyster and George Sousa v. Louisiana-Pacific Corporation; and Superior Court of California, County of Stanislaus, on September 7, 2001, captioned Angel H. Jasso and Angela Jasso v. Louisiana-Pacific Corporation. The actions were filed on behalf of a purported national class of persons nationwide owning structures on which our Nature Guard Fiber Cement Shakes were installed as roofing. Plaintiffs generally allege product liability, negligence, breach of warranties, unfair business practices, false advertising, fraud, deceit and other theories related to alleged defects, and failure of such cement shakes as well as consequential damages to other components of the structures where the cement shakes were installed. Plaintiffs seek general, compensatory, special and punitive damages as well as disgorgement of profits and the establishment of a fund to provide restitution to the purported class members.

        We have also been named on June 13, 2001 as defendant in a putative class action filed in Superior Court for the State of Washington, Snohomish County, captioned Nick P. Marassi, M.D. and Debra Marassi v. Louisiana-Pacific Corporation. The action was filed on behalf of a purported national class of persons owning structures on which our Nature Guard Fiber Cement Shakes were installed as roofing. Plaintiffs generally allege nondisclosure, fraudulent concealment and violation of Washington's Consumer Protection Act arising from alleged product defects. Plaintiffs seek compensatory, exemplary and statutory damages, an injunction against marketing or selling the product, a declaration that we are financially responsible for the costs and expenses of repair and replacement of all roofs containing the product, and disgorgement of profits or restitution.

        We no longer manufacture or sell fiber cement shakes, but have established and maintain a claims program for the Nature Guard shakes previously sold. We believe that we have substantial defenses to the foregoing actions and intend to defend them vigorously. At the present time, we cannot predict the potential financial impact of the above actions.

OTHER PROCEEDINGS

        We are parties to other legal proceedings. Based on the information currently available, we believe that the resolution of such proceedings will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity.

CONTINGENCY RESERVES

        We maintain reserves for the estimated cost of the legal and environmental matters referred to above. However, as with any estimate, there is uncertainty of predicting the outcomes of claims and litigation and environmental investigations and remediation efforts that could cause actual costs to vary materially from current estimates. Due to various uncertainties, we cannot predict to what degree actual payments (including payments under the OSB siding litigation settlements or any alternative strategies adopted by us with respect to OSB siding claims) will exceed the recorded liabilities related to these matters. However, it is possible that, in either the near term or the longer term, revised estimates or actual payments will significantly exceed the recorded liabilities.

        For information regarding our financial statement reserves for the estimated costs of the environmental and legal matters referred to above, see Note 8 of the Notes to the financial statements in item 8 in this report.

ITEM 4.    Submission of Matters to a Vote of Security Holders

        No matter was submitted to a vote of LP's security holders during the fourth quarter of 2001.

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PART II

ITEM 5.    Market for Registrant's Common Equity and Related Stockholder Matters

        The common stock of LP is listed on the New York Stock Exchange with the ticker symbol "LPX". The Dow-Jones newspaper quotations symbol for the common stock is "LaPac." Information regarding the high and low sales prices for the common stock for each quarter of the last two years is included in the table in Item 6 headed "High and Low Stock Prices."

        Information regarding cash dividends paid during 2001 and 2000 is included in the tables in Item 6—headed "2001 Quarterly Data" and "2000 Quarterly Data." Certain financing agreements to which we are a party prohibit us from paying cash dividends on our common stock.

ITEM 6.    Selected Financial Data

			2001			2000
			Dollar Amounts in Millions, Except Per Share
ANNUAL DATA
	Net sales		$	2,359.7		$	2,932.8
	Net income (loss)			(171.6	)		(13.8	)
	Net income (loss) per share—basic and diluted			(1.64	)		(0.13	)
	Net cash provided by operating activities			148.7			82.5
	Capital expenditures—plants, logging roads and timber (excludes acquisitions)			74.7			220.3
	Working capital			183.6			275.9
	Ratio of current assets to current liabilities			1.59 to 1			1.73 to 1
	Total assets			3,016.8			3,374.7
	Long-term debt, excluding current portion			1,152.0			1,183.8
	Long-term debt as a percent of total capitalization			51.6	%		47.8	%
	Stockholders' equity			1,080.9			1,295.2
	Stockholders' equity per ending share of common stock			10.35			12.41
	Number of employees			9,700			11,000
	Number of stockholders of record			14,583			15,485

			1ST QTR			2ND QTR			3RD QTR			4TH QTR			YEAR
2001 QUARTERLY DATA
Net sales			$	558.5		$	649.8		$	635.5		$	515.9		$	2,359.7
Gross profit (loss)(1)				(39.8	)		62.4			38.2			(18.4	)		42.4
Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate				(113.1	)		(13.6	)		(21.8	)		(140.6	)		(289.1	)
Net income (loss)				(89.4	)		(9.7	)		(1.7	)		(70.8	)		(171.6	)
Net income (loss) per share—basic and diluted				(0.86	)		(0.09	)		(.02	)		(0.68	)		(1.64	)
Cash dividends per share				0.14			0.05			0.05			0.00			0.24
2000 QUARTERLY DATA
Net sales			$	829.7		$	831.5		$	702.7		$	568.9		$	2,932.8
Gross profit (loss) (1)				167.9			152.1			44.4			(29.7	)		334.7
Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate				96.7			37.7			(31.5	)		(117.7	)		(14.8	)
Net income (loss)				57.7			21.0			(40.9	)		(51.6	)		(13.8	)
Net income (loss) per share—basic and diluted				0.55			0.20			(0.39	)		(0.50	)		(0.13	)
Cash dividends per share				0.14			0.14			0.14			0.14			0.56
HIGH AND LOW STOCK PRICES
2001 High			$	12.29		$	13.95		$	11.84		$	9.45		$	13.95
	Low			9.29			8.55			5.46			6.05			6.05
2000 High			$	14.05		$	14.65		$	11.24		$	10.37		$	14.65
	Low			10.25			10.05			8.17			6.96			6.96

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(1)

Gross profit is income before selling and administrative expenses, other operating credits and charges, taxes, minority interest, interest and equity in earnings of unconsolidated affiliate.

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        In the first quarter of 2000, we recorded a $5.0 million ($3.1 million after taxes, or $0.03 per diluted share) gain on an insurance recovery for siding related matters and an impairment charge of $3.4 million ($2.1 million after taxes, or $0.02 per diluted share) to reduce the carrying value of a manufacturing facility to its estimated net realizable value.

        In the second quarter of 2000, we recorded a net charge of $38.0 million ($22.7 million after taxes, or $.21 per diluted share) primarily related to an impairment charge to reduce the carrying value of the Samoa pulp mill to its estimated net realizable value, an impairment charge at an MDF facility, a mark to market charge on an interest rate hedge and a gain on an insurance recovery for siding related matters.

        In the third quarter of 2000, we recorded a gain on an insurance recovery of $10.6 million ($6.4 million after taxes, or $.06 per diluted share) related to a 1999 fire at its Athens, Georgia OSB facility. We also recorded gains on the sales of the Mellen, Wisconsin veneer facilities and a former plant site in California that totaled $6.1 million ($3.7 million after taxes, or $.03 per diluted share). In addition, we recorded charges relating to the settlement of an interest rate hedge, additional environmental reserves for sites in Quebec that were acquired in 1999, additional reserves for non-product litigation and impairment charges relating to several facilities which will be permanently closed totaling $17.8 million ($10.7 million after taxes, or $.10 per diluted share).

        In the fourth quarter of 2000, we recorded a net charge of $15.4 million ($9.4 million after taxes, or $.09 per share) associated with the permanent closure or planned sale of several high-cost non-competitive mills. Additionally, we recorded impairment charges of $15.4 million ($9.4 million after taxes, or $.09 per share) related to other assets held. We also recorded $2.3 million ($1.3 million after taxes, or $.01 per share) of severance charges related to a reorganization of administrative functions.

        In the first quarter of 2001, we recorded a loss of $10.1 million ($6.2 million after taxes, or $0.06 per diluted share) associated with impairment charges on assets held. We also recorded a net loss of $2 million ($1.2 million after taxes, or $0.01 per diluted share) for additional reserves for non-product litigation.

        In the second quarter of 2001, we recorded a loss of $2.0 million ($1.2 million after taxes, or $0.01 per diluted share) associated with the impairment of an equity investment.

        In the third quarter of 2001, we recorded a gain of $1.6 million ($0.9 million after taxes, or $0.01 per diluted share) from the sale of pollution credits associated with closed mills. We also recorded severance charges of $0.5 million ($0.3 million after tax, or $0.0 per diluted share) associated with certain corporate restructurings.

        In the fourth quarter of 2001, we recorded other operating credits and charges of $54 million ($32.9 million after taxes or $0.32 per diluted share). Included in this number, we recorded a charge of $37.6 million ($23.1 million after taxes, or $0.22 per diluted share) associated with the impairment, severance and environmental expenses due to the indefinite closure of the Chetwynd pulp mill. Additionally, we recorded impairment charges of $10.1 million ($6.0 million after taxes, or $0.06 per diluted share) related to other assets held. We also recorded $4.7 million ($2.9 million after taxes, or $0.03 per diluted share) of severance charges related to certain corporate restructurings. We also recorded a gain of $4.6 million ($2.8 million after taxes, or $0.03 per diluted share) from the sale of pollution credits associated with closed mills. Due to the recent bankruptcy filing of Enron, we were required to record a mark-to-market adjustment on several energy contracts of $6.1 million ($3.7 million or $0.04 per diluted share), as future physical delivery of the energy was no longer deemed probable.

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Financial Summary

			Year Ended December 31
			2001			2000			1999			1998			1997
			Dollar Amounts in Millions, Except Per Share
SUMMARY INCOME STATEMENT DATA(1)
Net sales			$	2,359.7		$	2,932.8		$	3,071.6		$	2,451.1		$	2,563.5
Gross profit(2)				42.4			334.7			596.5			257.9			91.9
Interest, net				(59.8	)		(43.1	)		(11.9	)		(12.8	)		(29.0	)
Provision (benefit) for income taxes				(112.4			(11.5	)		139.5			14.4			(44.4	)
Net income (loss)				(171.6	)		(13.8	)		216.8			2.0			(101.8	)
Net income (loss) per share—basic and diluted				(1.64	)		(0.13	)		2.04			0.02			(0.94	)
Cash dividends per share				0.24			0.56			0.56			0.56			0.56
Average shares of common stock outstanding (millions)
	Basic			104.4			104.1			106.2			108.4			108.5
	Diluted			104.4			104.1			106.2			108.6			108.5
SUMMARY BALANCE SHEETS
Current assets			$	493.1		$	654.1		$	739.4		$	612.1		$	596.8
Timber and timberlands, at cost less cost of timber harvested				563.1			590.6			611.1			499.0			634.2
Property, plant and equipment, net				1,133.4			1,308.8			1,334.0			913.3			1,191.8
Notes receivable from asset sales				403.8			403.8			403.8			403.8			49.9
Goodwill and other assets				423.4			417.4			399.9			90.9			105.7
Total assets			$	3,016.8		$	3,374.7		$	3,488.2		$	2,519.1		$	2,578.4
Current liabilities			$	309.5		$	378.2		$	540.7		$	366.6		$	319.3
Long-term debt, excluding current portion				1,152.0			1,183.8			1,014.8			459.8			572.3
Deferred income taxes and other				474.4			517.5			572.7			469.9			400.6
Stockholders' equity				1,080.9			1,295.2			1,360.0			1,222.8			1,286.2
Total liabilities and stockholders' equity			$	3,016.8		$	3,374.7		$	3,488.2		$	2,519.1		$	2,578.4
KEY FINANCIAL TRENDS
Working capital			$	183.6		$	275.9		$	198.7		$	245.5		$	277.5
Plant and logging road additions(3)			$	69.2		$	187.7		$	88.3		$	77.8		$	106.2
	Timber additions, net			5.5			32.6			29.6			44.7			49.7
Total capital additions			$	74.7		$	220.3		$	117.9		$	122.5		$	155.9
Long-term debt as a percent of total capitalization				52	%		48	%		43	%		27	%		31	%
Income (loss) as a percent of average equity				(14	)%		(1	)%		17	%		—			(8	)%

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(1)

Includes other operating credits and charges. See the Notes to the financial statements in Item 8 of this report.

(2)

Gross profit (loss) is income (loss) before selling and administrative expenses, other operating credits and charges, income taxes, minority interest, interest and equity in earnings of unconsolidated affiliate.

(3)

Excludes acquisitions.

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ITEM 7.    Management's Discussion and Analysis

CRITICAL ACCOUNTING POLICIES

        Presented in Note 1 of Notes to financial statements in Item 8 of this report is a discussion of our significant accounting policies. The discussion of each of the policies outlines the specific accounting treatment related to each of these accounting areas. While all of these are important to understand when reading our financial statements, there are several policies that we have adopted and implemented from among acceptable alternatives that could lead to different financial results:

        Inventory valuation.    We use LIFO (last-in, first-out) method for most log and lumber inventories with the remaining inventories valued at FIFO (first-in, first-out) or average cost.

        Timber and timberlands.    We use an overall policy on fee timber that amortizes timber costs over the total fiber available during the estimated growth cycle as volume is harvested. Timber carrying costs, such as reforestation and forest management, are expensed as incurred. Additionally, included in the balance of timber and timberlands are values allocated to Canadian forest licenses in the purchase price allocation for Le Groupe Forex (Forex) and the assets of Evans Forest Products (Evans). This allocation was based upon appraised values.

        Property, plant and equipment.    We principally use the units of production method of depreciation for machinery and equipment that amortizes the cost of equipment over the estimated units that will be produced during a conservative estimate of its useful life.

SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGMENTS

        Throughout the preparation of the financial statements, we employ significant judgments in the selection and application of accounting principles and methods. These judgments are primarily related to the assumptions used to arrive at various estimates. For 2001, these significant accounting estimates and judgments include:

        Legal contingencies.    Our estimates of our loss contingencies for legal proceedings are based on various judgments and assumptions regarding the potential resolution or disposition of the underlying claims and associated costs. With respect to OSB siding claims subject to our nationwide class action settlement, these judgments and assumptions relate to, among other things: the timing and magnitude (in terms of both the number of claims and the square footage of damaged siding) of additional claims; the extent to which claims may be resolved through means other than those provided for in the settlement; and the costs associated with the administration of the settlement and the resolution of disputes and other legal matters. In making these judgments and assumptions, we consider, among other things, discernible trends in the rate of claims assertion and related damage estimates, information obtained through consultation with statisticians, including statistical analyses of potential outcomes based on experience to date, the experience of third parties who have been subject to product-related claims judged to be comparable and our potential ability to resolve claims for less than their calculated value under the settlement. With respect to other product claims, we have much less historical experience as to both the validity of the claims and the potential means and costs of resolving or disposing of them. Due to the numerous variables associated with these judgments and assumptions, both the precision and reliability of the resulting estimates of the related loss contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to these contingencies and, as additional information becomes known, may change our estimates significantly.

        Environmental contingencies.    Our estimates of our loss contingencies for environmental matters are also based on various judgments and assumptions, the specific nature of which varies in light of the particular facts and circumstances surrounding each such contingency. These estimates typically reflect judgments and assumptions relating to the probable nature, magnitude and timing of required

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investigation, remediation and/or monitoring activities and the probable cost of these activities, and in some cases reflect judgments and assumptions relating to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of the cost of these activities. In making these judgments and assumptions we consider, among other things, the activity to date at particular sites, information obtained through consultation with applicable regulatory authorities and third-party consultants and contractors and our historical experience at other sites that are judged to be comparable. Due to the numerous variables associated with these judgments and assumptions, and the effects of changes in governmental regulation and environmental technologies, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. We regularly monitor our estimated exposure to environmental loss contingencies and, as additional information becomes known, may change our estimates significantly.

        Impairment of Long-Lived Assets.    We review the long-lived assets held and used by us (primarily property, plant and equipment and timber and timberlands) and goodwill for impairment when events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. Identifying these events and changes in circumstances, and assessing their impact on the appropriate valuation of the affected assets under U.S. generally accepted accounting principles requires us to make judgments, assumptions and estimates. In general, losses are recognized when the book values exceed our estimate of the undiscounted future net cash flows associated with the affected assets. The key assumptions in estimating these cash flows are future production volumes and pricing of commodity products and future estimates of expenses to be incurred. The prices are based upon the average pricing over the commodity cycle (generally five years) due to the inherent volatility of commodity product pricing. These prices are estimated from information gathered from industry research firms, research reports published by investment analysts and other published forecasts. Our estimate of expenses are based upon our expectation that we will continue to reduce product costs that will offset inflationary impacts. When impairment is indicated, the book values of the assets are written down to their estimated fair value. Assets to be disposed of are written down to their estimated fair value, less sales costs. In situations where we have experience in selling assets of a similar nature, we may estimate net sales proceeds on the basis of that experience. In other situations, we may hire independent appraisers to estimate net sales proceeds for us. Due to the numerous variables associated with our judgments and assumptions relating to the valuation of our assets in these circumstances, and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates of the related impairment charges are subject to substantial uncertainties and, as additional information becomes known, we may change our estimates significantly.

        Deferred Taxes.    We record deferred tax assets, including net operating loss and other carryover amounts, and deferred tax liabilities. The amounts that we record for these assets (including any related valuation allowances) and liabilities are based upon various judgments, assumptions and estimates, including judgments regarding the tax rates that will be applicable to the deferred tax amounts, the likelihood that we will generate sufficient taxable income or gain to utilize deferred tax assets prior to their expiration, potential future tax liability relating to audits by taxing authorities and the indefinite reinvestment of foreign earnings. Due to the numerous variables associated with our judgments, assumptions and estimates relating to the valuation of our deferred tax assets and liabilities, and the effects of changes in circumstances affecting these valuations, both the precision and reliability of the resulting estimates are subject to substantial uncertainties and, as additional information becomes known, we may change our estimates significantly.

RESULTS OF OPERATIONS

        We lost $171.6 million ($1.64 per diluted share) in 2001, including pre-tax other operating credits and charges of $67.2 million ($40.9 million after taxes, or $0.39 per diluted share) and the non-cash charge associated with the impairment of the investment in assets and liabilities transferred under

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contractual arrangement of $42.5 million ($25.6 million after taxes or $0.25 per diluted share). This compares to a loss of $13.8 million ($0.13 per diluted share) in 2000, including net pre-tax other operating charges and credits of $70.5 million ($42.5 million after taxes, or $0.41 per diluted share) and $5.3 million ($3.3 million after taxes, or $.04 per diluted share) included in the Equity in (earnings) losses of unconsolidated affiliate line item. We earned $216.8 million ($2.04 per diluted share) in 1999 including net pre-tax other operating charges and credits of $8.2 million ($5.1 million after taxes, or $.05 per diluted share). The other operating credits and charges for all three years are discussed in further detail in Note 7 of the Notes to the financial statements included in Item 8 of this report. Excluding the effects of other operating credits and charges, we lost $104.8 million in 2001 ($1.00 per diluted share), earned $32.1 million ($.31 per diluted share) in 2000 and earned $221.9 million ($2.09 per diluted share) in 1999.

        Sales in 2001 were $2.4 billion, a decline of 17% from 2000 sales of $2.9 billion. Sales in 2000 were 5% lower than 1999 sales of $3.1 billion.

        Reduced pricing for our building products and the threat of slowing housing markets factored negatively into our results for 2001 and 2000. Softening demand, along with higher industry capacity, resulted in reduced market prices for structural panels (oriented strand board (OSB), plywood and lumber). For 2000 as compared to 1999, the market-related decrease in sales was partially offset by the inclusion for a full year of the operations of ABT Building Products Corporation (ABT), which we acquired in late February 1999, Le Group Forex Inc. (Forex), which we acquired in September 1999 and certain assets of Evans Forest Products Ltd. (Evans), which were acquired in November 1999. ABT expanded our product offerings in the Exterior Products segment with hardboard and vinyl siding; expanded our Industrial Panels products segment with decorative hardboard and added plastic moldings to our Other Products segment. Forex added OSB capacity on the East Coast of North America to our Structural Products Segment, helping to fill a geographic gap. Evans added to our laminated veneer lumber (LVL), cedar decking and plywood production capacities, all of which are part of our Structural Products segment.

        We operate in five major business segments: Structural Products, Exterior Products, Industrial Panel Products, Other Products, and Pulp. Structural Products is the most significant segment, accounting for approximately 60% or more of net sales in 2001, 2000, and 1999. During 2001, we continued our plan to exit the pulp business through the indefinite closure of our Chetwynd, British Columbia pulp mill (see Note 7 of the Notes to the financial statements in item 8 of this report). Our results of operations are discussed below for each of these segments separately. Additional information about the factors affecting these segments is presented in Item 1 under the heading "Segment and Price Trend Data."

        Most of our products are sold as commodities and therefore sales prices fluctuate daily based on market factors over which we have little or no control. We cannot predict whether the prices of our products will remain at current levels, or will increase or decrease in the future because supply and demand are influenced by many factors, only two of which are the cost and availability of raw materials. We are not able to determine to what extent, if any, we will be able to pass any future increases in the price of raw materials on to customers through product price increases.

        Demand for the majority of our products is subject to cyclical fluctuations over which we have no control. Demand for our building products is heavily influenced by the level of residential construction activity and the repair and remodeling markets, both of which are subject to fluctuations due to changes in economic conditions, interest rates, population growth and other factors. These cyclical fluctuations in demand are unpredictable and may have substantial effects on our results of operations.

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Selected Segment Data

			Year Ended December 31
			2001			2000			1999			01-00		00-99
												Increase (Decrease)
			Dollars Amounts in Millions
TOTAL SALES
Structural products			$	1,520		$	1,817		$	1,876		(16.3	)%	(3.1	)%
Exterior products				359			329			276		9.1	%	19.1	%
Industrial panel products				199			287			300		(30.7	)%	(4.2	)%
Other products				235			348			477		(32.5	)%	(26.9	)%
Pulp				47			152			143		(68.4	)%	5.9	%
	Total sales		$	2,360		$	2,933		$	3,072		(19.5	)%	(4.5	)%
OPERATING PROFIT (LOSS)
Structural products			$	(1	)	$	176		$	440		(100.6	)%	(60.7	)%
Exterior products				16			19			53		(15.8	)%	(63.8	)%
Industrial panel products				(19	)		2			13		n.m.		(86.2	)%
Other products				(2	)		(12	)		(11	)	83.3	%	(9.1	)%
Pulp				(27	)		13			(15	)	(307.7	)%	183.3	%
Other operating credits and charges, net				(67	)		(71	)		(8	)	5.6	%	n.m.
Loss related to assets and liabilities transferred under contractual arrangement				(43	)		—			—		n.m.		n.m.
General corporate and other expense, net				(86	)		(99	)		(103	)	13.1	%	3.9	%.
Interest, net				(60	)		(43	)		(12	)	(39.5	)%	(258	)%
	Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate		$	(289	)	$	(15	)	$	357		(1826	)%	(1042	)%

STRUCTURAL PRODUCTS

        Our structural products segment manufactures and distributes structural panel products, including OSB; plywood; lumber; and EWP, including I-joists and LVL. Our structural products segment also includes our timberlands. The decline in sales for 2001 was primarily due to lower OSB and lumber prices and plywood volumes. The decline in sales for 2000 compared to 1999 was primarily due to lower OSB, plywood and lumber prices, which were partially offset by higher sales volumes resulting from the inclusion of a full year of operations of Forex and Evans that were acquired in late 1999. Percent changes in average sales prices and unit shipments were as follows:

        We and several of our competitors have announced plans to construct new OSB plants or expand existing facilities, which will add significantly to industry capacity in the next few years. Several of these planned facilities, including two of our planned facilities, have been delayed or cancelled. Anticipation

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of this additional capacity, combined with a slow-down in the U.S. economy that was forecasted to slow the pace of future housing starts and, therefore, the demand for building products, drove down the average pricing for OSB in both 2001 and 2000. OSB sales volume declined in 2001 compared to 2000 due to our market related downtime and increased in 2000 compared to 1999 primarily as a result of the Forex acquisition.

        The results for our plywood products also declined in 2001. The commodity side of plywood has continued to suffer from market share erosion to OSB in 2001 and 2000, particularly as OSB prices have declined in that period. We have continued to shift production to higher-value products and away from commodity sheathing products. Plywood sales volume declined in 2001 as compared to 2000 due to the closure of one plywood mill and a shift from plywood production to veneer production at two of our remaining mills for use at our LVL facilities or sale on the open market.

        Our lumber sales in 2001 and 2000 declined compared to 2000 and 1999 due to weakened market conditions. The price decreases reflect an oversupply of lumber in North American markets. Decreases in our lumber volumes were primarily related to market-related downtime and the permanent closures in of several sawmills. Sales from the distribution business are shown in the Other Products segment.

        Sales volumes of LVL and I-Joist both increased in 2001 due to increasing market share through the addition of several new customers. In 2000, EWP sales volume increased primarily due to agreements to market products of independent producers. In both 2001 and 2000, we have seen declining prices due to a general overcapacity in the market.

        In 2001, the profitability of our Structural Products segment declined significantly, primarily due to price decreases in our commodity based products. The cumulative effect of the price declines in OSB, lumber and plywood resulted in a loss to this segment of over $220 million. The impact of declining sales prices was offset by improvements in operating efficiencies and reduction in wood costs. In 2000, the profitability of our Structural Products segment declined significantly, primarily as a result of price decreases in OSB, plywood and lumber. Additionally, this segment was negatively impacted by significant increases in resin and energy costs in both 2001 and 2000. Overall, log costs in 2001 declined by approximately 1% and did not change significantly in 2000 compared to 1999. LIFO (last-in first-out) inventory income (expense) adjustments of $4 million in 2001, $10 million in 2000, $(6) million in 1999 are included in the Structural Products segment.

EXTERIOR PRODUCTS

        Our exterior products segment produces and markets wood and vinyl siding and related accessories, composite decking and specialty OSB. Percent changes in average sales prices and unit shipments were as follows:

        For 2001 compared to 2000, the increased volume of both our hardboard siding and our OSB-based exterior products was primarily due to capturing additional sales as a result of mill closures by a key competitor. Vinyl pricing declined however volume increased due to the introduction of a new line of vinyl siding products. Composite decking sales significantly increased due to a full year of operations in 2001 versus four months in 2000 (due to the introductory nature of these products, they are not included in the table above). During both 2001 and 2000, one of our specialty OSB facilities produced commodity OSB. This commodity OSB volume declined in 2001 as compared to 2000

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primarily due to increasing utilization of this facility to produce OSB-based specialty products. The increase in 2000 of commodity OSB was primarily related to the conversion of a commodity OSB mill into a specialty OSB mill in early 2000. See discussion with Structural Panel Products above as to reasons for declines in the commodity OSB pricing.

        Profitability of our exterior products segment declined in 2001 compared to 2000 due to lower pricing for those specialty OSB products that are closely related to commodity pricing and losses from product introduction and market penetration efforts associated with the composite decking operations. Total profits decreased in 2000 compared to 1999 primarily due to decreased sales prices and significant increase in resin costs associated with both the wood-based siding and vinyl operations.

INDUSTRIAL PANEL PRODUCTS

        Our industrial panel products segment manufactures and distributes particleboard, medium density fiberboard (MDF), and decorative panels. For particleboard, 2001 sales prices declined about 11% compared to 2000 due to weak market conditions and sales volumes declined 4%. For MDF, 2001 volumes declined 75% compared to 2000 and sales prices increased 23%. The significant decline in MDF volume was due to plant closures, fiber supply shortages and increased competition from offshore suppliers. The increase in pricing is due to our focus on a higher percentage of on-grade and value added products. Hardboard sales volumes fell 16% in 2001 with sales prices remaining relatively flat due to reduced demand as a result of product substitution and a lower percentage mix of interior hardboard products of our East River, Nova Scotia facility. Our East River, Nova Scotia facility was utilized to produce more exterior hardboard siding during 2001 (see discussion in exterior products). The primary factors in the decreased profitability of this segment in 2001 were the lower volumes in MDF, higher energy costs and significant increases in wood fiber cost. For 2000 as compared to 1999, decreased demand for particleboard and MDF resulted in relatively flat average sales prices and significant reduction in volumes. During 2000, we permanently closed two MDF facilities and one hardboard facility due to market conditions. Reduced volumes and significant increases in energy costs negatively impacted our 2000 profits in this segment.

OTHER PRODUCTS

        Our other products segment includes plastic molding products, as well as our distribution and wholesale business, wood chips and our OSB plants located in Chile and Ireland. Our other products segment previously included our cellulose insulation business (contributed to a joint venture in August 2000), coatings and specialty chemicals business (sold in December 1999) and our Alaska lumber and logging operations (sold in November 1999). The primary reason for the decrease in sales in our other products segment for 2001 as compared to 2000 was the significant declines in commodity prices that negatively impacted sales and profits of our distribution facilities. Additional declines are related to our Ireland operation that saw depressed pricing due to the oversupply of OSB in Europe. The primary cause of the decrease in sales in our other products segment for 2000 compared to 1999 was the sale of the coatings and specialty chemicals business and the Alaska lumber and logging operations. Additionally, in 2000, significant declines in commodity prices negatively impacted sales and profits of our distribution facilities.

        The operating loss in this segment for 2001 was reduced as compared to 2000 as a result of our contribution of our cellulose insulation operation to a joint venture in August of 2000, reduction in losses in our Alaskan operations and the significant improvement in our distribution business. While sales in the distribution business were lower, due to the prolonged reduced pricing, we were able to increase our profitability. The operating loss in this segment was relatively flat in 2000 compared to 1999.

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PULP

        Our pulp segment operations declined significantly in 2001. Sales volumes declined by 67% and sales averages declined by 25%. The decline in pricing was due to reduced demand for pulp in the worldwide market. Volumes declined due to the transfer in mid-February of a controlling interest in our pulp facilities in Samoa, California as described in Note 11 to the Notes to the financial statements included in item 8 of this report as well as the initial market-related curtailment and then indefinite closure of our Chetwynd, British Columbia mill (see discussion in Note 7 of the Notes to the financial statements in item 8 of this report). In addition to the impact of lower pricing and volume, higher costs for energy negatively affected profits of this segment. Comparing 2000 to 1999, our sales volumes declined 18% and our average selling prices rose 48%. For 2000 compared to 1999, the pulp markets temporarily improved as the Asian economy improved and pulp producers closed operations or took downtime. These improved prices significantly improved operating profits.

        Our pulp products represent the majority of our export sales. Therefore, the changes in pulp sales were the primary reason for the decreases in 2001 and 2000 of our export sales. Information regarding our geographic segments and export sales are provided in Note 12 of the Notes to the financial statements included in Item 8 of this report.

GENERAL CORPORATE EXPENSE, NET

        Net general corporate expense was $86 million in 2001 as compared to $99 million in 2000 and $103 million in 1999. The decline in 2001 is primarily related to a continuing focus on cost reduction, including the elimination of numerous mid- to upper level management positions toward the end of the year and reductions in outside professional fees, travel, marketing expenses and other discretionary expenses. The decline in 2000 is primarily related to a reduction in management bonuses tied to company performance.

OTHER OPERATING CREDITS AND CHARGES, NET

        For a discussion of other operating credits and charges, net, refer to Note 1 and 7 of the Notes to the financial statements included in item 8 of this report.

INTEREST, NET

        In 2001, 2000 and 1999, net interest expense was $59.8 million, $43 million and $11.9 million. The increase in interest expense in 2001 over 2000 was due to a higher average level of debt outstanding throughout 2001 compared to 2000 to fund operations as well as increased interest rates due to the addition of our senior subordinated notes. In 2000, net interest expense increased over 1999 due to the indebtedness incurred in connection with the Forex, ABT and Evans acquisitions.

EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATE

        In August 2000, together with Casella Waste Systems, Inc., we each contributed most of the assets of our respective cellulose insulation operations to a joint venture, U.S. GreenFiber, LLC (GreenFiber). Pursuant to the Limited Liability Company Agreement, each company owns 50% of GreenFiber. Subsequent to the formation of the joint venture, GreenFiber recorded a restructuring charge related to the closure of duplicate facilities and other activities associated with streamlining the combined business. Our share of this restructuring charge in 2000 was $5.3 million ($3.3 million after taxes, or $.03 per diluted share). GreenFiber elected to be treated as a partnership for income tax purposes and therefore the entity is not taxed directly. The amortization of goodwill resulting from our 1997 purchase of the contributed assets is reflected in this line item. GreenFiber's operations improved significantly in 2001 due to declines in raw material costs.

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INCOME TAXES

        We recorded a tax benefit of $112.4 million in 2001 and $11.5 million in 2000 and a tax provision of $139.5 million in 1999. In 2001, our effective tax rate approximated the statutory rate. For 2000, the effective tax rate differed from the statutory rate primarily due to the effects of non-deductible goodwill (relative to pre-tax income (loss)), reductions in prior year provisions due to closure of prior year tax audits and an increase in the valuation allowance related to foreign tax credits due to expectation of lower future foreign income. Additionally, the income tax effects of our share of the loss of GreenFiber are recorded in this line item while our share of the pre-tax income or loss is recorded in the line item "Equity in earnings (losses) of unconsolidated affiliate." In 1999, our effective tax rate approximated the statutory rates.

LEGAL AND ENVIRONMENTAL MATTERS

        Refer to Note 8 of the Notes to the financial statements included in item 8 of this report for a discussion of certain legal matters involving LP as well as the past and potential future impact on LP. In addition, a more detailed discussion of the significant past charges recorded by LP related to OSB siding litigation and the current status of related settlements follows.

        Background of OSB Siding Litigation. In 1994 and 1995, we were served with numerous individual and class action lawsuits alleging defects in our OSB Siding. Those suits were settled either on an individual basis or pursuant to court approved class action settlements in Florida (the "Florida Settlement") and in Oregon (the "National Settlement").

        The Florida Settlement covered residents of the State of Florida only and had a five year term that terminated on October 4, 2000. As of December 31, 2001, approximately 27,000 approved claims had been paid under the Florida Settlement at an aggregate cost of approximately $76 million. There are no approved, unpaid Florida claims outstanding; and all future liability to Florida claimants on account of OSB siding claims subject to the settlement has been extinguished.

        The National Settlement covered homeowners throughout the United States (except Florida) with our OSB Siding and has a seven year term for filing claims, which ends on December 31, 2002. The National Settlement requires us to make a total of $275 million of mandatory payments to claimants in accordance with an agreed payment schedule. It also provides that if the total amount of claims filed during the first four years of the settlement exceeds $275 million, the settlement terminates unless we make two additional discretionary contributions of $50 million each: the first in August 2001 and the second in August 2002.

        Prior to October 1998, it was apparent that within the first four years of the settlement, the total amount of claims would exceed $275 million. Accordingly, for claimants electing to participate in the program, we proposed an accelerated funding program by which we prepaid, at a discount, the balance of the mandatory payments and substantially all of the $100 million of discretionary payments (the "Early Payment Program"). In addition, we funded a separate $125 million settlement fund from which pro-rata distributions were made to eligible claimants (the "Second Settlement Fund"). Both of these programs were approved by the court and implemented in late 1998 and early 1999.

        By reason of the payments made under the foregoing programs, we have satisfied (or made provision for the satisfaction of) all funding obligations required to keep the National Settlement in effect and binding on all parties in accordance with its terms until at least August 2003.

        At December 31, 2001, approximately 27,000 claims with an aggregate face value of $117 million had been approved and were awaiting payment under the National Settlement. Additional claims will be filed during 2002. Currently, there is no money in the settlement fund to pay the vast majority of those claims. Prior to August 2003, LP must elect whether to pay all remaining approved claims filed prior to January 1, 2003. If LP elects to pay them, it must do so in two equal payments, the first of

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which is due in August 2004 and the second in August 2005. Upon the payment of those sums, class members will not be able to assert any claims against us for damage to their OSB Siding subject to the settlement, except for claims arising after the termination of the settlement that are covered under our standard written warranty applicable to such siding.

        We are currently exploring the possibility of implementing a program to prepay these claims at a discount in order to extinguish these liabilities within our established reserves. Inherent in the $78 million of reserve for these claims is the assumption that we will settle the claims for less than the calculated value.

        If in August 2003 we elect not to make further payment to the claimants, the unpaid claimants are thereafter released from the terms of the settlement and may pursue their individual legal remedies. In any such subsequent legal proceeding, however, all of the legal defenses waived by us under the settlement are revived and may be asserted by us as defenses.

        As of December 31, 2001, (i) approximately 314,000 requests had been received for claim forms for the National Settlement and the Florida Settlement, compared to 299,000 at December 31, 2000, and (ii) approximately 201,000 completed claim forms for the National Settlement and the Florida Settlement had been received, compared to 192,000 at December 31, 2000. The average payment amount for settled claims as of December 31, 2001 and December 31, 2000 was approximately $3,800. Excluding claims satisfied on a discounted basis pursuant to the Second Settlement Fund, the average payment amount for settled claims as of December 31, 2001 was $5,100. The total number of completed claim forms pending (not settled) as of December 31, 2001 was approximately 27,000 (approximately 21,000 at December 31, 2000) while approximately 139,000 claims had been settled (approximately 137,000 at December 31, 2000) and approximately 35,000 claims had been dismissed (approximately 34,000 at December 31, 2000). Dismissal of claims is typically the result of claims for product not produced by LP or claims that lack sufficient information or documentation after repeated efforts to correct those deficiencies.

        Amount and Timing of Accruals.    Our accruals through the periods these settlements were in effect represented management's best estimates of the amounts to be paid based on the information available at the time. However, the unusual nature of the settlements and of the circumstances that surrounded their performance makes the process of estimating these accruals difficult. The Florida Settlement has expired and we were able to complete payments to Florida claimants within our established reserves. In regard to the National Settlement, the liabilities recorded at December 31, 2001 represent management's best estimate of the future liability related to the siding claims based on the most current information available. Numerous factors affect the total amount of the future liability, including,

•

Our ability to liquidate the unpaid claims at a discount (see discussion above).



•

If an alternative settlement is reached, the cost of its administration, notice and attorney fees.



•

The cost and uncertainties of any subsequent class actions that may be brought on behalf of unpaid claimants or the cost of defending against a myriad of individual actions.



•

The cost of resolving litigation brought to recover damages arising from the use of OSB Siding (other than damages to the product itself.)

        Although we do not currently anticipate that these or other factors will cause a material change in the recorded liability, there can be no assurance that the ultimate liability will not significantly exceed the recorded liability. No additional accruals were made in 2001, 2000 and 1999. Payments were $12 million, $136 million and $97 million in 2001, 2000 and 1999.

        Insurance Recoveries.    We recorded approximately $17.2 million of insurance recoveries in 2000 related to the OSB siding claims. We do not expect any further insurance recoveries related to OSB Siding claims.

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

        Net cash provided by operations was $149 million in 2001, $83 million in 2000 and $473 million in 1999. In 2001, the increase in cash provided from operations resulted primarily from declines in inventories, a reduction in the cash outflows for litigation contingencies and income tax refunds received. In 2000, the decline in cash provided by operations resulted primarily from the decline in operating income and increased cash outflows for litigation contingencies, including settlements under the Second Settlement Fund. We paid out $18 million in 2001, $162 million in 2000 and $104 million in 1999 related to litigation settlements.

        Net cash used by our investing activities was $50 million in 2001, including $69 million used for the purchase of capital equipment at existing mills. Our capital expenditures were partially offset by $48 million received from the sale or transfer of assets of including several sawmills, several non-operating facilities, a pulp mill and other equipment. Additionally, we acquired the assets and assumed an operating lease on a sawmill in Northern Idaho. Also, during 2001, we loaned SPC $15.1 million under a secured line of credit (see discussion at Note 11 included in the Notes to the financial statements included in item 8 of this report). Net cash used by investing activities was $261 million in 2000 and was primarily used for acquisitions of capital equipment to improve the efficiencies of existing mills. Additionally, we used $55 million to acquire the selected assets of Sawyer Lumber Company and the assets of Hoff Companies, Inc. We received proceeds of $21 million in 2000 from the sale of several sawmills, a veneer plant and various land sites. Net cash used in investing activities was $783 million in 1999 and was primarily used for the ABT, Forex and Evans acquisitions as well as other capital expenditures. We received proceeds of $74 million in 1999 from the sale of the Alaskan operations and from the sale of the coatings and chemicals business (Associated Chemists, Inc. subsidiary). Capital expenditures for 2002 are estimated to be between $60 million and $70 million.

        In 2001, net cash used in our financing activities was $76 million, compared to net cash provided from financing activities of $101 million in 2000 and $300 million in 1999. In 2001, we borrowed $174 million and repaid $208 million primarily associated with a public debt offering and the repayment of a term loan with a group of banks. The public debt offering consisted of $200 million of 10.875% senior subordinated notes due in 2008 and was completed on August 13, 2001. In 2000, we borrowed $668 million and repaid $502 million primarily associated with a public debt offering and the repayment of bridge loans associated with 1999 acquisitions. The public debt offering consisted of $200 million of 8.875% senior notes due 2010 and $190 million of 8.50% senior notes due 2005 and was completed on August 18, 2000. Additional borrowings financed the acquisitions of selected assets of Sawyer Lumber Company and Hoff Companies, Inc. and payments under the Second Settlement Fund described above. In 1999, we borrowed $629 million, primarily to finance acquisitions, and repaid $225 million of existing debt.

        We expect to be able to meet the future cash requirements of our existing businesses through cash from operations, existing cash balances, existing credit facilities and other capital resources. Cash and cash equivalents totaled $62 million at December 31, 2001 as compared to $38 million at December 31, 2000 and $116 million at December 31, 1999.

        We have a $190 million secured revolving credit facility, under which no borrowings and $44 million of letters of credit were outstanding at December 31, 2001 (available credit at December 31, 2001 was $146 million). This facility is available until January 2004. The $190 million revolving credit facility contains five specific financial covenants (at December 31, 2001), as follows:

1.

Minimum required Shareholders Equity, as defined, of approximately $1 billion



2.

Maximum debt to capitalization ratio, as defined, of 52.5%



3.

Minimum earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), as defined, for the prior four consecutive quarters of $50 million

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4.

Minimum collateral coverage ratio, as defined, of two times the committed amount



5.

The borrowing base under the receivables securitization facility described below must be at least $50 million and the aggregate financing commitment thereunder must be at least $100 million.

The maximum debt to capitalization ratio will decrease and the minimum EBITDA amounts will increase in future reporting periods. We are also prohibited from certain transactions, including paying cash dividends on or purchasing shares of our common stock.

        Additionally, we have a $25 million (Canadian) secured revolving credit facility, under which no borrowings and $3 million in outstanding letters of credit were outstanding at December 31, 2001 (available credit at December 31, 2001 was $22 million). This facility is available until December 2002, subject to extension at the option of the lender. In addition, the Canadian credit facility contains certain restrictive financial covenants, including a requirement that LPC maintain a minimum current ratio, as defined, of 1.15 to 1.0. Additionally, we, as guarantor, must comply with financial covenants substantially similar to those contained in the $190 million credit facility discussed above.

        We also have an accounts receivable securitization facility of up to $125 million of which $70 million was outstanding at December 31, 2001. The maximum amount available to be borrowed under this facility changes based upon the amount of eligible receivables, as defined, concentration of eligible receivables and other factors. Additionally, the facility contains a provision under which specified downgrades of our unsecured debt rating could cause an amortization event under this facility and trigger cross-defaults in other long term debt agreements.

        As of December 31, 2001, we were in compliance with all of our debt covenants. For a discussion of various risks associated with our indebtness, see the information in Outlook: Issues and Uncertainties, under the captions "Our substantial debt could have important consequences" and "The instruments governing our debt contain restrictive covenants, events of default and consequences of downgrades in our credit ratings".

        Contingency reserves, which represent an estimate of future cash needs for various contingencies (principally, payments for siding litigation settlements), totaled $155 million at December 31, 2001, of which $20 million is estimated to be payable within one year. As with all accounting estimates, there is inherent uncertainty concerning the reliability and precision of such estimates. As described above and in Note 8 to the financial statements, the amounts ultimately paid in resolving these contingencies could exceed the current reserves by a material amount.

        The table below summarizes our contractual obligations as of December 31, 2001 over the next several years. See discussion above concerning provisions that could accelerate the due dates on our long term debt.

		Payments Due By Period
Contractual Obligations		Total			Less Than 1 Year			1-3 Years			4-5 Years			After 5 Years
		Dollars Amounts in Millions
Long-term debt		$	1,189.7		$	37.7		$	126.0		$	260.8		$	765.2
Operating leases			60.9			8.1			15.0			12.1			25.7
Unconditional purchase obligation			43.3			6.2			19.1			14.4			3.6
Other long-term obligations			2.0			2.0			—			—			—
Total contractual cash obligations		$	1,295.9		$	54.0		$	160.1		$	287.3		$	794.5

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STOCK REPURCHASE PROGRAM

        As of December 31, 2001, we have reacquired a total of approximately 7.9 million shares for $125 million under an authorization to reacquire up to 20 million shares from time to time in the open market. We had approximately 104 million shares outstanding at year end. Effective November 3, 2001, LP's Board of Directors rescinded this authorization.

DIVIDEND

        On November 5, 2001, we announced that our Board of Directors has suspended the quarterly cash dividend. Combined, these dividend reductions are expected to result in an annual cash savings of approximately $58 million based upon dividend levels in 2000. Our new revolving credit facility prohibits the payment of dividends until the agreement expires or its earlier termination. Prior to that, we announced on May 7, 2001, that our Board of Directors reduced the quarterly dividend to $0.05 a share from $0.14 per share paid in the first quarter of 2001.

POTENTIAL IMPAIRMENTS

        We have a continuing financial interest in Samoa Pacific Cellulose LLC (SPC) (see discussion at Note 11 of the Notes to the financial statements in item 8 in this report) in the form of various classes of preferred equity interests and secured and unsecured receivables. Due to weak pulp markets, SPC has incurred substantial losses from operations and one of its major customers is in the process of liquidation. During 2001, we wrote off our remaining investment in SPC except for the secured amounts with a balance of $15.1 million at December 31, 2001. While we currently believe that the secured receivable from SPC is recoverable based upon the value of underlying collateral, we continue to closely monitor SPC's operating results and financial condition and it is possible that we may be required to record further impairment charges related to SPC in the future. In addition, there are several contingent liabilities (primarily environmental in nature) associated with these operations that, under certain circumstances, could become our liabilities. We have not recorded an accrual for these liabilities, as we do not believe it is probable that we will incur these liabilities. However it is possible that we may be required to record such an accrual in the future.

        Due to the current market slowdown, we continue to review several mills for potential impairments. We currently believe we have adequate support for the carrying value of each of these mills based upon the future demand and pricing assumptions. However, should the markets for our products deteriorate from December 31, 2001 levels or remain at current levels for an extended period, it is possible that we will be required to record further impairment charges.

        We are currently negotiating with the Quebec government regarding the amount of government-owned timber allotted to us to construct a new OSB facility in the province. These negotiations also involve the timber that has previously been allotted to our sawmill in Lac Bouchette, Quebec. We assigned values to both timber allotments and the existing sawmill in the allocation of our purchase price of Forex in 1999. At December 31, 2001, the net book value of the sawmill was $3.8 million (including timber allotment) and the net book value of the timber allotment for the new facility was $15.6 million. Should these negotiations result in a reduction in the amount of timber allotted to one or both facilities, we may be required to record an impairment charge for some or all of the value assigned to one or both timber allotments and the sawmill. Depending on the outcome of these discussions, we may decide not to proceed with the construction of the new OSB facility.

        Refer to Note 1 in the Notes to the financial statements included in item 8 of this report for a discussion of our accounting policy regarding asset impairments.

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OUTLOOK: ISSUES AND UNCERTAINTIES

        Management does not provide public forecasts of future financial performance. However, we do believe that based upon information available from industry sources that we should see improved business conditions over the next several years. Factors that support his view include a favorable interest rate environment, trend of increasing home ownership rates, steady growth of repair and remodeling and the demographics that support more housing and increased sizes. While management is optimistic about our long-term prospects, the following issues and uncertainties should be considered in evaluating our Company.

        Cyclical industry conditions and commodity pricing have and may continue to adversely affect our financial conditions and results of operations.    Our operating results reflect the general cyclical pattern of the building products industry. Most of our products, including structural panels and lumber, are globally traded commodity products. In addition, our products are subject to competition from manufacturers worldwide. Historical prices for our products have been volatile, and we, like other participants in the building products industry, have limited influence over the timing and extent of price changes for our products. Product pricing is significantly affected by the relationship between supply and demand in the building products industry. Product supply is influenced primarily by fluctuations in available manufacturing capacity. Demand is affected by the state of the economy in general and a variety of other factors. The demand for our building products is primarily affected by the level of new residential construction activity and home repair and remodeling activity. Demand is also subject to fluctuations due to changes in economic conditions, interest rates, population growth, weather conditions and other factors. We are not able to predict with certainty market conditions and selling prices for our products. We cannot assure you that prices for our products will not decline from current levels. A prolonged and severe weakness in the markets for one or more of our principle products could seriously harm our financial condition and results of operations and our ability to satisfy our cash requirements, including the payment of interest and our principle on our debt.

        We have a high degree of product concentration.    OSB accounted for over 30% of our revenues during fiscal 2001, and we expect OSB sales to continue to account for a substantial portion of our revenues in the future. Concentration of our business in the OSB market further increases our sensitivity to commodity pricing and price volatility. We cannot assure you that pricing for OSB or our other products will not decline from current levels.

        Increased industry production capacity for OSB could constrain our operating margins for the foreseeable future.    According to the APA- The Engineered Wood Association (the "APA"), an industry trade association, total North American OSB annual production capacity increased by about 1 billion square feet in 2001 on a ³/8-inch equivalent basis and is projected to increase by approximately 4.2 billion square feet in the 2002 to 2007 period. The APA has projected that total North American demand for OSB will increase by about 5.1 billion square feet during the 2002 to 2007 period. If increases in OSB production capacity exceed increases in OSB demand, OSB could have constrained operating margins for the foreseeable future.

        Intense competition in the building products industry could prevent us from increasing or sustaining our net sales and from regaining or sustaining profitability.    The markets for our products are highly competitive. Our competitors range from very large, fully integrated forest and building products firms to smaller firms that may manufacture only one or a few types of products. We also compete less directly with firms that manufacture substitutes for wood building products. Many of our competitors have greater financial and other resources than we do, and certain of the mills operated by our competitors may be lower-cost producers than the mills operated by us.

        Our results of operations may be harmed by increases in raw material costs.    The most significant raw material used in our operations is wood fiber. We currently obtain more than 50% of our wood

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fiber requirements in the open market. Wood fiber is subject to commodity pricing, which fluctuates on the basis of market factors over which we have no control. In addition, the cost of various types of wood fiber that we purchase in the market has at times fluctuated greatly because of economic or industry conditions. In addition to wood fiber, we also use a significant quantity of various resins in the manufacturing processes for our structural and industrial panel products, as well as certain of our vinyl products. Resin product costs are influenced by changes in the prices of raw materials used to produce resins, primarily petroleum products, as well as demand for resin products. Selling prices of our products have not always increased in response to raw material cost increases. We are unable to determine to what extent, if any, we will be able to pass any future raw material cost increases through to our customers through product price increases. Our inability to pass increased costs through to our customers could have a material adverse effect on our financial condition, results of operations and cash flow.

        Our operations require substantial capital and our capital resources many not be adequate to provide for all of our cash requirements.    Our operations require substantial capital. Although we have invested significantly in the past, and believe that capital expenditures related to our facilities will be less in the foreseeable future, capital expenditures for expansion or replacement of existing facilities or equipment or to comply with future changes in environmental laws and regulations may require substantial expenditures. Although we maintain our production equipment with regular periodic and scheduled maintenance, we cannot assure you that key pieces of equipment in our various production processes will not need to be repaired or replaced or that we will not incur significant additional costs associated with environmental compliance. The costs of repairing or replacing such equipment and the associated downtime of the affected production line could have a material adverse effect on our financial condition, results of operations and cash flow. Based on our current operations, we believe our cash flow from operations and other capital resources will be adequate to meet our operating needs, capital expenditures and other cash requirements for the foreseeable future. However, we cannot assure you that our capital resources will be adequate for these purposes. If our capital resources are inadequate to provide for our operating needs, capital expenditures and other cash requirements on economic terms, we could experience a material adverse effect on our business, financial condition, results of operations and cash flow.

        We are subject to significant environmental regulation and environmental compliance expenditures and liabilities.    Our businesses are subject to many environmental laws and regulations, particularly with respect to the restoration and reforestation of timberlands, discharges of pollutants and other emissions on or into land, water and air, and the disposal and remediation of hazardous substances or other contaminants. Compliance with these laws and regulations is a significant factor in our business. We have incurred and expect to continue to incur significant expenditures to comply with applicable environmental laws and regulations. Moreover, some or all of the environmental laws and regulations to which we are subject could become more stringent or more stringently enforced in the future. Our failure to comply with applicable environmental laws and regulations and permit requirements could result in civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or curtailing operations or requiring corrective measures, installation of pollution control equipment or remedial actions.

        Some environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of facilities and sites for contamination at such facilities and sites without regard to causation or knowledge of contamination. In addition, we occasionally evaluate various alternatives with respect to our facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to discoveries of contamination that must be remediated, and closures of facilities may trigger compliance requirements that are not applicable to operating facilities. Consequently, we cannot assure you that existing or future circumstances or developments with respect to contamination will not require significant expenditures by us.

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        We are involved in various environmental matters and legal proceedings. The outcome of these matters and proceedings and the magnitude of related costs and liabilities are subject to uncertainties.    We currently are and from time to time in the future will be involved in a number of environmental matters and legal proceedings. These matters and proceedings, including class action settlements relating to certain of our products, have in the past caused and in the future may cause us to incur substantial costs. We have established contingency reserves in our consolidated financial statements with respect to the estimated costs of existing environmental matters and legal proceedings to the extent that our management has determined that such costs are both probable and reasonably estimable as to amount. However, such reserves are based upon various estimates and assumptions relating to future events and circumstances, all of which are subject of inherent uncertainties. We regularly monitor our estimated exposure to environmental and litigation loss contingencies and, as additional information becomes known, may change our estimates significantly. However, no estimate of the range of any such change can be made at this time. At December 31, 2001, the estimated approved but unpaid claims under the settlement agreement relating to the class action settlement of our national OSB siding litigation, exceeded the sum of the then-current balance of the related settlement fund and our remaining mandatory contributions to the related settlement fund by approximately $117 million. Consequently, the actual costs we ultimately incur may vary significantly from the estimated costs reflected in our contingency reserves depending on our ability to settle these liabilities at discounted amounts. Moreover, we may incur costs in respect of existing and future environmental matters and legal proceedings as to which no contingency reserves have been established. We cannot assure you that we will have sufficient resources available to satisfy the related costs and expenses associated with these matters and proceedings.

        We do not maintain insurance for our losses to our standing timber from natural resources or other causes.    The volume and value of timber that can be harvested from our lands or that we may purchase from other sources may be limited by natural disasters such as fire, insect infestation, disease, ice storms, flooding and other weather conditions and other causes. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. As is typical in the industry, we do not maintain insurance for any loss to our standing timber from natural disasters or other causes.

        Our substantial debt could have important consequences.    As of December 31, 2001, we had consolidated debt of approximately $1.2 billion. This level of indebtness which could increase in the future, could (1) require us to dedicate a substantial portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures and other cash requirements; (2) limit our flexibility in planning for, or reacting to, changes and opportunities in, the building products industry, which may place us at a competitive disadvantage compared to our competitors; (3) limit our ability to incur additional debt on commercially reasonably terms, if at all; and (4) increase our vulnerability to adverse economic and industry conditions.

        The instruments governing our debt contain restrictive covenants, events of default and consequences of downgrades in our credit ratings.    Among other things, the covenants require us to comply with or maintain certain financial tests and ratios and restrict our ability to: (1) incur debt; (2) incur liens (3) redeem and/or prepay debt; (4) make acquisitions; (5) make investments, including loans and advances; (6) make capital expenditures; (7) engage in mergers, consolidations or sales of assets; (8) engage in transactions with affiliates; and (9) pay dividends or engage in stock redemptions. Our ability to comply with these covenants is subject to various risks and uncertainties, and events beyond our control which could affect our ability to comply with and maintain the financial tests and ratios. Any failure by us to comply with and maintain all applicable financial tests and ratios and to comply with all applicable covenants could result in an event of default with respect to, and the acceleration of the maturity of, a substantial portion of our debt. Even if we are able to comply with the applicable

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covenants, the restrictions on our ability to operate our business in our sole discretion could harm our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other corporate opportunities. In addition, specified downgrades in our credit ratings could increase our costs of borrowing and, in the case of our accounts receivable securitization facility, a one-level downgrade by a particular rating agency could (after the passage of six months time or upon a downgrade by another rating agency) result in an amortization event and trigger cross-defaults which could result in the acceleration of the maturity of a substantial portion of our debt.

ITEM 7A.    Quantitative and Qualitative Disclosures about Market Risk

        A portion of our outstanding debt bears interest at variable rates and accordingly is sensitive to changes in interest rates. Interest rate changes would result in gains or losses in the market value of our debt portfolio due to differences in the market value of our debt portfolio due to differences in market interest rates and the rates at the inception of the debt agreements. Based upon our indebtedness at December 31, 2001, a 100 basis point interest rate change would impact the pre-tax net income and cash flow by $1.2 million annually.

        Our international operations create exposure to foreign currency rate risks, primarily due to fluctuations in the Canadian dollar. Although we have entered into foreign exchange contracts to manage a portion of the foreign currency rate risk associated with certain of its indebtedness, we historically have not entered into material currency rate hedges with respect to its exposure from operations (although it may do so in the future). At December 31, 2001, we had outstanding foreign exchange contracts with notional amounts of $51 million (Canadian) to hedge firm and anticipated purchase commitments, debt payments and firm sales commitments denominated in foreign currencies.

        Most of our products are sold as commodities and therefore sales prices fluctuate daily based on market factors over which we have little or no control. Significant commodity products we sell include; OSB, plywood and lumber. For OSB, with an annual volume of 5.8 billion square feet (³/8" basis) or 4.9 billion feet (⁷/16" basis), a $1 change in the annual average price on ⁷/16" basis would change annual pre-tax profits by approximately $4.9 million. For plywood, with an annual volume of 950 million square feet (³/8" basis) or approximately 715 million square feet (¹/2" basis), a $1 change in the annual average price on a ¹/2" basis would change annual pre-tax profits by approximately $.7 million. For lumber, with an annual volume of 1.4 billion board feet, a $1 change in the annual average price would change annual pre-tax profits by $1.4 million.

        We historically have not entered into material commodity futures and swaps, although it may do so in the future.

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ITEM 8.    Financial Statements and Supplementary Data

Consolidated Balance Sheets

			December 31
			2001			2000
			Dollar Amounts in Millions
ASSETS
Current assets:
Cash and cash equivalents			$	61.6		$	38.1
Receivables, less reserves of $3.2 and $3.7				118.3			129.6
Inventories				213.2			327.5
Prepaid expenses				21.1			22.8
Income tax refunds receivable				37.5			91.5
Deferred income taxes				41.4			44.6
	Total current assets			493.1			654.1
Timber and timberlands, at cost less cost of timber harvested				563.1			590.6
Property, plant and equipment, at cost:
Land, land improvements and logging roads, net of road amortization				149.0			163.6
Buildings				314.3			324.7
Machinery and equipment				1,831.7			1,966.7
Construction in progress				60.3			107.8
				2,355.3			2,562.8
Accumulated depreciation				(1,221.9	)		(1,254.0	)
	Net property, plant and equipment			1,133.4			1,308.8
Goodwill, net of amortization				298.3			326.3
Notes receivable from asset sales				403.8			403.8
Assets transferred under contractual arrangement				29.1			—
Other assets				96.0			91.1
	Total assets		$	3,016.8		$	3,374.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt			$	37.7		$	39.4
Accounts payable and accrued liabilities				251.8			303.8
Current portion of contingency reserves				20.0			35.0
	Total current liabilities			309.5			378.2
Long-term debt, excluding current portion:
Limited recourse notes payable				396.5			396.5
Other debt				755.5			787.3
	Total long-term debt			1,152.0			1,183.8
Deferred income taxes				235.6			334.0
Contingency reserves, excluding current portion				135.1			126.6
Other long-term liabilities and minority interest				89.7			56.9
Liabilities transferred under contractual arrangement				14.0			—
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value, 200,000,000 shares authorized, 116,937,022 shares issued				117.0			117.0
Preferred stock, $1 par value, 15,000,000 shares authorized, no shares issued				—			—
Additional paid-in capital				440.8			440.2
Retained earnings				807.6			1,004.3
Treasury stock, 12,358,920 shares and 12,576,172 shares, at cost				(230.6	)		(235.1	)
Accumulated comprehensive income (loss)				(53.9	)		(31.2	)
	Total stockholders' equity			1,080.9			1,295.2
	Total liabilities and stockholders' equity		$	3,016.8		$	3,374.7

See Notes to Financial Statements.

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Consolidated Statements of Income

			Year Ended December 31
			2001			2000			1999
			Dollar Amounts in Millions, Except Per Share
Net sales			$	2,359.7		$	2,932.8		$	3,071.6
Operating costs and expenses:
	Cost of sales			2,122.1			2,362.6			2,272.5
	Depreciation and amortization			170.2			184.4			156.3
	Cost of timber harvested			25.0			51.1			45.7
	Selling and administrative			164.4			234.7			219.4
	Other operating credits and charges, net			67.2			70.5			8.2
	Loss related to assets and liabilities transferred under contractual arrangement			42.5			—			—
Total operating costs and expenses				2,591.4			2,903.3			2,702.1
	Income (loss) from operations			(231.7	)		29.5			369.5
Non-operating income (expense):
	Interest expense, net of capitalized interest			(95.6	)		(81.0	)		(47.9	)
	Interest income			35.8			37.9			36.0
	Foreign exchange gains (losses)			2.4			(1.2	)		(0.6	)
Total non-operating income (expense)				(57.4	)		(44.3	)		(12.5	)
Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate				(289.1	)		(14.8	)		357.0
Provision (benefit) for income taxes				(112.4	)		(8.1	)		139.5
Minority interest in net income (loss) of consolidated subsidiaries				(5.1	)		—			0.7
Equity in (earnings) loss of unconsolidated affiliate				—			7.1			—
Net income (loss)			$	(171.6	)	$	(13.8	)	$	216.8
Net income (loss) per share—basic and diluted			$	(1.64	)	$	(0.13	)	$	2.04
Cash dividends per share of common stock			$	0.24		$	0.56		$	0.56
Average shares of common stock outstanding (millions) basic and diluted				104.4			104.1			106.2

See Notes to Financial Statements.

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Consolidated Statements of Cash Flows

			Year Ended December 31
			2001			2000			1999
			Dollar Amounts in Millions
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)			$	(171.6	)	$	(13.8	)	$	216.8
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation, amortization and cost of timber harvested			195.2			235.5			202.0
	Other operating credits and charges, net			63.9			85.6			8.2
	Cash settlements of contingencies, net of cash received			(17.6	)		(162.4	)		(104.0	)
	Loss on assets and liabilities transferred under contractual arrangement			42.5			—			—
	Other adjustments			(5.6	)		14.5			20.4
	Decrease (increase) in receivables			8.3			67.5			7.0
	Decrease (increase) in inventories			97.0			(37.4	)		13.5
	Decrease (increase) in income tax refunds receivable			54.0			(91.5	)		46.0
	Decrease (increase) in prepaid expenses			1.6			(3.0	)		(5.9	)
	Increase (decrease) in accounts payable and accrued liabilities			(41.4	)		(0.4	)		12.7
	Increase (decrease) in income taxes payable			—			(8.3	)		2.6
	Increase (decrease) in deferred income taxes			(77.6	)		(3.8	)		53.3
Net cash provided by operating activities				148.7			82.5			472.6
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant, and equipment additions				(69.2	)		(187.7	)		(88.3	)
Timber and timberland additions				(5.5	)		(32.6	)		(29.6	)
Proceeds from asset sales				25.1			20.5			74.2
Proceeds from transfer of assets and liabilities under contractual arrangement				22.4			—			—
Cash loaned under credit facility related to assets and liabilities transferred under contractual arrangement				(15.1	)		—			—
Acquisitions, including replacement of debt				(6.9	)		(54.7	)		(726.1	)
Other investing activities, net				(.4	)		(6.6	)		(13.6	)
Net cash used in investing activities				(49.6	)		(261.1	)		(783.4	)
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term borrowings, including net increase in revolving borrowings				174.0			667.6			629.3
Repayment of long-term debt				(207.5	)		(502.4	)		(224.6	)
Cash dividends				(25.1	)		(58.3	)		(59.2	)
Purchase of treasury stock				—			(11.3	)		(47.9	)
Other financing activities, net				(17.0	)		5.1			2.7
Net cash provided by (used in) financing activities				(75.6	)		100.7			300.3
Net increase (decrease) in cash and cash equivalents				23.5			(77.9	)		(10.5	)
Cash and cash equivalents at beginning of year				38.1			116.0			126.5
Cash and cash equivalents at end of year			$	61.6		$	38.1		$	116.0

See Notes to Financial Statements.

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Consolidated Statements of Stockholders' Equity
Dollar and Share Amounts in Millions, Except Per Share Amounts

		Common Stock					Treasury Stock
												Additional Paid In Capital			Retained Earnings			Loans to ESOTs			Accumulated Comprehensive Income (Loss)			Total Stockholders' Equity
		Shares		Amount			Shares		Amount
BALANCE AS OF DECEMBER 31, 1998		116.9		$	117.0		9.7		$	(204.0	)	$	465.4		$	918.8		$	(28.8	)	$	(45.6	)	$	1,222.8
Net income		—			—		—			—			—			216.8			—			—			216.8
Cash dividends, $0.56 per share		—			—		—			—			—			(59.2	)		—			—			(59.2	)
Issuance of shares for employee stock plans and for other purposes		—			—		(1.2	)		23.6			(20.0	)		—			—			—			3.6
Purchase of treasury stock		—			—		3.5			(47.9	)		—			—			—			—			(47.9	)
Employee Stock Ownership Trust contribution		—			—		—			—			—			—			21.9			—			21.9
Other comprehensive income		—			—		—			—			—			—			—			2.0			2.0
BALANCE AS OF DECEMBER 31, 1999		116.9			117.0		12.0			(228.3	)		445.4			1,076.4			(6.9	)		(43.6	)		1,360.0
Net income (loss)		—			—		—			—			—			(13.8	)		—			—			(13.8	)
Cash dividends, $0.56 per share		—			—		—			—			—			(58.3	)		—			—			(58.3	)
Issuance of shares for employee stock plans and for other purposes		—			—		(0.3	)		4.5			(5.2	)		—			—			—			(0.7	)
Purchase of treasury stock		—			—		0.9			(11.3	)		—			—			—			—			(11.3	)
Employee Stock Ownership Trust contribution		—			—		—			—			—			—			6.9			—			6.9
Other comprehensive income		—			—		—			—			—			—			—			12.4			12.4
BALANCE AS OF DECEMBER 31, 2000		116.9			117.0		12.6			(235.1	)		440.2			1,004.3			—			(31.2	)		1,295.2
Net income (loss)		—			—		—			—			—			(171.6	)		—			—			(171.6	)
Cash dividends, $0.24 per share		—			—		—			—			—			(25.0	)		—			—			(25.0	)
Issuance of shares for employee stock plans and for other purposes		—			—		(0.2	)		4.5			0.6			—			—			—			5.1
Other comprehensive loss		—			—		—			—			—			—			—			(22.7	)		(22.7	)
BALANCE AS OF DECEMBER 31, 2001		116.9		$	117.0		12.4		$	(230.6	)	$	440.8		$	807.6		$	—		$	(53.9	)	$	1,080.9

See Notes to Financial Statements.

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1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature Of Operations

        Louisiana-Pacific Corporation and its subsidiaries (collectively LP or the Company) are principally engaged in the manufacture of building products. In addition to its U.S. operations, the Company also maintains manufacturing facilities in Canada, Chile and Ireland through foreign subsidiaries and joint ventures. The principal customers for the Company's building products are retail home centers, builders, manufactured housing producers, distributors and wholesalers in North America, with minor sales to Asia, Europe and South America.

        During 2001, LP transferred ownership or indefinitely closed its pulp operations. In years prior to 2001, LP marketed and manufactured pulp. The principle customers for its pulp products were brokers in Asia and Europe, with minor sales occurring in North America.

        A significant portion of LP's sales are derived from wood-based structural products, including oriented strand board, plywood, lumber, engineered I-joists and laminated veneer lumber. See Note 12 below for further information regarding LP's products and segments.

Use Of Estimates In The Preparation Of Financial Statements

        The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America 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. Actual results could differ from those estimates. See discussion of specific estimates in the Notes entitled "Income Taxes," "Retirement Plans and Postretirement benefits," "Shareholders Equity," "Other Operating Credits and Charges, Net" and "Contingencies".

Consolidation

        The consolidated financial statements include the accounts of the Company and all majority owned subsidiaries. Intercompany transactions and accounts are eliminated in consolidation. Investments in affiliates, owned 20% to 50% inclusive, are accounted for under the equity method. LP's share of earnings of such investments is shown in the income statement under the heading "Equity in (earnings) loss of unconsolidated affiliate".

Earnings Per Share

        Basic and diluted earnings per share are based on the weighted average number of shares of common stock outstanding plus the effects of in-the-money outstanding stock options, computed under the treasury stock method. This method requires that the effect of potentially dilutive common stock equivalents (employee stock options and purchase plans) be excluded from the calculation of diluted earnings per share for the years in which losses are reported because the effect is anti-dilutive.

Cash And Cash Equivalents

        LP considers all highly liquid securities with maturities of three months or less at the time of purchase to be cash equivalents. Included in other assets is $8.2 million of restricted cash, which is serving as compensating balances, associated with various agreements.

        LP invests its excess cash with high quality financial institutions and, by policy, limits the amount of credit exposure at any one financial institution. In addition, LP generally holds its cash investments until maturity and is therefore not subject to significant market risk.

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Inventory

        Inventories are valued at the lower of cost or market. Inventory costs include materials, labor and operating overhead. The LIFO (last-in, first-out) method is used for most log and lumber inventories with remaining inventories valued at FIFO (first-in, first-out) or average cost. The major types of inventories are as follows (work in process is not material):

        A reduction in LIFO inventories in 2001, 2000 and 1999 resulted in a reduction of cost of sales of $5.7 million, $12.9 million and $8.8 million.

Timber And Timberlands

        LP follows an overall policy on fee timber that amortizes timber costs over the total fiber available during the estimated growth cycle as volume is harvested. Timber carrying costs, such as reforestation and forest management, are expensed as incurred. Cost of timber harvested includes not only the cost of fee timber, but also the amortization of the cost of long-term timber deeds and licenses.

        Included in the balance of timber and timberlands are values allocated to Canadian forest licenses in the purchase price allocation for Le Groupe Forex (Forex) and the assets of Evans Forest Products (Evans) (see Note 10 for a discussion of acquisitions). These licenses have a life of twenty to twenty-five years and are renewable every five years. These licenses are amortized on a straight-line basis over the original life of the license.

        The major asset classifications included in timber and timberlands are as follows:

Property, Plant And Equipment

        LP principally uses the units of production method of depreciation for machinery and equipment which amortizes the cost of equipment over the estimated units that will be produced during its useful life. Provisions for depreciation of buildings and the remaining machinery and equipment have been computed using straight-line rates based on the estimated service lives. The effective straight-line lives for the principal classes of property range from five to twenty years.

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        Logging road construction costs are capitalized and included in land and land improvements. These costs are amortized as the timber volume adjacent to the road system is harvested.

        LP capitalizes interest on borrowed funds during construction periods. Capitalized interest is charged to machinery and equipment accounts and amortized over the lives of the related assets. Interest capitalized during 2001, 2000, and 1999 was $1.1 million, $1.1 million and $0.3 million.

Asset Impairments

        In accordance with Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", long-lived assets to be held and used by LP (primarily property, plant and equipment and timber and timberlands) and goodwill are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Losses are recognized when the book values exceed expected undiscounted future net cash flows. These undiscounted cash flows are based upon management's estimate of future cash inflows and outflows. The key assumptions in estimating these cash flows are future pricing of commodity products and future estimates of expenses to be incurred. When impairment is indicated, the book values of the assets are written down to their estimated fair value. Assets to be disposed of are written down to their estimated fair value, less sales costs. See Note 7 below for a discussion of charges in 2001, 2000, and 1999 related to impairments of property, plant and equipment.

Deferred Income Taxes

        Deferred income taxes, reflecting the impact of temporary differences between assets and liabilities recognized for financial reporting and tax purposes, are based upon tax laws enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. See Note 3 below for further discussion of deferred taxes.

Stock-Based Compensation

        Stock options and other stock-based compensation awards are accounted for using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations.

Derivative Financial Instruments

        To reduce foreign currency exchange and interest rate risks, LP utilizes derivative financial instruments. LP has established policies and procedures for risk assessment and approving, reporting and monitoring of derivative financial instrument activities. Gains and losses on forward exchange contracts used to hedge the currency fluctuations on transactions denominated in foreign currencies and the offsetting losses and gains on the hedged transactions are recorded in the income statement. In general, LP does not utilize financial instruments for trading or speculative purposes.

        LP utilizes forward purchase contracts in the normal course of its operations as a means of managing price risks on the purchase of energy. These contracts generally meet the definition of "normal purchases" under SFAS No. 133, as amended, and are therefore not required to be recorded at fair value. However, in the event that a contract does not meet the definition of a "normal purchase" as a result of LP's inability to use all of the energy under the contract, LP records such contracts at fair value with the corresponding gain or loss recorded in Cost of Sales (which resulted in a loss of $3.3 million for the year ended December 31, 2001). In the event that a contract does not

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meet the definition of a "normal purchase" as a result of unforeseen circumstances outside of LP's control, LP records such contracts at fair value with the corresponding gain or loss recorded in Other Operating Credits and Charges, net (which resulted in losses of $6.1 million for the year ended December 31, 2001).

Foreign Currency Translation

        The functional currency for the majority of the Company's foreign subsidiaries is the U.S. dollar. The financial statements of these foreign subsidiaries are remeasured into U.S. dollars using the historical exchange rate for property, plant and equipment, timber and timberlands, goodwill, equity and certain other non-monetary assets and liabilities and related depreciation and amortization on these assets and liabilities. LP uses the exchange rate at the balance sheet date for the remaining assets and liabilities, including deferred taxes. A weighted average exchange rate is used for each period for revenues and expenses. These transaction gains or losses are recorded in foreign exchange gains (losses) in the income statement. In cases where the local currency is the functional currency, translation adjustments (which are based upon the exchange rate at the balance sheet date for assets and liabilities and the weighted average rate for the income statement) are recorded in the Accumulated Comprehensive Income (Loss) section of Stockholders' Equity.

Goodwill

        Goodwill has resulted from acquisitions and, prior to January 1, 2002, was being amortized on a straight-line basis over periods ranging from 5 to 15 years. Historically, the amortization period of goodwill was periodically reviewed by the Company. Accumulated amortization was $67.3 million and $39.8 million at December 31, 2001 and 2000.

Notes Receivable From Asset Sales

        Notes receivable from asset sales are related to transactions that occurred during 1997 and 1998. These notes receivable (which are unsecured) provide collateral for LP's limited recourse notes payable (see Note 4 below).

        In 1997, LP received $49.9 million in notes from a third party. The notes are due in principal payments of $20.0 million in 2008, $20.0 million in 2009 and $9.9 million in 2012. Interest is received in semi-annual installments and the interest rates vary from 5.62% to 7.5%.

        In 1998, LP received $353.9 million in notes from a third party. The notes are due in principal payments of $70.8 million in 2006, $54.3 million in 2008, $115.1 million in 2010, $91.4 million in 2013 and $22.3 million in 2018. Interest is received in semi-annual installments and the weighted average interest rate of the notes is 7%.

        LP believes the fair value of these notes at December 31, 2001 and 2000 was approximately $392 million and $391 million, respectively.

        LP monitors the collectibility of these notes on a regular basis.

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Comprehensive Income (Loss)

        Comprehensive income (loss) consists of net income (loss), cumulative translation adjustments and additional minimum pension liability adjustments.

Year Ended December 31		2001			2000			1999
		Dollar Amounts in Millions
Net income (loss)		$	(171.6	)	$	(13.8	)	$	216.8
Currency translation adjustment			(0.1	)		1.5			1.7
Pension minimum liability adjustment			(22.6	)		10.9			—
Other			—			—			0.3
Comprehensive income (loss)		$	(194.3	)	$	(1.4	)	$	218.8

Revenue Recognition

        Revenue is primarily recognized when customers receive products and title has passed in accordance with Staff Accounting Bulletin No. 101—Revenue Recognition in the Financial Statements.

Supplemental Cash Flow Information

        Cash paid during 2001, 2000, and 1999 for interest (net of capitalized interest) was $90.5 million, $67.4 million and $46.2 million. Net cash paid (received) during 2001, 2000, and 1999 for income taxes was $(66.0) million, $92.1 million and $39.3 million.

        During 2000, LP and Casella Waste Systems, Inc. contributed most of the assets of their respective cellulose insulation operations to a joint venture, U.S. GreenFiber, LLC (GreenFiber). Pursuant to the Limited Liability Company Agreement, each company owns 50% of GreenFiber. LP's contribution, which was transferred at book value, was approximately $28 million.

Other Operating Credits And Charges, Net

        LP classifies significant amounts that management considers to be unrelated to core operating activities as Other Operating Credits and Charges in the income statement. Such items include, but are not limited to, amounts related to restructuring charges (including asset impairment and severance charges), charges to establish litigation or environmental reserves, gains from insurance recoveries, gains or losses from settlements with governmental or other organizations and gains or losses related to asset disposals. Due to the nature of these items, amounts in the income statement can fluctuate from year to year. The determination of which items are considered significant and unrelated to core operations is based upon management's judgment. See Note 7 below for a discussion of specific amounts in 2001, 2000, and 1999.

Prospective Accounting Pronouncements

        In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, "Goodwill and Other Intangible Assets". This statement addresses financial accounting and reporting for goodwill and other intangible assets. Under this standard, goodwill and other intangible assets that are deemed to have an indefinite life will no longer be amortized. However, these indefinite life assets will be tested for impairment on an annual basis by applying a fair value based test. SFAS 142 will be effective for LP beginning January 1, 2002. LP has until June 30, 2002 to determine if any indefinite life intangible assets are impaired as of January 1, 2002 and until December 31, 2002 to determine the amount of any such impairment. If an impairment is deemed to exist, the charge will be recorded as of

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January 1, 2002. Management is currently evaluating the impact of this statement. LP's goodwill amortization for 2001 was approximately $27.5 million ($4.6 million of which was recorded in Equity in earnings (losses) of unconsolidated affiliate in the Income Statement).

        In June of 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations". This statement addresses financial accounting and reporting obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. Additionally, in August of 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement supersedes SFAS 121. SFAS 143 will be effective for LP beginning January 1, 2003. SFAS 144 will be effective for LP beginning January 1, 2002. Management is currently evaluating the impact of these statements.

Reclassifications

        Certain prior year amounts have been reclassified to conform to the current year presentation.

2.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

3.    INCOME TAXES

        Income (loss) before taxes, minority interest and equity in income (loss) of unconsolidated affiliate was taxed in domestic and foreign jurisdictions, as follows:

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        Provision (benefit) for income taxes includes the following:

        The income tax effects of LP's share of the income or loss of GreenFiber in 2001 and 2000 are recorded in the line item "Provision (benefit) for income taxes" in LP's consolidated income statement, while LP's share of the pre-tax loss is recorded in the line item "Equity in earnings (loss) of unconsolidated affiliate."

        The tax effects of significant temporary differences creating deferred tax (assets) and liabilities at December 31 were as follows:

        A subsidiary of LP, Louisiana-Pacific Canada Ltd. (LPC), has unrealized foreign investment tax credits (ITC) of approximately C$19 million (Canadian dollars). These credits can be carried forward to offset future tax of LPC and reduce LPC's basis in the related property, plant and equipment. The credits expire C$4 million in 2003, C$13 million in 2004 and C$2 million in 2005. The $79 million of capital loss and net operating loss (NOL) carryover amount included in the above table consists of $42 million of federal NOL carryovers which will expire in 2016; $21 million of state NOL carryovers which will expire in various years through 2015; $4 million of Canadian NOL carryovers which will

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expire in 2005; and $12 million of Canadian capital loss carryovers which may be carried forward indefinitely. LP has recorded a valuation allowance against the entire Canadian capital loss carryover amount. The change in the valuation allowance from 2000 to 2001 primarily represents the Canadian investment tax credits that expired in 2001.

        U.S. taxes have not been provided on foreign subsidiaries' earnings of approximately $103.1 million which are deemed indefinitely reinvested. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practical.

        The following table summarizes the differences between the statutory U.S. federal and effective income tax rates:

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4.    LONG-TERM DEBT

				December 31,
		Interest Rate at Dec. 31, 2001
				2001			2000
		Dollar Amounts in Millions
Debentures:
Senior notes, maturing 2005, interest rates fixed		8.5	%	$	189.5		$	189.3
Senior notes, maturing 2010, interest rates fixed		8.875			199.2			199.1
Senior subordinated notes, maturing 2008, interest rates fixed		10.875			200.0			—
Bank credit facilities:
Revolving credit facility, repaid in 2001, interest rate variable					—			107.4
Revolving credit facility, payable in 2004, interest rate variable					—			—
Term loan, repaid in 2001, interest rate variable					—			170.0
Chilean revolving credit facility, payable in 2005, interest rate variable		4.0			6.5			—
Canadian revolving credit facility, payable in 2002, interest rates variable					—			—
Limited recourse notes payable:
Senior notes, payable 2008-2012, interest rates fixed		7.1 - 7.5			47.9			47.9
Senior notes, payable 2006-2018, interest rates fixed		6.8 - 7.3			348.6			348.6
Project bank financing:
Waterford, Ireland, OSB plant, payable in Irish pounds through 2002, interest rate variable		4.25			5.0			7.1
Project revenue bond financings, payable through 2022, interest rates variable		1.6 - 7.1			39.3			39.3
Other financings:
Accounts receivable securitization, payable in 2004, interest rate variable		2.1			70.0			—
Notes payable to former Forex shareholders, payable in Canadian dollars annually through 2003, interest rate variable		4.5			63.6			101.5
Other, interest rates vary					20.1			13.0
Total					1,189.7			1,223.2
Current portion					(37.7	)		(39.4	)
Net long-term debt				$	1,152.0		$	1,183.8

        LP believes the carrying amounts of its variable rate long-term debt approximates fair market value. LP estimates the limited recourse notes payable have a fair value of approximately $378 million and $383 million at December 31, 2001 and 2000. LP estimates the Senior notes maturing in 2005 and 2010 have a fair market value of $188.1 million and $198.0 million at December 31, 2001 and $187.2 million and $193.2 million at December 31, 2000 based upon market quotes. LP estimates the Senior subordinated notes have a fair market value of $197.0 million at December 31, 2001.

        The underlying assets of the related manufacturing facility typically secure project bank and project revenue financings. For one project in Louisiana, a portion of the timberlands adjacent to the facility also provides security for the loan.

        In 1997, LP issued $47.9 million of senior debt in a private placement to institutional investors. The notes mature in principal amounts of $20 million in 2008, $20 million in 2009, and $7.9 million in

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2012. They are secured by $49.9 million in notes receivable from Sierra Pacific Industries. In the event of a default by Sierra Pacific Industries, LP is fully liable for the notes payable.

        LP issued $348.6 million of senior debt in June 1998 in a private placement to institutional investors. The notes mature in principal amounts of $69.7 million in 2006, $53.5 million in 2008, $113.4 million in 2010, $90.0 million in 2013 and $22.0 million in 2018. The notes are secured by $353.9 million of notes receivable from Simpson Timber Company. Pursuant to the terms of the notes payable, in the event of a default by Simpson, LP would be liable to pay only 10% of the indebtness represented by the notes payable.

        In April 2000, LP's shelf registration statement filing for $750 million of debt securities was declared effective. This registration allows for debt securities to be offered from time to time in one or more series. The amount, price and other terms of any such offering are determined on the basis of market conditions and other factors existing at the time of any such offering. During August 2000, LP issued unsecured senior notes, under the shelf registration, in an aggregate principal amount of $390 million. The net proceeds were used to retire a portion of three bridge loans used to finance acquisitions in 1999. During August 2001, LP issued unsecured senior subordinated notes in an aggregate principal amount of $200 million under the shelf registration. The net proceeds were used to retire a term loan of $170 million and a portion of the outstanding balance under a revolving credit facility.

        In addition to the specific covenants discussed below, most of LP's debt agreements contain standard cross-default or cross-acceleration clauses to LP's other significant debt agreements.

        In November 2000, LP entered into a $170 million unsecured three-year term loan with a syndication of banks. Interest was based upon the floating London Interbank Offered Rate (LIBOR) plus 1%. The proceeds from this loan were used to repay the remaining balance on the acquisition bridge loans and to pay down a portion of the amounts owed under LP's revolving credit facility. This facility was repaid with the proceeds from the issuance of the unsecured senior subordinated notes in August 2001.

        In December 2000, LP Chile entered into a five-year term credit facility with a Chilean bank. The facility is for an amount up to $10 million. At December 31, 2001, $6.5 million in borrowings were outstanding. The facility bears interest at LIBOR plus .9%. The proceeds from the facility will be used to fund working capital and construction of an OSB plant in Chile. Borrowings under the line of credit are secured.

        In November 2001, LP entered into a $190 million secured revolving credit facility with a syndicate of banks. This facility expires in January 2004. This facility is secured primarily by a portion of LP's timberlands located in Texas, stock of certain of LP's subsidiaries and a subordinated lien on LP's inventories in the U.S. At December 31, 2001, no borrowings and $44 million of outstanding letters of credit were outstanding under this facility (available credit at December 31, 2001 was $146 million). Borrowings under this agreement bear interest at LIBOR plus 3% or specified alternative rates selected by LP. Fees associated with this revolving credit facility include a facility fee of .75% per annum on the amount by which the aggregate commitments of the lenders exceed the outstanding borrowings, plus upfront fees and expenses totaling $3.9 million, which are being amortized over the term of the agreement. These rates and fees may be adjusted according to a rate grid based upon LP's long-term debt ratings. This revolving credit facility contains five specific financial covenants (at December 31, 2001), as follows:

1.

Minimum required Shareholders Equity, as defined, of approximately $1 billion

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2.

Maximum debt to capitalization ratio, as defined, of 52.5%



3.

Minimum earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA"), as defined, for the prior four consecutive quarters of $50 million



4.

Minimum collateral coverage ratio, as defined, of two times the committed amount



5.

The borrowing base under the receivables securitization facility described below must be at least $50 million and the aggregate financing commitment thereunder must be at least $100 million.

The maximum debt to capitalization ratio will decrease and the minimum EBITDA amounts will increase in future reporting periods. LP is also prohibited from certain transactions, including paying cash dividends on or purchasing shares of LP's common stock.

        In November 2001, LP entered into an accounts receivable secured revolving credit facility providing for up to $125 million of borrowing capacity. At December 31, 2001, approximately $70 million was outstanding under this facility. The structure of this facility required LP to create a wholly owned nonqualifying special purpose entity, which is consolidated in accordance with SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." This entity purchases receivables from LP and then borrows from a third party using receivables as collateral. The transaction is treated as a secured borrowing because the Company has the right to terminate early any borrowings outstanding, allowing LP to retain effective control over the receivables. The pledged receivables outstanding and the corresponding debt are included as Accounts Receivable and Long-term Debt on the accompanying balance sheet. At December 31, 2001, borrowings under this facility bore interest at commercial paper rates plus .55%. The maximum amount available for borrowing under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. The facility contains a provision under which specified downgrades of LP's long term unsecured senior debt rating could cause an amortization event under this facility and trigger cross-defaults in other debt agreements.

        In December 2001, LPC entered into a $25 million (Canadian) secured credit facility. This facility is secured by Canadian receivables and inventory. At December 31, 2001, no borrowings and $3 million in letters of credit were outstanding (available credit at December 31, 2001 was $22 million (Canadian)). Borrowings under this facility bear interest at LIBOR plus 3% or specified alternative rates selected by LPC. This interest rate may be adjusted according to a rate grid based upon LP's long-term debt ratings. Fees associated with this facility include a facility fee of .5% per annum on the amount by which the aggregate commitment of the lender exceeds the outstanding borrowings. The facility contains certain restrictive financial covenants, including a requirement that LPC maintain a minimum current ratio, as defined, of 1.15 to 1.0. Additionally, LP, as guarantor, must comply with covenants substantially similar to those contained in the $190 million credit facility discussed above.

        In connection with the unsecured installment notes payable by LPC to former Forex shareholders, LP entered into a standby purchase and note support agreement with two banks. LP would become obligated to purchase the installment notes from the two banks, upon the occurrence of a payment default under the installment notes or upon the occurrence of specified events of default that are generally comparable to those applicable to the $190 million credit facility described above. This contingent purchase obligation is secured by LP's inventories held in the U.S. and a subordinated lien on a portion of LP's timberlands located in Texas.

        LP has entered into forward contracts for the purchase of Canadian dollars to hedge fifty percent of LP's exposure to the Canadian currency for the notes payable to former Forex shareholders. These

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forward contracts, which are recorded at fair value of $2.9 million at December 31, 2001, is included in Other assets on the consolidated balance sheet. The terms of the forward contracts are the same as the related debt. Counterparties to the hedge agreements are major financial institutions who also participate in LP's bank credit facilities. Credit loss from counterparty nonperformance is not anticipated.

        The weighted average interest rate for all long-term debt at December 31, 2001 and 2000 was approximately 7.4 percent and 7.6 percent. Required repayment of principal for long-term debt is as follows:

5.    RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

        LP sponsors various defined benefit and defined contribution retirement plans that provide retirement benefits to substantially all of its employees. Vesting generally occurs after 3 to 5 years of service. Most regularly scheduled employees are eligible to participate in these plans except those covered by a collective bargaining agreement, unless the collective bargaining agreement specifically allows for participation in LP plans. LP contributes to multiple employer and multiemployer plans for certain employees covered by collective bargaining agreements.

Defined Benefit Plans

        Contributions to the qualified defined benefit pension plans are based on actuarial calculations of amounts to cover current service costs and amortization of prior service costs over periods ranging from 10 to 20 years. Beginning in 2000, benefit accruals under the most significant plan, which accounts for approximately 84% of the assets and benefit obligations in the tables below, are credited as 5% of eligible compensation with an interest credit based on the 30-year U.S. Treasury rate. Prior to 2000, this plan was frozen. There is a variety of benefit formulas in the remaining defined benefit pension plans.

        LP also maintains a Supplemental Executive Retirement Plan (SERP), an unfunded non-qualified defined benefit plan intended to provide supplemental retirement benefits to key executives. Benefits are generally based on compensation in the years immediately preceding normal retirement. LP has established a grantor trust to informally provide funds for the benefits payable under the SERP and a separate executive deferred compensation plan. The deferred compensation plan was terminated late in 2001 and the participant contributions and Company matching contributions were distributed to participants in early 2002. The assets of the grantor trust are invested in corporate-owned life insurance policies. At December 31, 2001 and 2000, the trust assets were valued at $17.4 million and $17.0 million and are included in other assets in LP's consolidated balance sheet.

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        The following table sets forth the change in the benefit obligation, the change in plan assets, the plans' funded status and the amounts recognized in the consolidated balance sheet for LP sponsored plans:

        The actuarial assumptions used to determine pension expense and the funded status of the plans were: a discount rate on benefit obligations of 7.00% in 2001, 7.75% in 2000 and 7.50% in 1999; an 8.75% expected long-term rate of return on plan assets for all three years; and a 3.0% to 5.0% annual increase in future compensation levels depending on the plan.

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        Net periodic pension cost included the following components:

Defined Contribution Plans

        In 2001 and 2000, these plans were primarily 401(k) plans for hourly and salaried employees in the U.S. which allow for pre-tax employee deferrals and a company match of up to 3.5% of an employee's eligible wages (subject to certain limits). Under the profit sharing feature of these plans, LP may elect to contribute a discretionary amount as a percentage of eligible wages. In 1999, LP sponsored Employee Stock Ownership Plans under which 10% of eligible wages were contributed to the plans and invested in LP common stock. Included in the assets of the 401(k) and profit sharing plans are 8.3 million shares of LP common stock that represented approximately 39.3% of the total market value of plan assets at December 31, 2001. As of January 1, 2002, employees were free to transfer all but 0.4 million of the LP shares to other investment options within the plans. Expenses related to defined contribution plans and multi-employer plans in 2001, 2000 and 1999 were $7.0 million, $12.1 million and $26.6 million.

Postretirement Benefits

        LP has several plans that provide minimal postretirement benefits other than pensions, primarily for salaried employees in the US and certain groups of Canadian employees. The accrued postretirement benefit cost at December 31, 2001 was $5.6 million. Net expense related to these plans was not significant. LP does not generally provide postemployment benefits.

6.    STOCKHOLDERS' EQUITY

Preferred Stock

        The Company is authorized to issue up to 15,000,000 shares of preferred stock at $1.00 par value. At December 31, 2001, no shares of preferred stock have been issued; however, 2,000,000 shares of Series A Junior Participating Preferred Stock have been reserved for issuance in connection with the Company's Shareholder Rights Plan. Additional series of preferred stock may be designated and the related rights and preferences fixed by action of the Board of Directors.

Shareholder Rights Plan

        In May 1998, the Board of Directors approved a shareholder rights plan and declared a dividend of one preferred share purchase right for each outstanding common share. Each right represents the right to purchase one hundredth of a share of Preferred Stock, at an exercise price of $100.00, subject to adjustment. The rights are only exercisable ten days after a person or group acquires, or commences a tender or exchange offer to acquire, beneficial ownership of 15% or more of the Company's outstanding common stock.

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        Subject to the terms of the shareholder rights plan and the discretion of the Board of Directors, each right would entitle the holder to purchase a number of additional shares of common stock of LP having a market value of twice the exercise price of each right. The rights expire in June 2006, but may be redeemed by action of the Board of Directors prior to that time at $.01 per right.

Stock Compensation Plans

        LP has several stock plans that provide for the granting of stock and stock options to officers and key employees. The objectives of these plans include attracting and retaining the best personnel, providing for additional performance incentives and promoting the success of the Company by providing employees the opportunity to acquire common stock.

        LP grants options to key employees and directors to purchase LP common stock. The options are granted at 100 percent of market price at the date of grant. The options become exercisable over 3 years beginning one year after the grant date and expire 10 years after the date of grant. At December 31, 2001, 509,360 shares were available under the current stock award plan for future option grants and all other stock-based awards.

        Changes in options outstanding and exercisable and weighted average exercise price were as follows:

        The Company continues to account for stock based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" under which no compensation cost for stock options is recognized for stock options granted at or above fair market value. As permitted, LP applies only the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" which establishes a fair value approach to measuring compensation expense related to employee stock plans. Had compensation expense for LP's stock-based compensation plans been determined based on the fair value at the grant dates under those

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plans consistent with the fair value methodology of SFAS 123, LP's net income (loss) and net income (loss) per share would have been adjusted to the pro forma amounts indicated below:

        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model using the actual option terms with the following assumptions: a 2.3 percent to 4.6 percent dividend yield; volatility of 42 percent in 2001, 34 percent in 2000 and 40 percent in 1999; and an average risk free interest rate of 5.3 percent in 2001, 6.8 percent in 2000 and 5.0 percent in 1999.

        Summary information about the Company's stock options outstanding at December 31, 2001, is as follows:

		OUTSTANDING
									EXERCISABLE
				Weighted Average Contractual Periods in Years
Range of Exercise Prices		Outstanding December 31, 2001 (In Thousands)				Weighted Average Exercise Price			Exercisable at December 31, 2001 (In Thousands)		Weighted Average Exercise Price
$5.96-$8.94		50		9.4		$	7.79		7		$	8.14
$8.95-$11.92		1,596		8.7			11.33		21			10.86
$11.93-$14.90		856		7.7			12.39		286			12.39
$14.91-$17.88		72		3.0			17.52		72			17.52
$17.89-$20.86		1,799		5.8			18.95		1,480			18.92
$20.86-$23.84		300		4.5			21.86		292			21.86
$23.85-26.82		200		4.0			25.25		200			25.25
$26.83-$29.80		56		1.1			29.80		56			29.80
$5.96-$29.80		4,929		6.9		$	15.77		2,414		$	19.14

Performance-Contingent Stock Awards

        LP has granted performance-contingent stock awards to senior executives as allowed under the current stock award plan. The awards entitle the participant to receive a number of shares of LP common stock determined by comparing LP's cumulative total stockholder return to the mean total stockholder return of five other forest products companies for the four-year period beginning in the year of the award. Awards are granted at a target share level. Depending on LP's four-year total stockholder return, the actual number of shares issued at the end of the four-year period could range from zero to 200 percent of this target. LP did not record any compensation expense related to these awards in 2001, 2000, or 1999, based on the cumulative stockholders return for the applicable periods.

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6.    STOCKHOLDERS' EQUITY (Continued)

        Changes in performance-contingent stock awards were as follows:

Incentive Share Awards

        In 2001, LP granted incentive share stock awards to senior executives as allowed under the current stock award plan. The awards entitle the participant to receive a specified number of shares of LP common stock at no cost to the participant. Shares awarded under this program totaled 193,550 shares. These awards vest over a five-year period. However, if LP's stock trades at or above $18.00 per share for at least five consecutive days prior to the end of the five-year period, fifty percent of the stock will automatically vest at that time. If LP's stock trades at or above $22.00 per share for at least five consecutive days prior to the end of the five-year period, one hundred percent of the stock will automatically vest. LP recorded compensation expense related to these awards in 2001 of $0.4 million.

Stock Purchase Plans

        LP offers employee stock purchase plans to most employees. Under each plan, employees may subscribe to purchase shares of LP stock over 12 months (24 months prior to January 1, 2001) at 85 percent of the market price. During 2001, LP issued 142,987 shares to employees at an average price of $7.49 under all Employee Stock Purchase Plans. No plans were open at December 31, 2001.

Executive Loan Program

        In November 1999, the subcommittee of the Compensation Committee approved an Executive Loan Program under which up to 1,700,000 shares of Common Stock were offered by LP for purchase prior to January 23, 2000, by LP's executive officers, and other executives designated by its chief executive officer. In November 2000, this subcommittee of the Compensation Committee authorized additional loans under the Executive Loan Program during the 60-day period which ended January 23, 2001. During 2001, LP added one additional participant to the program. This participant purchased 38,275 shares of LP's stock with total loan proceeds of $0.4 million. Also during 2001, two executives paid off their loans and accrued interest due to the termination of their employment with LP. The total loan principal of these two loans was $1.1 million. As of December 31, 2001, the current balance of all loans outstanding was $12.7 million covering 996,144 shares.

        Each loan is initially recorded as an offset to paid-in capital. In anticipation of the loan forgiveness in 2006, LP amortizes each loan and its accrued interest to expense over the period between its inception and the anticipated forgiveness date. Therefore the balance remaining in paid-in capital

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differs from the total amount outstanding on all loans discussed above. The following provides a summary of activity in paid-in capital related to the Executive Loan Program:

        Participants were permitted to borrow up to 100 percent of the purchase price of the shares to be purchased, which was equal to the closing price of the Common Stock on the New York Stock Exchange (NYSE) on the date of delivery to LP of a participant's election to participate times the number of shares. The maximum amount an individual was permitted to borrow was three times his or her annual base pay. The loans bear interest at the annual rate of 6.02 percent.

        Interest and principal are due and payable at the earlier of January 23, 2006, or 30 days following the executive's resignation or involuntary termination of employment. The loans are unsecured. With respect to loans outstanding on or entered into after November 24, 2000, if the executive remains continuously employed by LP through the following dates, the loan balance at that date will be forgiven in the following percentages: January 23, 2004, 50 percent of the original principal; January 23, 2005, an additional 25 percent of the principal plus 50 percent of the accrued interest; and January 23, 2006, all remaining principal and accrued interest. If an executive's employment is terminated due to death, disability, or termination by LP without cause, his or her loan was forgiven in a prorated amount of the percentages specified above based on the amount of time elapsed since January 23, 2001. If an executive's employment is terminated after November 2, 2001, by reason of death, disability, involuntary termination by LP without cause or termination by the executive for good reason following a change in control of LP, an amount of original loan principal equal to the excess of the executive's cost basis in shares of Common Stock purchased under the program over the fair market value of such shares on the employment termination date (to the extent such amount exceeds loan forgiveness amounts under the program's other provisions plus any amounts paid as severance based on losses under the program), together with 100 percent of the executive's accrued loan interest, will be forgiven. In addition, if the Common Stock has traded on the NYSE for at least five consecutive trading days at specified price levels or above during the 12-month period immediately preceding January 23, 2004 or 2005 and the executive remains employed by LP, the following additional percentages of the loan balance will be forgiven: January 23, 2004, 25 percent of the principal and 50 percent of the accrued interest at a price level of $16.00 per share or 50 percent of the principal and 100 percent of the accrued interest at a price level of $20.00 per share; and January 23, 2005, all remaining principal and accrued interest at a price level of $18.00 per share. No amount of a loan will be forgiven if the executive does not still own, as of the applicable date, all shares purchased under the Executive Loan Program.

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7.    OTHER OPERATING CREDITS AND CHARGES, NET

        The major components of "Other operating credits and charges, net" in the statements of income for the years ended December 31 are reflected in the table below and described in the paragraphs following the table:

2001

Contingency Reserves

        In the first quarter of 2001, LP recorded a $2.0 million charge related to increases in reserves associated with non-product litigation. In the fourth quarter of 2001, LP increased its environmental reserves by $9.0 million. This increase was associated with the announcement of the indefinite closure of LP's Chetwynd, British Columbia pulp mill. Should the final disposition of the site be different than current expectation, additional environmental costs could be incurred.

Long-Lived Asset Impairments

        LP recognized $44.6 million in impairment charges on long-lived assets. These impairments included $24.4 million related to the Chetwynd pulp mill, $3.3 million related to a closed medium density fiber (MDF) facility, $5.2 million related to an operating MDF facility, $6.8 million related to the carrying value of certain manufacturing equipment and $4.9 million associated with LP's Ireland OSB facility.

        In the fourth quarter of 2001, LP recorded a $24.4 million impairment charge related to the Chetwynd pulp mill coinciding with the announcement of the indefinite closure of this mill. The impairment recorded is the difference between the estimated fair value and the carrying value of this mill. The fair value was determined by an independent appraisal based upon specific assumptions as to the expected future use of the facility. Should the final disposition of these assets differ from the assumptions used in the appraisal, an additional impairment charge could be required. For the year ended December 31, 2001, LP recorded operating losses on this facility of $19 million. At December 31, 2001, the carrying value of this asset was $10 million.

        During 2000, LP recorded an impairment charge associated with the permanent closure of a MDF facility. Due to changes in MDF market conditions in the first quarter of 2001, management determined that the mill equipment would be sold individually at auction, rather than as an operating facility. This decision resulted in an additional impairment charge for this facility of $3.3 million to reduce the carrying value of the mill to the estimated auction value of the equipment and the property.

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        During 2000, LP entered into a contract with a third party to sell certain OSB manufacturing equipment. Due to the decline in OSB prices in early 2001 and the inability of the third party to obtain financing, this contract was terminated in the first quarter of 2001. In the absence of this contract, LP reduced its estimate of the fair value of the equipment. An impairment charge of $6.8 million was recorded in the first quarter of 2001 to reduce the carrying values of the equipment to its estimated sales value less selling costs.

        LP's remaining MDF facility is currently operating due to requirements under an agreement with the State of Louisiana. In the fourth quarter of 2001, LP recorded a $5.2 million impairment charge on this facility based upon the difference between the discounted cash flows expected over the remaining term of the agreement (based upon forecasted industry pricing) and the then current carrying value.

        In the fourth quarter of 2001, LP recognized an impairment charge of $4.9 million associated with its interest in a joint venture OSB operation in Ireland. LP has been actively marketing its interest in this venture over several years. This charge reduces the carrying value of the fixed assets to be sold to their estimated fair value based upon a signed nonbinding letter of intent to sell LP's interest in the joint venture.

Mark To Market On Energy Contracts

        In 2001, LP entered into two forward contracts with Enron Corporation (Enron) for the purchase of energy through 2007. Due to Enron's recent bankruptcy filing, delivery of the energy to LP under the contracts was no longer deemed probable. As a result, the contracts no longer met the definition of "normal purchases" under SFAS No. 133, as amended. LP was required to record the contracts at fair value that resulted in a $6.1 million charge in the fourth quarter of 2001. The contracts will continue to be recorded at fair value until delivery is deemed probable.

Gain On Sale Of Pollution Credits, Equity Investment And Severance Charges

        LP recorded a gain of $6.1 million from the sale of pollution credits associated with closed mills of which $1.6 was recorded in the third quarter of 2001 and the remaining amount in the fourth quarter of 2001. In the second quarter of 2001, LP recorded a loss of $2.0 million associated with the impairment of an equity investment in an e-commerce company that has ceased operations.

        In 2001, LP announced and began to implement a series of actions intended to reduce operating costs through involuntarily termination of employees that should enhance the Company's ability to manage effectively through a slowing economy. These actions included a net reduction of approximately 300 mid-to-high-level corporate positions. Total amount charged to other operating credits and charges in the income statements were $9.4 million at December 31, 2001 of which $3.0 million had been paid out to 210 of these employees, with the remaining employees to be paid severance of approximately $6.4 under contract through 2002. No other adjustments have been made to this liability. The remaining amount is included in the caption Accounts payable and accrued liabilities on the accompanying balance sheet as of December 31, 2001.

2000

Contingency Reserves

        In 2000, LP recorded $4.3 million in the third quarter related to adjustment of environmental reserves at a number of sites to reflect current estimates of remediation costs (see Note 8 below for further details). An additional $5.4 million was related to increases in reserves associated with non-product litigation recorded in the fourth quarter.

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Long-Lived Asset Impairments

        LP recognized $62.7 million in impairment charges on long-lived assets. Of this total, $40 million was recorded in the second quarter related to the Samoa pulp mill to reduce the carrying value of the fixed assets to be sold to their estimated fair value based upon the estimated sales price. See Note 11 for a discussion of a 2001 transaction related to this facility. During the third and fourth quarter, impairment charges were recognized on the permanent closure or disposition of a plywood plant, two MDF facilities, a veneer facility and a hardboard facility. In connection with this decision, management estimated the fair value of these facilities by taking into account relevant factors such as the continuing decline in commodity priced products, the fair value of the real estate and the numerous mills being offered for sale by others. These valuations resulted in impairment charges of $22.7 million. The operating losses of these facilities in 2000 were approximately $9.6 million. Although management continues to pursue the disposal of these facilities, the timing of such disposal is not presently determinable. With regard to one of the MDF facilities mentioned above, refer to additional impairments charges recorded in 2001.

Interest Rate Hedge

        In anticipation of a public debt offering, LP entered into an interest rate hedge. Due to the significant decrease in treasury rates, LP incurred a loss of $11.4 million on this hedge, which was recorded in the second and third quarters of 2000.

Asset Sales, Insurance Settlements And Severance

        In the third quarter of 2000, LP recorded total gains on asset sales of $6.1 million, including a $2.7 million gain on the sale of a hardwood veneer facility and a $3.4 million gain on the sale of a non-operating facility.

        During 2000, LP recognized $28.4 million in insurance settlements. This amount is primarily comprised of $10.6 million related to the 1999 fire at the Athens, Georgia OSB facility recorded in the third quarter and $17.2 million associated with insurance recoveries related to OSB siding litigation, of which $5 million was recorded in the first quarter and $12.2 million was recorded in the second quarter.

        Charges for severance totaled $8.2 million in 2000 and were fully paid in 2000. These charges were primarily related to closures of mills discussed above and $2.3 million associated with reorganization of administrative functions recorded in the fourth quarter.

        Additionally, in the fourth quarter of 2000, LP recorded a $7.0 million loss in connection with the write off of a note receivable associated with the sale of certain assets of Ketchikan Pulp Company.

Restructuring Charges at GreenFiber

        Also, LP recognized a loss of $5.3 million associated with its share of restructuring charges at GreenFiber, the joint venture between LP and Casella Waste Systems, Inc. This loss is reported on the line item "Equity in earnings of unconsolidated affiliate" in LP's income statement and was recorded in the fourth quarter.

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1999

Contingency Reserves

        In the third quarter of 1999, LP's Ketchikan Pulp Company (KPC) subsidiary increased its reserves for environmental liabilities by $20.0 million as a result of changes in facts and circumstances at KPC sites and as a result of additional facts discovered, largely during activities to prepare for the sale of the majority of KPC assets. This is an estimate primarily for costs of remediation of hazardous or toxic substances on various sites owned or used by KPC and for closing and monitoring activities.

Long-Lived Asset Impairments

        In the third quarter 1999, LP recorded a $7.6 million asset impairment charge primarily in relation to the sale of the KPC facilities to reduce the carrying value of the fixed assets sold to fair value at the date of sale. The sale of KPC assets for approximately $11.5 million in cash and promissory notes was completed in November 1999 (as discussed above, the notes were written off in the fourth quarter of 2000).

Asset Sales

        In 1999, LP recorded total gains on the sale of assets of $19.7 million. In the second quarter, LP sold timber and approximately 5,500 acres of timberlands in Texas and recorded a $5.2 million gain on the sale. In December 1999, LP sold the assets of its Associated Chemists, Inc. (ACI) subsidiary, and recorded a gain of $14.5 million. ACI is a manufacturer of coatings and chemicals.

Contract Settlement And Other

        In the third quarter 1999, KPC recorded a $5.0 million gain under a 1997 agreement with the U.S. government based on satisfaction of requirements under the agreement. KPC also received $2.0 million from a local government agency upon satisfaction of certain obligations with that agency. Other losses of $7.3 million are primarily to due to the write off of a note receivable associated with the sale of assets in 1998.

8.    CONTINGENCIES

Environmental Proceedings

        In November 2000, LP's subsidiary Ketchikan Pulp Company ("KPC") finalized a consent decree with the federal government to complete remediation activities at KPC's former pulp mill site and of Ward Cove, a body of water adjacent to the mill site. Total costs for the investigation and remediation of Ward Cove are estimated to cost approximately $7.5 million (of which approximately $5.7 million had been spent at December 31, 2001).

        In connection with the remediation of KPC's former log transfer facilities; the United States Forest Service (the "USFS") has asserted that KPC is obligated to adhere to more stringent remediation standards than those imposed by the Alaska Department of Environmental Conservation. The USFS has also asserted that previously closed-out facilities may need to be re-evaluated. LP disputes the authority of the USFS to require KPC to adhere to the more stringent standards, or to re-evaluate closed-out facilities. Adherence to the more stringent standards and/or re-evaluation of closed-out facilities, if ultimately required, could substantially increase the cost of the remediation.

        LP is involved in a number of other environmental proceedings and activities, and may be wholly or partially responsible for known or unknown contamination existing at a number of other sites at

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which it has conducted operations or disposed of wastes. Based on the information currently available, management believes that any fines, penalties or other costs or losses resulting from these matters will not have a material adverse effect on the financial position, results of operations, cash flows or liquidity of LP.

        LP maintains a reserve for estimated environmental loss contingencies. The balance of the reserve was $40.5 million and $40.1 million at December 31, 2001 and 2000, of which $7.5 million and $12.9 million related to matters associated with the operations formerly conducted by KPC. The remainder of these balances was primarily for estimated future costs of remediation of hazardous or toxic substances at numerous sites currently or previously owned by the Company and closing and monitoring landfills. LP's estimates of its environmental loss contingencies are based on various assumptions and judgments, the specific nature of which varies in light of the particular facts and circumstances surrounding each environmental loss contingency. These estimates typically reflect assumptions and judgments as to the probable nature, magnitude and timing of required investigation, remediation and/or monitoring activities and the probable cost of these activities, and in some cases reflect assumptions and judgments as to the obligation or willingness and ability of third parties to bear a proportionate or allocated share of the cost of these activities. Due to the numerous uncertainties and variables associated with these assumptions and judgments, and the effects of changes in governmental regulation and environmental technologies, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. LP regularly monitors its estimated exposure to environmental loss contingencies and, as additional information becomes known, may change its estimates significantly. However, no estimate of the range of any such change can be made at this time. LP's estimates of its environmental loss contingencies do not reflect potential future recoveries from insurance carriers except to the extent that recovery may from time to time be deemed probable as a result of a carrier's agreement to payment terms. In those instances in which LP's estimated exposure reflects actual or anticipated cost-sharing arrangements with third parties, LP does not believe that it will be exposed to additional material liability as a result of non-performance by such third parties.

        The activity in LP's reserve for estimated environmental loss contingency reserves for the last three years is summarized in the following table.

        During 2001, LP adjusted its reserves to reflect the estimated remediation costs at manufacturing sites permanently closed during the year. This increase in reserves is primarily related to the indefinite closure of LP's Chetwynd, British Columbia pulp mill. Should the ultimate disposition of this facility be different than expected, additional costs for environmental remediation may be required.

        During 2000, LP adjusted its reserves at a number of sites to reflect current estimates of remediation costs, including estimated remediation costs at manufacturing sites permanently closed during the year and newly discovered contamination sites requiring remediation. The most significant

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adjustment occurred at sites in Quebec that LP acquired in the Forex transaction in 1999. As the sites were cleaned up, initial liability estimates that were recorded in the Forex purchase price proved inadequate due to the discovery of additional material requiring remediation and the determination that higher cost methods of remediation were required. LP therefore accrued an additional $3.6 million to reflect the updated estimated costs of remediation. The reserve adjustments at other sites were not individually significant.

        In 1999, KPC increased its reserves for environmental liabilities by $23.7 million (including $20.0 million charged to Other operating credits and charges, net) as a result of changes in facts and circumstances at KPC sites and as a result of additional facts discovered, largely during activities to prepare for the sale of the majority of KPC assets. This is an estimate primarily for future costs of remediation of hazardous or toxic substances on various sites owned or used by KPC and for closing and monitoring activities. The remaining 1999 accruals related to revisions of estimates at other sites.

OSB Siding Matters

        In 1994 and 1995, LP was named as a defendant in numerous class action and nonclass action proceedings brought on behalf of various persons or purported classes of persons (including nationwide classes in the United States and Canada) who own or purchased or used OSB siding manufactured by LP. In general, the plaintiffs in these actions alleged unfair business practices, breach of warranty, misrepresentation, conspiracy to defraud and other theories related to alleged defects, deterioration or failure of OSB siding products.

        In June 1996, the U.S. District Court for the District of Oregon approved a settlement between LP and a nationwide class composed of all persons who own, have owned, or acquire property on which LP's OSB siding was installed prior to January 1, 1996, excluding persons who timely opted out of the settlement and persons who are members of the settlement class in the Florida litigation described below. Under the settlement agreement, an eligible claimant whose claim is filed prior to January 1, 2003 (or earlier in certain cases) and is approved by an independent claims administrator is entitled to receive from the settlement fund established under the agreement a payment equal to the replacement cost (determined by a third-party construction cost estimator and currently estimated to be in the range of $2.20 to $6.40 per square foot depending on the type of product and geographic location) of damaged siding, reduced by a specific adjustment (of up to 65%) based on the age of the siding. Class members who previously submitted or resolved claims under any other warranty or claims program of LP may be entitled to receive the difference between the amount payable under the settlement agreement and the amount previously paid. The extent of damage to OSB siding at each claimant's property is determined by an independent adjuster in accordance with a specified protocol. Settlement payments are not subject to adjustment for improper maintenance or installation.

        A claimant who is dissatisfied with the amount to be paid under the settlement may elect to pursue claims against LP in a binding arbitration seeking compensatory damages without regard to the amount of payment calculated under the settlement protocol. A claimant who elects to pursue an arbitration claim must prove his entitlement to damages under any available legal theory, and LP may assert any available defense, including defenses that otherwise had been waived under the settlement agreement.

        The settlement requires LP to contribute $275 million to the settlement fund. Approximately $273 million of that obligation had been satisfied at December 31, 2001 through cash payments on a discounted basis of approximately $263 million. LP's remaining mandatory contributions to the settlement fund are due in June 2002 (approximately $2 million). In addition to its mandatory contributions, at December 31, 2001, LP had paid, on a discounted basis, approximately $97 million of

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its two $50 million optional contributions, at a cost to LP of approximately $68 million, and LP has committed to the court that it will make the balance of these two optional contributions when they become due in August 2002. LP was entitled to make its mandatory and optional contributions to the settlement fund on a discounted basis as a result of a court-approved early payment program (the "Early Payment Program").

        During 2000, LP offered eligible claimants the opportunity to receive a pro rata share of a court approved second settlement fund (the "Second Settlement Fund") in satisfaction of their claims. Pursuant to this offer, LP paid approximately $115 million from the Second Settlement Fund in satisfaction of approximately $319 million in claims. All of the payments under the Second Settlement Fund has been completed. Claimants who accepted payment from the Second Settlement Fund may not file additional claims under the settlement. Claimants who elected not to participate in the Second Settlement Fund remain bound by the terms of the original settlement.

        At December 31, 2001, the estimated amount of approved but unpaid claims under the settlement agreement exceeded the sum of the then-current balance of the settlement fund and LP's remaining mandatory and committed optional contributions to the settlement fund by approximately $117 million. Approximately 8,700 new claims were filed during 2001.

        Based upon the payments that LP has made and committed to make, the settlement will continue in effect until at least August 2003. Within 60 days after June 7, 2003, the Claims Administrator shall notify LP of the dollar value of all remaining unfunded and approved claims. LP shall then have 60 days to notify the Claims Administrator whether LP elects to fund all such remaining claims. If LP elects to fund those claims, then LP will pay by the end of the next 12-month period (2004) the greater of: (i) 50% of the aggregate sum of those claims (with the remaining 50% to be paid by 12 months thereafter in 2005); or (ii) 100% of the aggregate sum of those claims, up to a maximum of $50 million (with all remaining claims paid 12 months thereafter in 2005). If LP elects not to pay the unpaid claims pursuant to the settlement, the settlement will terminate with respect to such unpaid claims and all unpaid claimants will be free to pursue their individual remedies from and after the date of LP's election.

        If LP makes all contributions to the original settlement fund required under the settlement agreement, including all additional optional contributions as described in the immediately preceding paragraph, class members will be deemed to have released LP from all claims for damaged OSB siding, except for claims arising under their existing 25-year limited warranty after termination of the settlement agreement. The settlement agreement does not cover consequential damages resulting from damage to OSB Inner-Seal siding or damage to utility grade OSB siding (sold without any express warranty), either of which could create additional claims. In addition to payments to the settlement fund, LP was required to pay fees of class counsel in the amount of $26.25 million, as well as expenses of administering the settlement fund and inspecting properties for damage and certain other costs.

        A settlement of a related class action in Florida was approved by the Circuit Court for Lake County, Florida, on October 4, 1995. Under the settlement, LP established a claims procedure pursuant to which members of the settlement class could report problems with LP's OSB siding and have their properties inspected by an independent adjuster, who would measure the amount of damage and also determine the extent to which improper design, construction, installation, finishing, painting, and maintenance may have contributed to any damage. The maximum payment for damaged siding was $3.40 per square foot for lap siding and $2.82 per square foot for panel siding, subject to reduction by up to 75 percent for damage resulting from improper design, construction, installation, finishing, painting, or maintenance, and also subject to reduction for age of siding more than three years old. LP has agreed that the deduction from the payment to a member of the Florida class will not be greater

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than the deduction computed for a similar claimant under the national settlement agreement described above. Class members were entitled to make claims until October 4, 2000. By December 31, 2001, approximately 27,000 Florida class action claims had been paid. No further claims will be accepted or paid under this settlement.

        Throughout the period the above described settlements have been in effect, LP has recorded accruals which represent management's best estimates of amounts to be paid based on available information. The unusual nature of these settlements and the various alternatives available to LP makes the process of estimating these accruals difficult. In connection with the national settlement, the liability recorded at December 31, 2001 represents management's best estimate of the future liability related to eligible siding claims based upon the most current information available. Inherent in the $78 million of reserve for these claims is the assumption that LP will settle them for less than the calculated value. There can be no assurance that the ultimate liability will not significantly exceed the recorded liability.

ABT Hardboard Siding Matters

        Between 1995 and 1999, ABT Building Products Corporation ("ABT"), ABTco, Inc., a wholly owned subsidiary of ABT ("ABTco" and, together with ABT, the "ABT Entities"), Abitibi- Price Corporation ("Abitibi"), a predecessor of ABT, and certain affiliates of Abitibi (the "Abitibi Affiliates" and, together with Abitibi, the "Abitibi Entities") was named as a defendant in numerous class action and nonclass action proceedings brought on behalf of various persons or purported classes of persons (including nationwide classes in the United States and Canada) who own or have purchased or installed hardboard siding manufactured or sold by the defendants. In general, the plaintiffs in these actions have claimed unfair business practices, breach of warranty, fraud, misrepresentation, negligence, and other theories related to alleged defects, deterioration, or other failure of such hardboard siding, and seek unspecified compensatory, punitive, and other damages (including consequential damage to the structures on which the siding was installed), attorneys' fees and other relief).

        LP acquired ABT in February 1999 and ABT was merged into LP in January of 2001.

        On September 21, 2000, the Circuit Court of Choctaw County, Alabama, under the caption Foster, et al. v. ABTco, Inc., ABT Building Products Corporation, Abitibi-Price, Inc. and Abitibi-Price Corporation (No. CV95-151-M), approved a settlement agreement among the defendants and attorneys representing a nationwide class composed of all persons who own or formerly owned homes or, subject to limited exceptions, other buildings or structures on which hardboard siding manufactured by the defendants was installed between May 15, 1975 and May 15, 2000. Except for approximately 30 persons who timely opted out, the settlement includes and binds all members of the settlement class and resolves all claims asserted in the various proceedings described above. Under the settlement agreement, class members who previously made a warranty claim or already repaired or replaced their siding had until May 15, 2001 to file a claim; class members whose siding was installed between May 15, 1975 and May 15, 1976 to file their claims; and all other class members will have twenty-five years after their siding was installed to file a claim.

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8.    CONTINGENCIES (Continued)

        Under the settlement agreement, the defendants will be entitled to elect to make an offer of settlement to an eligible claimant based on the information set forth in the claim submitted by such claimant, and such claimant will be entitled to accept or reject the offer. If an eligible claimant declines the offer, or if no offer is made, such claimant will be entitled to a payment based on an independent inspection. Such payments will be based on a specified dollar amount (calculated on the basis of statewide averages and ranging from $2.65 to $6.21, depending upon the state) per square foot of covered siding that has experienced specified types of damage, subject to reduction based on the age of the damaged siding and any failure to paint the damaged siding within stated intervals (except in the case of damaged siding installed on mobile homes, as to which a uniform 50% reduction will apply in all circumstances). If applicable, payments under the settlement will also be subject to reduction to reflect any warranty payments or certain other payments previously recovered by a claimant on account of the damaged siding. Under the settlement agreement, LP (as a successor to ABT) will be required to pay the expenses of administering the settlement and certain other costs.

        ABT and Abitibi were parties to an agreement of an allocation of liability with respect to claims related to siding sold prior to October 22, 1992. On June 13, 2001, in exchange for a cash payment from Abitibi of approximately $19 million which was received in July 2001, LPC, a wholly owned subsidiary of LP, agreed to accept a transfer of all of Abitibi's rights and obligations under the settlement agreement and the allocation agreement; and LP and LPC agreed to indemnify and hold harmless Abitibi from any cost of liability arising from it's sale of hardboard siding in the United States. From the date of the agreement, Abitibi has no further rights, obligations or liabilities under either the class action settlement agreement or the allocation agreement. All of such rights, obligations and liabilities having been assigned to and accepted and assumed by LPC.

        Based on the information currently available and previously recorded reserves, management believes that the resolution of the foregoing ABT hardboard siding matters will not have a material adverse effect on the financial position, results of operations, cash flows or liquidity of LP.

Nature Guard Cement Shakes Matters

        LP has been named in three putative class action proceedings filed in California in the following courts on the following dates: Superior Court of California, County of Stanislaus, on January 9, 2001 captioned Virgina L. Davis v. Louisiana-Pacific Corporation; Superior Court of California, County of San Francisco, on July 30, 2001 captioned Mahleon R. Oyster and George Sousa v. Louisiana-Pacific Corporation; and Superior Court of California, County of Stanislaus, on September 7, 2001, captioned Angel H. Jasso and Angela Jasso v. Louisiana-Pacific Corporation. These actions were filed on behalf of a purported national class of persons nationwide owning structures on which LP's Nature Guard Fiber Cement Shakes were installed as roofing. Plaintiffs generally allege product liability, negligence, breach of warranties, unfair business practices, false advertising, fraud, deceit and other theories related to alleged defects, and failure of such cement shakes as well as consequential damages to other components of the structures where the cement shakes were installed. Plaintiffs seek general, compensatory, special and punitive damages as well as disgorgement of profits and the establishment of a fund to provide restitution to the purported class members.

        LP has also been named on June 13, 2001 as defendant in a putative class action filed in Superior Court for the State of Washington, Snohomish County, captioned Nick P. Marassi, M.D. and Debra Marassi v. Louisiana-Pacific Corporation. The action was filed on behalf of a purported national class of persons owning structures on which LP's Nature Guard Fiber Cement Shakes were installed as roofing. Plaintiffs generally allege nondisclosure, fraudulent concealment and violation of Washington's Consumer Protection Act arising from alleged product defects. Plaintiffs seek compensatory, exemplary

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and statutory damages, an injunction against marketing or selling the product, and a declaration that LP is financially responsible for the costs and expenses of repair and replacement of all roofs containing the product, and disgorgement of profits or restitution.

        LP no longer manufactures or sells fiber cement shakes, but established and maintains a claims program for the Nature Guard shakes previously sold. LP believes that it has substantial defenses to the foregoing actions and intends to defend them vigorously. At the present time, LP cannot predict the potential financial impact of the above actions.

Other Proceedings

        LP and its subsidiaries are parties to other legal proceedings. Based on the information currently available, management believes that the resolution of such proceedings will not have a material adverse effect on the financial position, results of operations, cash flows or liquidity of LP.

Contingency Reserves

        LP maintains loss contingency reserves in addition to the environmental reserves discussed above. The balance of these reserves, exclusive of the environmental reserves discussed above, was $114.6 million and $121.5 million at December 31, 2001 and 2000, respectively (of which $78.2 million and $90.4 million, respectively, related to OSB siding contingencies). LP's estimates of its non-environmental loss contingencies are based on various assumptions and judgments. In the case of the OSB siding contingency reserves, these assumptions and judgments relate to, among other things: the timing and magnitude (in terms of both the number of claims and the square footage of damaged siding) of additional claims; the extent to which claims may be resolved through means other than those provided for in the applicable settlement; and the costs associated with the administration of the settlement and the resolution of disputes and other legal matters. Due to the numerous uncertainties and variables associated with these assumptions and judgments, both the precision and reliability of the resulting estimates of the related contingencies are subject to substantial uncertainties. LP regularly monitors its estimated exposure to non-environmental loss contingencies and, as additional information becomes known, may change its estimates significantly. While no estimate of the range of any such change can be made at this time, the amount that LP may ultimately pay in connection with these matters could materially exceed, in either the near term or the longer term, the amounts accrued to date. LP's estimates of its loss contingencies do not reflect potential future recoveries from insurance carriers except to the extent that recovery may from time to time be deemed probable as a result of a carrier's agreement to payment terms.

        The activity in the portion of LP's loss contingency reserves relating to OSB siding contingencies for the last three years is summarized in the following table.

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9.    COMMITMENTS

        LP is obligated to purchase timber under certain cutting contracts that extend to 2008. LP's best estimate of its commitment at current contract rates under these contracts at December 31, 2001 is approximately $21.6 million for approximately 139 million board feet of timber.

        LP is obligated to purchase electricity in several Western states under certain electricity contracts which extend to 2007. LP's best estimate of its commitment at current contract rates under these contracts at December 31, 2001 is approximately 449 thousand megawatts at an average cost of $48.50 per megawatt. See Note 7 above for discussion of mark-to-market accounting for these contracts.

        The Company and its subsidiaries lease certain manufacturing, warehousing and other facilities and equipment. The leases generally provide for the lessee to pay taxes, maintenance, insurance and certain other operating costs of the leased properties. At December 31, 2001, future minimum annual rent commitments are as follows:

        Rental expense for operating leases amounted to $36.3 million, $35.3 million and $28.2 million in 2001, 2000 and 1999, respectively.

10.    ACQUISITIONS

2001

        During 2001, LP acquired a sawmill in Northern Idaho for approximately $7 million in cash and the assumption of an operating lease covering the majority of the assets related to this facility. This acquisition was accounted for as a purchase and assumption of an operating lease and the results of operations of the acquired assets were included in LP's Consolidated Statements of Income for the year ended December 31, 2001 from the date of acquisition. No goodwill was recorded in connection with this acquisition.

2000

        During 2000, LP acquired selected assets of Sawyer Lumber Company and the assets of Hoff Companies for approximately $55 million in cash. These acquisitions were accounted for as purchases and the results of operations of the acquired assets were included in LP's Consolidated Statements of Income for the years ended December 31, 2000 and 2001 from the dates of acquisition. No goodwill was recorded in connection with these acquisitions.

1999

        On February 25, 1999, LP acquired the capital stock of ABT Building Products Corporation (ABT) for approximately $164 million in cash. Concurrent with the acquisition, LP also paid off approximately $49 million of ABT debt. The acquisition was accounted for as a purchase and ABT's results of operations for the period subsequent to the acquisition have been included in LP's Consolidated

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Statements of Income for the years ended December 31, 1999, 2000 and 2001. The purchase price was allocated to the assets and liabilities of ABT based on their estimated fair values. Based on these estimates, LP recorded $53 million of goodwill in its Consolidated Balance Sheet at December 31, 1999, which was being amortized using the straight-line method over 15 years.

        On September 14, 1999, LP acquired the capital stock of Forex for a total purchase price of approximately $516.5 million. Approximately $376.6 million of this amount was paid in cash and approximately $139.9 million was paid through the issuance of promissory notes to Forex shareholders. Concurrent with the acquisition, LP also paid off approximately $101.5 million of Forex debt. In connection with the acquisition of Forex, LP borrowed $426.6 million under new uncommitted bank credit facilities. The acquisition was accounted for as a purchase and Forex's results of operations for the period subsequent to the acquisition have been included in LP's Consolidated Statements of Income for the years ended December 31, 1999, 2000 and 2001. The purchase price was allocated to the assets and liabilities of Forex based on their estimated fair values. Based on these estimates, LP recorded $271.0 million of goodwill in its Consolidated Balance Sheet at December 31, 1999, which was being amortized using the straight-line method over 15 years.

        The following unaudited pro forma financial information gives effect to the acquisitions of ABT and Forex as if they had been consummated at the beginning of each period presented.

        The principal pro forma adjustments reflected above are adjustments to record interest expense on indebtedness incurred in connection with the acquisitions, increased depreciation expense resulting from the allocation of purchase price to acquired fixed assets at their estimated fair value, increased depletion expense resulting from the allocation of purchase price to acquired timber contracts at their estimated fair value and the amortization of goodwill. The foregoing pro forma information is provided for illustrative purposes only and does not purport to be indicative of results that actually would have been achieved had the acquisitions been consummated at the beginning of the periods presented or of future results.

        On November 30, 1999, LP acquired the assets of Evans for approximately $98 million in cash. The acquisition was accounted for as a purchase and the results of operations of the acquired assets for the period subsequent to the acquisition have been included in LP's Consolidated Statements of Income for the years ended December 31, 1999, 2000 and 2001. No goodwill was recorded related to this acquisition.

11.    DISPOSITIONS

        In February 2001, LP sold a controlling interest in Samoa Pacific Cellulose LLC (SPC), a company that owns a pulp mill and related assets in Samoa, California, for approximately book value. In this transaction, LP received approximately $22 million in cash, and promissory notes of SPC valued at a fair value of $29 million and retained preferred stock of SPC valued at a fair value of approximately $9 million. Management believed the fair value of the consideration received approximated the carrying value of the assets at that time. The preferred stock is pledged as collateral against SPC's senior borrowing. The term of the promissory notes is longer than five years. Additionally, LP has agreed to provide SPC an $18 million credit facility secured by accounts receivable and inventory. At

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December 31, 2001, the balance owed to LP under the credit facility was $15.1 million. If SPC defaults on this line of credit and the security does not cover the outstanding balance due to LP, additional losses could be incurred.

        Due to its continuing financial interest in SPC, LP did not record the transaction as a sale. In compliance with Staff Accounting Bulletin No. 30—Accounting For Divestiture Of A Subsidiary Or Other Business Operation, LP recorded the assets and the liabilities of SPC on LP's balance sheet under the captions "Assets transferred under contractual arrangement" and "Liabilities transferred under contractual arrangement." During 2001, LP recorded a valuation allowance equal to its non-secured, net investment in SPC due to SPC's substantial losses from operations due to weak pulp markets. This valuation allowance is reflected on LP's Consolidated Statements of Income under the caption "Loss related to assets and liabilities transferred under contractual arrangement."

        In addition, there are several contingent liabilities (primarily environmental in nature) associated with these operations that, under certain circumstances, could become liabilities of LP. LP has not recorded an accrual for these liabilities, as it does not believe it is probable that it will incur these liabilities, although it is possible that LP may be required to record such an accrual in the future.

12.    SEGMENT INFORMATION

        LP operates in five major business segments: Structural Products, Exterior Products, Industrial Panel Products, Other Products, and Pulp. LP's business units have been aggregated into these five reportable segments based on the similarity of economic characteristics, customers, distributions methods and manufacturing processes. Segment information was prepared in accordance with the same accounting principles as those described in Note 1 above. LP evaluates the performance of its business segments based on operating profits excluding other operating credits and charges, general corporate and other expenses, interest, equity in earnings of unconsolidated affiliate and income taxes.

        The Structural Products segment includes North American OSB, plywood, lumber, engineered wood products (EWP), (primarily laminated veneer lumber (LVL) and I-joists) and timberlands. The Exterior Products segment includes wood and vinyl siding and related accessories, composite decking and specialty OSB products. The Industrial Panel Products segment includes particleboard, medium density fiberboard (MDF), hardboard and decorative panels. The Other Products segment includes distribution facilities, plastic moldings, wood chips, coatings and specialty chemicals (sold in December of 1999), cellulose insulation (contributed to a joint venture in August of 2000), Ireland OSB operations, Chile OSB operations, Alaska lumber and logging operations (sold in November of 1999) and other products. The Pulp segment includes the wood pulp products of LP's two pulp mills (controlling interest of one of which was transferred in February of 2001 as described in Note 11 and the indefinite closure of the other of which was announced in October 2001.

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        Export sales are primarily to customers in Asia and Europe. Information about LP's geographic segments is as follows:

Year Ended December 31			2001			2000			1999
			Dollar Amounts in Millions
TOTAL SALES—POINT OF ORIGIN
U.S.			$	1,895		$	2,331		$	2,743
Canada and other				705			832			455
Intersegment sales to US				(240	)		(230	)		(126	)
	Total sales		$	2,360		$	2,933		$	3,072
Export Sales (included above)			$	76		$	152		$	193
OPERATING PROFIT (LOSS)
U.S.			$	(17	)	$	210		$	391
Canada and other				(16	)		78			89
Other operating credits and charges, net				(67	)		(71	)		(8	)
Loss related to assets and liabilities transferred under contractual arrangement				(43	)		—			—
General corporate expense and interest, net				(146	)		(235	)		(115	)
	Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate		$	(289	)	$	(18	)	$	357
IDENTIFIABLE ASSETS
U.S.			$	2,024		$	2,274		$	2,335
Canada and other				993			1,101			1,153
	Total assets		$	3,017		$	3,375		$	3,488

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        Information about LP's product segments is as follows:

Year Ended December 31			2001			2000			1999
			Dollar Amounts in Millions
TOTAL SALES
Structural products			$	1,520		$	1,817		$	1,876
Exterior products				359			329			276
Industrial panel products				199			287			300
Other products				235			348			477
Pulp				47			152			143
	Total sales		$	2,360		$	2,933		$	3,072
OPERATING PROFIT (LOSS)
Structural products			$	(1	)	$	176		$	440
Exterior products				16			19			53
Industrial panel products				(19	)		2			13
Other products				(2	)		(12	)		(11	)
Pulp				(27	)		13			(15	)
Other operating credits and charges, net				(67	)		(71	)		(8	)
Loss related to assets and liabilities transferred under contractual arrangement				(43	)		—			—
General corporate and other expense, net				(86	)		(99	)		(103	)
Interest, net				(60	)		(43	)		(12	)
	Income (loss) before taxes, minority interest and equity in earnings of unconsolidated affiliate		$	(289	)	$	(15	)	$	357

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Year Ended December 31			2001			2000			1999
			Dollar Amounts in Millions
IDENTIFIABLE ASSETS
Structural products			$	1,559		$	1,689		$	1,738
Exterior products				227			203			199
Industrial panel products				114			142			160
Other products				162			228			174
Pulp				24			143			176
Non-segment related				931			970			1,041
	Total assets		$	3,017		$	3,375		$	3,488
DEPRECIATION, AMORTIZATION AND COST OF TIMBER HARVESTED
Structural products			$	144		$	167		$	123
Exterior products				22			20			14
Industrial panel products				9			14			14
Other products				6			14			17
Pulp				3			10			11
Non-segment related				11			11			23
	Total depreciation, amortization and cost of timber harvested		$	195		$	236		$	202
CAPITAL EXPENDITURES
Structural products			$	38		$	146		$	94
Exterior products				14			27			3
Industrial panel products				5			7			6
Other products				8			20			8
Pulp				1			2			4
Non-segment related				3			18			3
	Total capital expenditures		$	69		$	220		$	118

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(1)

See Note 7 above for an explanation of other operating credits and charges, net.

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Independent Auditors' Report

         To the Board of Directors and Stockholders of Louisiana-Pacific Corporation:

        We have audited the accompanying consolidated balance sheets of Louisiana-Pacific Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Louisiana-Pacific Corporation and subsidiaries at December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.

Portland, Oregon
January 30, 2002

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REPORT ON MANAGEMENT'S RESPONSIBILITIES

         Louisiana-Pacific Corporation and Subsidiaries

        Management of Louisiana-Pacific Corporation is responsible for the preparation, integrity and fair presentation of the consolidated financial statements and the estimates and judgments upon which certain amounts in the financial statements are based. Management is also responsible for preparing other information included in this annual report on Form 10-K. In our opinion, the accompanying financial statements have been prepared in conformity with generally accepted accounting principles in all material respects, and the other information in this annual report on Form 10-K has been prepared on a basis consistent with the financial statements.

        Management is also responsible for establishing and maintaining a system of internal control over financial reporting, including policies, procedures and controls designed to provide reasonable assurance as to the safeguarding of assets and the reliability of the published financial statements. The Corporation's internal audit staff regularly performs an independent assessment of this system in order to confirm that the system is adequate and operating effectively. The Corporation's independent public accountants also consider certain elements of the internal control system in order to determine their auditing procedures for the purpose of expressing an opinion on the financial statements. Management has considered any significant recommendations regarding the internal control system that have been brought to its attention by the internal audit staff or independent public accountants and has taken steps it deems appropriate to maintain a cost-effective internal control system. The Finance and Audit Committee of the Board of Directors, consisting entirely of independent directors who meet or exceed all criteria established by the SEC, provides oversight to the financial reporting process.

        The Corporation's management, internal auditors and independent public accountants meet regularly with the Finance and Audit Committee to discuss financial reporting and internal control issues and have full and free access to the Finance and Audit Committee at all times.

        There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even an effective internal control system can provide only reasonable assurance with respect to financial statement preparation. Furthermore, the effectiveness of an internal control system can vary over time due to changes in conditions.

        Management believes that as of December 31, 2001, the internal control system over financial reporting is adequate and effective in all material respects.

Mark A. Suwyn Chairman and CEO		Curtis M. Stevens Vice President, Treasurer and CFO

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ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

PART III

ITEM 10.    Directors and Executive Officers of the Registrant

        Information regarding LP's directors is incorporated herein by reference to the material included under the caption "Item 1—Election of Directors" in the definitive proxy statement filed by LP for its 2001 annual meeting of stockholders (the "2002 Proxy Statement"). Information regarding LP's executive officers is located in Item 1 of this report under the caption "Executive Officers of Louisiana-Pacific Corporation." Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the material included under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the 2002 Proxy Statement.

ITEM 11.    Executive Compensation

        Information regarding executive compensation is incorporated herein by reference to the material under the captions "Compensation Committee—Interlocks and Insider Participation," "Compensation of Executive Officers," "Retirement Benefits," "Directors' Compensation," and "Agreements with Executive Officers" in the 2002 Proxy Statement.

ITEM 12.    Security Ownership of Certain Beneficial Owners and Management

        Information regarding security ownership of certain beneficial owners and management is incorporated herein by reference to the material under the caption "Holders of Common Stock" in the 2002 Proxy Statement.

ITEM 13.    Certain Relationships and Related Transactions

        Information regarding management transactions is incorporated herein by reference to the material under the captions "Compensation Committee—Interlocks and Insider Participation" and "Management Loans and Other Transactions" in the 2002 Proxy Statement.

PART IV

ITEM 14.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K

A. Financial Statements and Financial Statement Schedules

        The following financial statements of LP are included in this report:

Consolidated Balance Sheets—December 31, 2001, and 2000.
Consolidated Statements of Income—years ended December 31, 2001, 2000, and 1999.
Consolidated Statements of Cash Flows—years ended December 31, 2001, 2000, 1999.
Consolidated Statements of Stockholders' Equity—years ended December 31, 2001, 2000 and 1999.
Notes to Financial Statements.
Independent Auditors' Report.

No financial statement schedules are required to be filed.

B. Reports on Form 8-K

        No reports on Form 8-K were filed during the fourth quarter 2001.

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C. Exhibits

        The exhibits filed as part of this report or incorporated by reference herein are listed in the accompanying exhibit index. Each management contract or compensatory plan or arrangement is identified in the index.

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Louisiana-Pacific Corporation, a Delaware corporation (the "registrant"), has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 14, 2002		LOUISIANA-PACIFIC CORPORATION (Registrant)
		/s/  CURTIS M. STEVENS       Curtis M. Stevens Vice President, Treasurer and Chief Financial 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 the registrant and in the capacities and on the dates indicated.

Date		Signature and Title
March 14, 2002		/s/  MARK A. SUWYN       Mark A. Suwyn Chief Executive Officer, Chairman of the Board, Director (Principal Executive Officer)
March 14, 2002		/s/  CURTIS M. STEVENS       Curtis M. Stevens Vice President, Treasurer and Chief Financial Officer (Principal Financial & Accounting Officer)
March 14, 2002		/s/  COLIN D. WATSON       Colin D. Watson Director
March 14, 2002		/s/  WILLIAM C. BROOKS       William C. Brooks Director
March 14, 2002		/s/  ARCHIE W. DUNHAM       Archie W. Dunham Director

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March 14, 2002		/s/  PAUL W. HANSEN       Paul W. Hansen Director
March 14, 2002		/s/  BRENDA LAUDERBACK       Brenda Lauderback Director
March 14, 2002		/s/  PATRICK F. MCCARTAN       Patrick F. McCartan Director
March 14, 2002		/s/  E. GARY COOK       E. Gary Cook Director
March 14, 2002		/s/  LEE C. SIMPSON       Lee C. Simpson Director

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EXHIBIT INDEX

        On written request, Louisiana-Pacific Corporation (LP) will furnish to any record holder or beneficial holder of its common stock any exhibit to this report upon the payment of a fee equal to LP's costs of copying such exhibit plus postage. Any such request should be sent to: Ward Hubbell, Vice President Corporate Affairs, Louisiana-Pacific Corporation, 805 SW Broadway, Suite 700, Portland, Oregon 97005-3303.

        Items identified with an asterisk (*) are management contracts or compensatory plans or arrangements.

3.1		Restated Certificate of Incorporation of LP. Incorporated herein by reference to Exhibit 3(a) to LP's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993.
3.2		Bylaws of LP. Incorporated herein by reference to Exhibit 3.1 to LP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
4.1		Rights Agreement dated as of May 26, 1998, between LP and First Chicago Trust Company of New York as Rights Agent. Incorporated herein by reference to Exhibit 1 to LP's Registration Statement on Form 8-A filed May 26, 1998.
4.2		Amendment to Rights Agreement dated as of October 17, 2001, between LP and First Chicago Trust Company of New York as Rights Agent.
4.3		Indenture, dated as of September 14, 1999, among Louisiana-Pacific Acquisition Inc., LP and Laurentian Trust of Canada Inc. Incorporated herein by reference to Exhibit 4.3 to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
4.4		Indenture, dated as of April 2, 1999, between LP and First National Bank of Chicago, N.A., as trustee (predecessor to Bank One Trust Company, N.A., as trustee). Incorporated herein by reference to Exhibit 4.2 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
4.5		First Supplemental Indenture, dated August 18, 2000, between LP and Bank One Trust Company, N.A., as trustee. Incorporated herein by reference to Exhibit 4.1 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
4.6		Second Supplemental Indenture, dated August 18, 2000, between LP and Bank One Trust Company, N.A., as trustee. Incorporated herein by reference to Exhibit 4.2 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
4.7		Third Supplemental Indenture, dated August 13, 2001, between LP and Bank One Trust Company, N.A., as trustee. Incorporated herein by reference to Exhibit 4.1 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.
10.1		Credit Agreement, dated November 15, 2001, among LP, Bank of America, N.A., and the other financial institutions that are parties thereto.
10.2		2001 LP Canada Credit Agreement, dated November 30, 2001, among LP, Louisiana-Pacific Canada Ltd. and Royal Bank of Canada.
10.3		Receivables Sale Agreement, dated as of November 15, 2001, as amended December 15, 2001, among LP, LP Wood Polymers, Inc. and LP Receivables Corporation.
10.4		Credit and Security Agreement, dated as of November 15, 2001, among LP, LP Receivables Corporation, Blue Ridge Asset Funding Corporation, Wachonia Bank, N.A., and the other financial institutions that are parties thereto.

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10.5		Standby Purchase and Note Support Agreement dated August 16, 1999, as amended as of July 18, 2001, among LP, Bank of America, N.A. and Canadian Imperial Bank of Commerce. Incorporated herein by reference to Exhibit 10.1 to LP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
10.6		Second amendment, dated November 15, 2001, to Standby Purchase and Note Support Agreement amount LP, Bank of America, N.A., and Canadian Imperial Bank of Commerce.
10.7		Note Purchase Agreement, dated June 30, 1998, among LP, LP SPV2, LLC, and the Purchasers listed therein. Incorporated herein by reference to Exhibit 4 to LP's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
10.8		Settlement Agreement, dated October 18, 1995, between LP and counsel for plaintiffs in nationwide siding class action litigation. Incorporated herein by reference to Exhibit 10 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.
10.9		Amendment to Settlement Agreement, dated April 26, 1996, between LP and counsel for plaintiffs in nationwide siding class action litigation. Incorporated herein by reference to Exhibit 10.A to LP's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.
10.10		Supplemental Funding Agreement, dated October 26, 1998, between LP and counsel for plaintiffs in siding class action litigation. Incorporated herein by reference to Exhibit 10.1 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
10.11		Settlement Agreement, dated May 3, 2000 among ABT Building Products Corporation, ABTco, Inc., Abitibi-Price Corporation, attorneys representing plaintiffs in hard board siding class action litigation and the other parties named therein. Incorporated herein by reference to Exhibit 10.2 to LP's Quarterly Report on Form 10-Q for the quarter ended March 30, 2000.
10.12		Assignment, Assumption, Release, and Indemnity Agreement, dated June 25, 2001, among LP, Louisiana-Pacific Canada, Ltd., Abitibi-Price Corporation and Abitibi-Consolidated Inc.
10.13		1984 Employee Stock Option Plan as amended. Incorporated herein by reference to Exhibit 10.A to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.*
10.14		1991 Employee Stock Option Plan. Incorporated herein by reference to Exhibit 10.B to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.*
10.15		1992 Non-Employee Director Stock Option Plan (restated as of May 1, 2000) and Related Forms of Option Agreements. Incorporated herein by reference to Exhibit 10.3 to LP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.*
10.16		1997 Incentive Stock Award Plan as restated as of May 6, 2001. Incorporated herein by reference to Exhibit 10.1 to LP's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001.*
10.17		Form of Award Agreement for Non-Qualified Stock Options under the 1997 Inventive Stock Award Plan. Incorporated herein by reference to Exhibit 10.F(2) to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.*
10.18		Form of Award Agreement for Incentive Shares under the 1997 Incentive Stock Award Plan. Incorporated herein by reference to Exhibit 10.4 to LP's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.*
10.19		Annual Cash Incentive Award Plan effective March 1, 1997. Incorporated herein by reference to Exhibit 10.F(3) to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 19996.*

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10.20		Supplemental Executive Retirement Plan, as amended and restated as of January 1, 2000. Incorporated herein by reference to Exhibit 10.14 to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.*
10.21		Executive Loan Program, as amended and restated November 3, 2001.*
10.22		2000 Employee Stock Purchase Plan, as amended and restated effective October 1, 2001.*
10.23		2000 Non-Employee Director Restricted Stock Plan. Incorporated herein by reference to Exhibit 10.2 to LP's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.*
10.24		Employment Agreement between LP and Mark A. Suwyn dated January 2, 1996. Incorporated herein by reference to Exhibit 10.L to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.*
10.25		Restricted Stock Award Agreement between LP and Mark A. Suwyn dated January 31, 1996. Incorporated herein by reference to Exhibit 10.J to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.*
10.26		1997 Cash Incentive Award for Mark A. Suwyn adopted March 11, 1997. Incorporated herein by reference to Exhibit 10.K to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1996.*
10.27		Letter agreement dated July 16, 1997, relating to the employment of Curtis M. Stevens. Incorporated herein by reference to Exhibit 10.0 to LP's Annual Report on Form 10-K for the fiscal year ended December 31, 1997.*
10.28		Form of Change of Control Employment Agreement between LP and each of Mark A. Suwyn, Curtis M. Stevens, Richard W. Frost, Joseph B. Kastelic, J. Keith Matheney, Michael J. Tull, Walter M. Wirfs, Jeff Duncan, Jr., W. Lee Kuhre, and M. Ward Hubbell. Incorporated herein by reference to Exhibit 10.2 to LP's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.*
21		List of LP's subsidiaries.
23		Consent of Deloitte & Touche LLP

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Pursuant to Item 601(b)(4)(iii) of Regulation S-K, LP is not filing certain instruments with respect to its long-term debt because the amount authorized under any such instrument does not exceed 10 percent of LP's total consolidated assets at December 31, 2001. LP agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.

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QuickLinks

ABOUT FORWARD-LOOKING STATEMENTS
ABOUT THIRD PARTY INFORMATION
PART I
Structural Products Segment
Exterior Products Segment
Industrial Panel Products Segment
Other Products Segment
Pulp Segment
Product Information Summary For Years Ended December 31
PART II
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Independent Auditors' Report
REPORT ON MANAGEMENT'S RESPONSIBILITIES
PART III
PART IV
SIGNATURES
EXHIBIT INDEX





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Exhibit 10.2

2001 LP CANADA CREDIT AGREEMENT

Dated for Reference November 30, 2001

AMONG:

LOUISIANA-PACIFIC CANADA LTD.

AND:

LOUISIANA-PACIFIC CORPORATION

AND:

ROYAL BANK OF CANADA

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TABLE OF CONTENTS

1.		INTERPRETATION				1
		1.1		Definitions		1
		1.2		Applicable Law		16
		1.3		Severability		16
		1.4		Successors and Assigns		16
		1.5		Included Words		16
		1.6		Headings and Marginal References		16
		1.7		Cross References		16
		1.8		Use of Word "Including"		16
		1.9		Expiration of Summary of Terms and Conditions		16
		1.10		Currency		17
		1.11		Payment Dates and Interest Calculation		17
		1.12		Accounting Terms		17
		1.13		Schedules		17
2.		REPRESENTATIONS AND WARRANTIES				18
		2.1		Representations and Warranties		18
		2.2		Status of the Borrower		18
		2.3		Status of Guarantor		18
		2.4		Power and Authority		18
		2.5		Due Authorization		18
		2.6		No Contravention		18
		2.7		No Breach		19
		2.8		Leases and Licences		19
		2.9		No Financial Default		19
		2.10		Disclosure of Material Facts		20
		2.11		Consents and Approvals		20
		2.12		Title		20
		2.13		Borrower's Financial Statements Furnished		20
		2.14		No Change in Borrower's Financial Condition		20
		2.15		Guarantor's Financial Status		20
		2.16		No Change in Guarantor's Financial Condition		21
		2.17		Financial Statements Not Misleading		21
		2.18		Taxes		21
		2.19		Environmental Law Compliance		21
		2.20		Insurance		21
		2.21		ERISA Compliance by Guarantor		22
3.		THE CREDIT FACILITY				22
		3.1		Establishment of the Credit Facility		22
		3.2		Nature of the Credit Facility		23
		3.3		Extension of Maturity Date		23
		3.4		Currencies and Other Options Available Under the Credit Facility		23
		3.5		Swap Contracts		23
		3.6		Interest on Advances Under the Credit Facility		24
		3.7		Interest and Fee Rate Adjustments		34
		3.8		Interest on Eurocurrency Advances Spanning More Than One Applicable Interest Rate		24
		3.9		Interest Act of Canada		25

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		3.10		Manner of Making Advances		25
		3.11		Amounts and Notice for Canadian Advances and U.S. Advances		25
		3.12		Notice for Eurocurrency Advances		25
		3.13		Eurocurrency Notice Particulars		25
		3.14		Conversions of Borrowings under §3.1 (a)		26
		3.15		Payment of Interest on Eurocurrency Advances		27
		3.16		Default Interest		27
		3.17		Indemnity for Out-of-Pocket Expenses		27
		3.18		Effective Time for Section 3 Notices		27
		3.19		Increased Costs		28
		3.20		Borrower's Option on Receipt of an Increased Costs Certificate		28
		3.21		Increased Costs Limitation		29
		3.22		Eurocurrency Funds Not Available		29
		3.23		Payment of Compensation Amount		29
		3.24		Borrower's Right to Revolve the Credit Facility		29
		3.25		Repayment of Credit Facility		30
		3.26		Currency of All Payments		30
		3.27		Borrower's Right to Cancel Available Amount of Credit Facility		30
		3.28		Standby Fees		31
		3.29		Standby Fees Waived		31
		3.30		Arrangement Fee		31
		3.31		Documentary Credits		31
		3.32		Evidence of Indebtedness		32
		3.33		Substitute Basis of Borrowing for Eurocurrency Advances		32
		3.34		Illegality for Eurocurrency Advances		33
		3.35		Exchange Rate Fluctuations		33
		3.36		Determination of Available Amount of the Credit Facility		33
4.		BANKERS' ACCEPTANCES				33
		4.1		Issuing Bankers' Acceptances		33
		4.2		Calculation of Borrowings		33
		4.3		Notice		34
		4.4		Form of Undertaking		34
		4.5		Power of Attorney Respecting Bankers' Acceptances		34
		4.6		Negotiation and Purchase of Drafts		34
		4.7		Issuance and Maturity		34
		4.8		Failure to Provide Notice		34
		4.9		Payment to Borrower		35
		4.10		No Days of Grace		35
		4.11		Acceptance Fees		35
		4.12		Calculation of Acceptance Fees		35
		4.13		Change of Acceptance Fee During Term of Bankers' Acceptance		35
		4.14		Increased Costs		35
		4.15		DBNA		36
		4.16		Maturity Date Restriction		36
5.		SECURITY FOR BORROWINGS				36
		5.1		Security for Borrowings		36
		5.2		Conflict Between the Agreement and Royal's Security		37
		5.3		Restrictions on Demanding Payment		37

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6.		CREDIT FACILITY CONDITIONS PRECEDENT				37
		6.1		Conditions Precedent to Initial Borrowings		37
		6.2		Conditions Precedent to Subsequent Borrowings		40
7.		COVENANTS OF THE BORROWER AND THE GUARANTOR				41
		7.1		Borrower's Covenants		41
		7.2		Guarantor's Covenants		44
		7.3		Environmental Law		47
8.		EVENTS OF DEFAULT				47
		8.1		Definition of Event of Default		47
		8.2		Remedies		49
		8.3		Remedies Cumulative		50
		8.4		Waivers		50
		8.5		Application of Payments Following Acceleration		50
		8.6		Royal May Perform Covenants		50
9.		GENERAL				50
		9.1		Waiver		50
		9.2		Effect of Amendment, Modification or Waiver		51
		9.3		Time of the Essence		51
		9.4		Further Assurances		51
		9.5		Set-Off		51
		9.6		Judgement Currency		51
		9.7		Account Debit Authorization		52
		9.8		Expenses		52
		9.9		Survival of Representations and Warranties		52
		9.10		Notice		52
		9.11		General Indemnity		52
		9.12		Counterparts		53
		9.13		Reasonable Consent or Approval of the Parties		53
		9.14		Evidence of London Interbank Offered Rate		53
		9.15		Entire Agreement		53
		9.16		No Deduction for Taxes		53
		9.17		Participations and Assignments		53
		9.18		Assignment After Default		54
		9.19		Obligations of Borrower Re Facility Disposition		54

        SCHEDULE A—INTEREST AND FEE RATES

        SCHEDULE B—GUARANTEE

        SCHEDULE C—OFFICER'S COMPLIANCE CERTIFICATE

        SCHEDULE D—UNFUNDED PENSION LIABILITIES

        SCHEDULE E—BORROWING BASE REPORT

        SCHEDULE F—PERMITTED ENCUMBRANCES

        SCHEDULE G—OTHER PERMITTED INDEBTEDNESS

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2001 LP CANADA CREDIT AGREEMENT

THIS 2001 LP Canada Credit Agreement is dated for reference November 30, 2001

AMONG:

LOUISIANA-PACIFIC CANADA LTD., a British Columbia company having an office at 2100 - 1075 West Georgia Street, Vancouver, British Columbia, V6E 3G2

AND:

LOUISIANA-PACIFIC CORPORATION, a Delaware corporation having an office at Suite 1200, 805 S.W. Broadway, Portland, Oregon, U.S.A., 97205

AND:

ROYAL BANK OF CANADA, a Canadian chartered bank, having its head office in Montreal, Quebec, and a branch office at 1025 West Georgia Street, Vancouver, British Columbia, V6E 3N9

WHEREAS:

A.

Royal has offered to make available to the Borrower:

(a)

a committed revolving operating credit facility of up to $25,000,000 or the Equivalent Amount in US$ or any combination thereof, and

(b)

a line of credit of up to $35,000,000 or the Equivalent Amount in US$ to cover Swap Termination Values, EFT Transfers, and PDS Services,

to be used by the Borrower for its general corporate purposes which shall include the refinancing of its existing credit facility with Royal;

B.

The Borrower has accepted Royal's offer and the Guarantor has agreed to provide the Guarantee.

1.    INTERPRETATION

1.1  Definitions

Where used in this Agreement, the following terms shall have the following meanings:

		(a)	"1997 LP Canada Credit Agreement" means the credit agreement named as such and dated for reference June 15, 1997 among the Borrower, the Guarantor and Royal as amended;
		(b)	"Additional Amount" means the amount defined as such in §3.19;
		(c)	"Advances" means Canadian Advances, Eurocurrency Advances and U.S. Advances;
		(d)	"Affiliate" means, in relation to a specified Person, any other Person which directly (or indirectly through one or more intermediaries) controls, or is controlled by, or is under common control with, the specified Person or any Subsidiary of the specified Person. The term "control" (including the phrases "controlled by" or "under common control with") means the possession, directly or indirectly, of the effective power 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;
		(e)	"Agreement" means this credit agreement entitled "2001 LP Canada Credit Agreement" dated for reference November 30, 2001 as amended, restated, modified, supplemented, extended, renewed or replaced from time to time;

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		(f)	"Announcement Date" means the date on which either of the Rating Agencies announces a rating change which will increase or decrease the rates of interest, acceptance fees, Documentary Credit Fees and Standby Fees payable by the Borrower pursuant to this Agreement;
		(g)	"BA Discount Rate" means the CDOR Rate for the period of time for which a Bankers' Acceptance will be outstanding;
		(h)	"Bankers' Acceptances" means Drafts in multiples of not less than $100,000 Face Amount and aggregating immediately following availment on any day at least $500,000 each for periods of not less than one month nor more than six months (excluding in each case days of grace) drawn by the Borrower in Canadian Funds and accepted as provided in Section 4;
		(i)	"Basis Point" and "BP" each means one one-hundredth (1/100) of one percent or .01%;
		(j)	"Banking Day" means a day which is both a Business Day and a day on which dealings in U.S. Funds by and between banks in the London, England interbank market may be conducted;
		(k)	"Borrower" means Louisiana-Pacific Canada Ltd., its successors and permitted assigns;
		(l)	"Borrower Guarantees" means the limited liability gurantee, in form and content satisfactory to Royal, to be provided by the Borrower guaranteeing the present and future, direct and indirect obligations of LP Engineered Wood Products Ltd. and Louisiana-Pacific B.C. Forest Products Limited to Royal under the credit facility established pursuant to §3.1(b) in favour of the Borrower and, with the consent of Royal, to be available for utilization by Subsidiaries of the Borrower in respect of EFT Transfers and PDS Services including overdrafts and cash management debits and liabilities, as amended, modified, supplemented, extended, renewed or replaced from time to time;
		(m)	"Borrower Subsidiaries" means all Subsidiaries of the Borrower;
		(n)	"Borrower Subsidiaries' Guarantees" means the limited liability guarantees, in form and content satisfactory to Royal, to be provided by LP Engineered Wood Products Ltd. and Louisiana-Pacific B.C. Forest Products Limited and any future Material Canadian Subsidiary guaranteeing the present and future, direct or indirect obligations of the Borrower to Royal under this Agreement, as such guarantee may be amended, modified, supplemented, extended, renewed or replaced from time to time;
		(o)	"Borrower Subsidiaries' Security Agreements" means the security agreements and hypothec (Province of Quebec) dated for reference November 30, 2001 to be provided by the Borrower Subsidiaries to support the Borrower Subsidiaries' Guarantees, in form and content satisfactory to Royal wherein each Borrower Subsidiary grants to and in favour of Royal, subject to no prior financial charges except for Permitted Encumbrances a first mortgage charge and security interest in and upon the inventory of the Borrower Subsidiary and the Borrower Subsidiary's trade accounts receivable, as amended, modified, supplemented, extended, renewed or replaced from time to time;
		(p)	"Borrowing" means a utilization or deemed utilization, as the case may be, by the Borrower of the credit facility established pursuant to §3.1(a) by way of Canadian Advances, U.S. Advances, Eurocurrency Advances, Bankers' Acceptances or Documentary Credits and of the credit facility established pursuant to §3.1(b) by way of Canadian Advances or U.S. Advances, and "Borrowings" means the aggregate of such utilizations;

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		(q)	"Borrowing Base" means that amount which the Chief Financial Officer certifies from time to time in a Borrowing Base Report as the aggregate amount of the credit facility to be established pursuant to §3.1(a) to be available to the Borrower from Royal during the currency of the Borrowing Base Report which amount shall be equal to the Current Asset Value;
		(r)	"Borrowing Base Report" means the report in substantially the form of Schedule E provided by the Chief Financial Officer to Royal pursuant to §7.1(y)(1);
		(s)	"Borrowing Options" means any of the borrowing options available to the Borrower pursuant to §3.4;
		(t)	"Branch of Account" means the branch of Royal located at 1025 West Georgia Street, Vancouver, British Columbia, V6E 3N9 or elsewhere as may be agreed between the Borrower and Royal in writing;
		(u)	"Business Day" means a day, excluding Saturday and Sunday, on which institutions are open for business in Toronto, Ontario, Canada and Vancouver, British Columbia, Canada and, in respect of any payments hereunder in U.S. Funds, a day on which banking institutions are also open for business in New York, New York, U.S.A.;
		(v)	"Business Plan" means the financial forecast to be prepared by the Guarantor for each fiscal year which forecast shall include projections of operating results and cash flow for the relevant fiscal year with a forecast for the next following year;
		(w)	"Canadian Advance" means any advance or conversion under the Credit Facility requested by the Borrower in Canadian Funds and advanced by Royal in Canadian Funds or determined as such pursuant to §4.1;
		(x)	"Canadian Funds" and "Cdn$" and "$" means lawful currency of Canada;
		(y)	"Capital Lease" means a lease of which all or a portion of the rents payable thereunder would be included in total liabilities on a balance sheet prepared in accordance with GAAP;
		(z)	"CDOR Rate" means the annual rate of interest equal to the average "BA 1 Month" interest rates for Cdn$ Bankers' Acceptances displayed and identified as such on the "Reuters Screen CDOR Page" (as defined in the International Swap Dealer Association Inc. definitions, as modified and amended from time to time) as of 10:00 a.m. local time at Toronto, Ontario on any particular day and, if such day is not a Business Day, then on the day immediately preceding the Business Day (as adjusted by Royal after 10:00 a.m. local time at Toronto, Ontario to reflect any error in a posted rate of interest or in the posted average annual rate of interest). If such rates are not available on the Reuters Screen CDOR Page on any particular day, then the CDOR Rate on that day shall be the 30 day rates applicable to Cdn$ Bankers' Acceptances quoted by Royal as of 10:00 a.m. local time at Toronto, Ontario on such day, or if such day is not a Business Day, then on the immediately preceding Business Day;
		(aa)	"Charter" means the Memorandum and Articles of the Borrower and the Certificate of Incorporation and Bylaws of the Guarantor, as the context requires, and includes in each case every amendment thereto;
		(bb)	"Chief Financial Officer" means that Person responsible for reporting to the board of directors of the Borrower or the Guarantor, as the case may be, on the financial condition and performance of the Borrower or the Guarantor, as the case may be, or any Person designated as such;

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		(cc)	"Closing Date" means November 28th, 2001 or such earlier or later date as agreed by Royal and the Borrower;
		(dd)	"Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder;
		(ee)	"Collateral Coverage Ratio" has the meaning set forth in the Guarantor Credit Agreement as in effect as of November 15, 2001 (that is, for greater certainty, prior to any amendment, restatement, modification, supplement, extension, renewal or replacement thereof);
		(ff)	"Compensation Amount" means an amount equal to any net loss, expense or net cost incurred by Royal as a direct result of prepayment of a Eurocurrency Advance, whether by way of repayment or conversion, prior to the Eurocurrency Maturity Date including, without duplication, any costs incurred in maintaining or redeploying deposits obtained by Royal to fund a Eurocurrency Advance;
		(gg)	"Compliance Certificate" means the certificate defined as such in the Guarantor Credit Agreement;
		(hh)	"Composite 3:30 p.m. Quotations for U.S. Government Securities" means the daily statistical release designated as such published by the Federal Reserve Bank of New York (U.S.A.) or in any successor publication;
		(ii)	"Consolidated EBITDA" means, as measured quarterly on the last day of each fiscal quarter for the four quarters then ending, for the Guarantor and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, and (d) the amount of depreciation, depletion and amortization expense deducted in determining such Consolidated Net Income;
		(jj)	"Consolidated Interest Charges" means, for any period, for the Guarantor and its Subsidiaries on a consolidated basis, (a) the sum of (i) all interest and the amortization of all premium payments, fees, charges and related expenses of the Guarantor and its Subsidiaries, determined on a consolidated basis, in connection with borrowed money (including capitalized interest) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, and (ii) the portion of rent expense of the Guarantor and its Subsidiaries, determined on a consolidated basis, with respect to such period under capital leases that is treated as interest in accordance with GAAP minus (b) interest income on the Timber Notes Receivable, up to the amount, if any, that the interest expense in such period on the senior notes secured by the Timber Notes Receivable is treated as interest in accordance with GAAP;
		(kk)	"Consolidated Net Income" means, for any period, for the Guarantor and its Subsidiaries on a consolidated basis, the net income of the Guarantor and its Subsidiaries from continuing operations for that period, including gains or losses from Dispositions of assets, but excluding (i) up to US$50,000,000 (in the aggregate) in other non-cash extraordinary items and non-cash gains or losses arising from (A) the pulp mill located in Samoa, California, (B) the pulp mill located in Chetwynd, British Columbia, (C) the 65% interest in a joint venture in Ireland that has an oriented strand board (OSB) mill, and (D) the Guarantor's industrial panel products segment, and (ii) up to US$10,000,000 in cash losses associated with the closure of the pulp mill located in Chetwynd, British Columbia;

4

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		(ll)	"Contaminant" means, but is not limited to meaning, any pollutants, dangerous substances, liquid waste, industrial waste, hauled liquid waste, toxic substances, hazardous wastes, hazardous materials, hazardous substances or contaminants including any of the foregoing as defined in any Environmental Law;
		(mm)	"Contingent Obligations" means any agreement, undertaking or arrangement by which a Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person, against loss, including any comfort letter, operating agreement, take-or-pay contract (except for take-or-pay contracts entered into in the ordinary course of business) or application for letter of credit or guarantee (except for Documentary Credits);
		(nn)	"Credit Facility" means the:

			(1)	the 364 day committed, revolving operating credit facility in the aggregate principal amount of $25,000,000 or the Equivalent Amount in US$ established by Royal in favour of the Borrower pursuant to §3.1(a), and
			(2)	the line of credit of up to $35,000,000 or the Equivalent Amount in US$ to cover Swap Termination Values and liabilities of the Borrower, or with the consent of Royal, any of its Subsidiaries in respect of EFT Transfers and PDS Services including overdrafts and cash management debts and liabilities established by Royal in favour of the Borrower pursuant to §3.1(b);

		(oo)	"Currencies" means Canadian Funds or U.S. Funds;
		(pp)	"Current Assets" mean those assets which, on a consolidated basis, are determined to be current assets of the Borrower in accordance with GAAP;
		(qq)	"Current Asset Value" means the aggregate of:

			(1)	75% of all Good Accounts Receivable (Cdn$),
			(2)	75% of the Equivalent Amount in Canadian Funds of all Good Accounts Receivable (US$), and
			(2)	50% of the Eligible Inventory,
			minus (but without duplication) the aggregate amount of Potential Preferred Claims;

		(rr)	"Current Liabilities" mean those liabilities which, on a consolidated basis, are determined to be current liabilities of the Borrower in accordance with GAAP;
		(ss)	"Current Ratio" means the ratio of Current Assets to Current Liabilities;
		(tt)	"DBNA" means the Depository Bills and Notes Act S.C. 1998 c. 13 and regulations issued pursuant to that Act, as from time to time amended;
		(uu)	"Debt to Capitalization Ratio" has the meaning set forth in the Guarantor Credit Agreement in effect as in effect as of November 15, 2001 (that is, for greater certainty, prior to any amendment, restatement, modification, supplement, extension, renewal or replacement thereof);
		(vv)	"Discount Proceeds" means, with respect to any Bankers' Acceptance required to be accepted by Royal hereunder an amount (rounded up, if necessary, to the nearest whole cent) calculated on the applicable Drawdown Date by multiplying:

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			(1)	the Face Amount of such Bankers' Acceptance divided by one hundred, by
			(2)	the price, where the price is determined by dividing one hundred by the sum of one plus the product of:

				(A)	the BA Discount Rate (expressed as a decimal), and
				(B)	a fraction, the numerator of which is the term of such Bankers' Acceptance expressed in days and the denominator of which is 365;

with the price as so determined being rounded up or down to the fifth decimal place and .000005 being rounded up;

		(ww)	"Disposition" means, with respect to any Person, the sale, transfer, license or other disposition (including any sale and leaseback transaction) of any property (other than the Stock of such Person) by such Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith;
		(xx)	"Documentary Credit Fee" means the fee for Guarantee Letters and Letters of Credit charged by Royal pursuant to §3.31;
		(yy)	"Documentary Credits" means Guarantee Letters and Letters of Credit;
		(zz)	"Draft" means a commercial draft in Royal's prescribed form made by the Borrower in accordance with the provisions of Section 4 of the Agreement;
		(aaa)	"Drawdown Date" means a Banking Day on which a Borrowing is advanced to or converted by the Borrower or renewed by Royal;
		(bbb)	"EFT Transfers" means electronic funds transfers by the Borrower or its present and future Subsidiaries;
		(ccc)	"EFT Transfer Fees" means the fees charged by Royal in respect of EFT Transfers;
		(ddd)	"Eligible Inventory" means the value before deducting any Potential Preferred Claims determined in Cdn$ of all Inventory located in Canada as determined by the Borrower and which is not subject to any mortgage, charge, security interest, assignment, lien, title retention agreement or other encumbrance (other than Permitted Encumbrances);
		(eee)	"Environmental Activity" means any past, present or future activity, event or circumstance in respect of a Contaminant, including its storage, use, holding, collection, purchase, accumulation, assessment, generation, manufacture, construction, processing, treatment, stabilization, disposition, handling or transportation, or its Release, escape, leaching, dispersal or migration into the natural environment, including the movement through or in the air, soil, surface water or groundwater;
		(fff)	"Environmental Law" means any and all applicable federal, provincial, municipal or local laws, statutes, regulations, orders, judgements, decrees, ordinances, official directives and all authorizations, relating to the environment or any Environmental Activity;
		(ggg)	"Equivalent Amount" means at any time on any date, the amount in Canadian Funds or U.S. Funds, as the case may be, which would result from the conversion of U.S. Funds to Canadian Funds or Canadian Funds to U.S. Funds, as the case may be, determined on the basis of the Spot Buying Rate for U.S. Funds against Canadian Funds or Canadian Funds against U.S. Funds, as the case may be. If the date for determination of an Equivalent Amount is not a Business Day, the applicable rate shall be the Spot Buying Rate quoted on the immediately preceding Business Day;

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		(hhh)	"ERISA" means the Employee Retirement Income Security Act of 1974 and regulations promulgated thereunder;
		(iii)	"ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Guarantor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code) other than the Guarantor and its Subsidiaries;
		(jjj)	"ERISA Event" means:

			(1)	a Reportable Event with respect to a Pension Plan;
			(2)	a withdrawal by the Guarantor or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a) (2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA which could reasonably be expected to give rise to any liability with respect to such withdrawal;
			(3)	a complete or partial withdrawal by the Guarantor or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization;
			(4)	the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan;
			(5)	an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or
			(6)	the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Guarantor or any ERISA Affiliate;

	(kkk)	"Eurocurrency Advance" means any advance, renewal or conversion under the Credit Facility requested by the Borrower in or to Eurocurrency Funds and advanced, renewed or made in Eurocurrency Funds by Royal;
	(lll)	"Eurocurrency Funds" means U.S. Funds for which London Interbank Offered Rates are quoted by leading banks in the London, England interbank market;
	(mmm)	"Eurocurrency Interest Period" means, with respect to a Eurocurrency Advance, that period selected by the Borrower for the Eurocurrency Advance to be outstanding (if the Borrower fails to select a period it shall be deemed to be for a period of one month), which period shall be for one, two, three or six months (or such shorter or longer periods as may be agreed to by Royal) but shall not extend to a date later than the Maturity Date, commencing on the Drawdown Date and ending on the Eurocurrency Maturity Date;
	(nnn)	"Eurocurrency Maturity Date" means the last day of a Eurocurrency Interest Period;
	(ooo)	"Event of Default" means any event set forth in §8.1 of the Agreement;
	(ppp)	"Face Amount" means the amount at maturity for which a Bankers' Acceptance is drawn;

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	(qqq)	"Federal Funds Effective Rate" means on any day, the rate of interest per annum set forth in the H.15(519) for that day opposite the caption "Federal Funds Effective". If on any day such rate is not yet published in the H.15(519), the rate for such day will be the rate set forth in the Composite 3:30 p.m. Quotations for US Government Securities for such day under the caption "Federal Funds Effective Rate". If on any day such rate is not yet published in either the H.15(519) or the Composite 3:30 p.m. Quotations for US Government Securities such rate shall be the average of the quotations for such day on overnight Federal Funds (such words to have the meaning generally given to them by money market brokers of recognised standing doing business in the United States of America) transactions received by Royal from three Federal Funds brokers of recognised standing selected by Royal;
	(rrr)	"Financial Ratios" means the following ratios or requirements or any of them: the Debt to Capitalization Ratio, the Collateral Coverage Ratio, the Current Ratio, Shareholders' Equity, and Consolidated EBITDA;
	(sss)	"Forex Indenture" means the Indenture dated as of September 14, 1999 among the Borrower, as successor to Louisiana-Pacific Acquisition Inc., as issuer, the Guarantor, as guarantor and Laurentian Trust of Canada Inc., as trustee, as amended from time to time;
	(ttt)	"GAAP" means generally accepted accounting principles as generally applied by the Guarantor as at September 30, 2001 and thereafter as set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, consistently applied;
	(uuu)	"Good Accounts Receivable (Cdn$)" means trade accounts receivable of the Borrower and its Material Canadian Subsidiaries payable in Canadian Funds, excepting therefrom:

			(1)	all trade accounts receivable from an account debtor any portion of which is outstanding more than 60 days after the due date thereof unless the unpaid portion is being disputed by such account debtor in good faith and relates to specific sales where the account debtor alleges that the Borrower or a Material Canadian Subsidiary has failed to meet the terms of the disputed sale in which case only the amount in dispute shall be excepted, or
			(2)	all trade accounts receivable from account debtors which are Affiliates of the Borrower;
			(3)	all trade accounts receivable which are subject to a material claim or written assertion of a right of set-off by an account debtor to the extent of such claims or assertions;
			(4)	all trade accounts receivable which are subject to any mortgage, charge, assignment, lien, title retention agreement, security interest or other encumbrance (other than Permitted Encumbrances) that ranks in priority to or pari passu to the Royal's Security;
			(5)	all trade accounts receivable which would be required to be treated as bad or doubtful accounts in accordance with GAAP including receivables from account debtors which are bankrupt, insolvent or have suspended payments; and
			(6)	that portion of all trade accounts receivable subject to a contracted right on the part of the account debtor to refuse payment on all or part of such receivables;

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	(vvv)	"Good Accounts Receivable (US$)" means the trade accounts receivable of the Borrower and its Material Canadian Subsidiaries payable in U.S. Funds which meet the same criteria set out in the definition of Good Accounts Receivable (Cdn$), except for the currency denomination qualification;
	(www)	"Governmental Approval" means any authorization, permit, approval, grant, licence, consent, right, privilege, registration, filing, order, commitment, judgement, direction, ordinance, decree or like instrument or affirmation issued or granted by any Governmental Body;
	(xxx)	"Governmental Body" means, as the context requires, any government, parliament, legislature, regulatory authority, agency, tribunal, department, commission, board or court or other law, regulation or rule making entity (including a Minister of the Crown) having or purporting to have jurisdiction on behalf of any country or nation, any province, state, municipality, region, district, any subdivision thereof or any other lawful authority;
	(yyy)	"Guarantee" means the limited liability guarantee of the Guarantor in substantially the form of Schedule B and includes all amendments and substitutions;
	(zzz)	"Guarantee Letters" means the letters of guarantee issued by Royal pursuant to §3.31;
	(aaaa)	"Guarantor" means Louisiana-Pacific Corporation, its successors and permitted assigns;
	(bbbb)	"Guarantor Affiliates" means any Affiliate of the Guarantor;
	(cccc)	"Guarantor Credit Agreement" means the credit agreement in respect of the Guarantor Credit Facility, unless otherwise provided, as amended, restated, modified, supplemented, extended, renewed or replaced from time to time;
	(dddd)	"Guarantor Credit Facility" means the credit facility made available to the Guarantor pursuant to the terms of a Credit Agreement entered into as of November 15, 2001 among the Guarantor, as borrower, Bank of America, N.A., as the Administrative Agent, Wachovia Bank, N.A., as the Syndication Agent, Royal, as Documentation Agent and the other lenders party to the credit agreement;
	(eeee)	"H.15(519)" means the weekly statistical release designated as such published by the Board of Governors of the Federal Reserve System of the United States of America or in any successor publication;
	(ffff)	"Indebtedness" means without duplication:

			(1)	all obligations for borrowed money (including the present value of capitalized lease obligations) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a consolidated balance sheet as of the date at which Indebtedness is to be determined, including deferred purchase price obligations;
			(2)	obligations for borrowed money secured by any lien upon property or assets owned by the Borrower or any of its Subsidiaries;

9

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			(3)	obligations created or arising under any conditional sale, deferred purchase price agreements or other similar agreement; and
			(4)	guarantees of Indebtedness and letters of credit to support Indebtedness for borrowed money of others;

(gggg)

"Insurance Coverage" means insurance provided by financially sound and reputable insurers or through a program of self-insurance with reserves in accordance with sound business practices or a combination of both, insuring the property, assets and business of the Borrower against such liabilities, casualties, risks and contingencies and in such types of insurance as is customary for companies engaged in the same or similar businesses including:

			(1)	fire, earthquake and extended coverage insurance on a replacement cost basis,
			(2)	boiler, furnace and machinery insurance,
			(3)	course of construction insurance (to the extent necessary to insure any modifications under construction),
			(4)	business interruption insurance,
			(5)	public liability insurance, and
			(6)	inventory insurance insuring the inventory of the Borrower not in transit to purchasers;

	(hhhh)	"Interest and Fee Rate Adjustment Date" means that date which is five Business Days following an Announcement Date;
	(iiii)	"Interest Determination Date" means a Banking Day which is two Banking Days prior to a Drawdown Date;
	(jjjj)	"Inventory" means the consolidated inventory of the Borrower and its Material Canadian Subsidiaries, whether located at the Borrower's premises or at the premises of a Material Canadian Subsidiary, in transit or otherwise, including finished goods (including lumber and chips), work-in-progress (including logs), raw materials and supplies (but, for greater certainty, excluding standing timber);
	(kkkk)	"Judgment Currency" shall have the meaning ascribed thereto in §9.6;
	(llll)	"Letters of Credit" means letters of credit issued by Royal pursuant to §3.31;
	(mmmm)	"Lien" means any mortgage, lien, charge, pledge, hypothecation, security interest or other encumbrance or title retention agreement and any other agreement or arrangement having substantially the same economic effect;
	(nnnn)	"London Interbank Offered Rate" means with respect to a particular Eurocurrency Advance, the rate of interest (rounded upwards, if necessary, to the nearest whole multiple of one sixteenth of one percent) at which Royal, in accordance with its normal practice, would be prepared to offer to leading banks in the London interbank market for delivery on the first day of the particular Eurocurrency Interest Period and for a period equal to such Eurocurrency Interest Period based on the number of days comprised therein, deposits in U.S. Funds of comparable amounts to be outstanding during such Eurocurrency Interest Period, at or about 11:00 a.m. (London, England, local time) on the second Banking Day prior to a Drawdown Date;

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	(oooo)	"Master Agreement" has the meaning ascribed thereto in the definition "Swap Contract";
	(pppp)	"Material Adverse Effect" has the meaning set forth in this Guarantor Credit Agreement in effect as at the reference date of November 15, 2001;
	(qqqq)	"Material Canadian Subsidiary" means a subsidiary of the Borrower which is 100% legally and beneficially owned by the Borrower which has all or substantially all of its property and assets located in Canada;
	(rrrr)	"Maturity Date" means that date which is 364 days after Closing Date or that date in any ensuing year which is 364 days after the immediately preceding Maturity Date if Royal accedes to a request from the Borrower pursuant to §3.3 for an extension of the Maturity Date;
	(ssss)	"Multiemployer Plan" means any employee benefit plan of a type described in Section 4001(a) (3) of ERISA, to which the Guarantor or any ERISA Affiliate makes or is obligated to make contributions or during the preceding three calendar years, has made or been obligated to make contributions;
	(tttt)	"PBGC" means the Pension Plan Guaranty Corporation, or any governmental authority succeeding to any of its principal functions under ERISA;
	(uuuu)	"PDS Services" means payment distribution services as may be approved from time to time by Royal;
	(vvvv)	"PDS Services Fees" means the fees charged by Royal in respect of PDS Services;
	(wwww)	"Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Guarantor or any ERISA Affiliate or to which the Guarantor or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years;
	(xxxx)	"Permitted Encumbrances" means:

			(1)	Liens for taxes, assessments or governmental charges or levies not at the time due and delinquent or the validity of which is being contested at the time by the Borrower or the relevant Subsidiary, as the case may be, in good faith;
			(2)	the Lien of any judgement rendered or claim filed against the Borrower or any of its Subsidiaries which is being contested in good faith;
			(3)	undetermined or inchoate Liens and charges, including construction Liens, Liens incidental to current operations of the Borrower or any of its Subsidiaries which have not at such time been filed pursuant to law against the Borrower or any of its Subsidiaries which relate to obligations neither due nor delinquent;
			(4)	restrictions, easements, rights-of-way, servitudes or other similar rights in land granted to or reserved by any Persons or minor defects or irregularities of title, all of which in the aggregate do not, in the opinion of Royal, materially impair the usefulness of the property subject to any such restriction, easement, right-of-way, servitude or other similar rights in land to the business of the Borrower;
			(5)	security given to a public utility or Governmental Body in connection with the operations of the Borrower or any of its Subsidiaries in the ordinary course of their respective businesses;

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			(6)	the reservations, limitations, provisos and conditions, if any, expressed in any original grants from the Crown;
			(7)	Purchase Money Obligations, pledges, charges, encumbrances, and security interests reasonably and properly incurred or acquired by the Borrower or any of its Subsidiaries in the ordinary course of their respective businesses;
			(8)	security granted to Royal pursuant to Royal's Security or otherwise; and
			(9)	security described in Schedule F;

(yyyy)

"Permitted Guarantees" means:

			(1)	guarantees by the Borrower in respect of purchases of assets by Subsidiaries not exceeding in the aggregate of $5,000,000;
			(2)	guarantees of any Subsidiary not exceeding in the aggregate of $5,000,000;
			(3)	guarantees by the Borrower in respect of Purchase Money Obligations;
			(4)	guarantees by the Borrower or its Subsidiaries provided in the ordinary course of business and not exceeding in the aggregate $5,000,000; and
			(5)	guarantees by the Borrower or its Subsidiaries in favour of Royal;

	(zzzz)	"Permitted Securitization" means the securitization of accounts receivable of the Guarantor and its Subsidiaries with Blue Ridge Asset Funding Corporation and the other parties thereto;
	(aaaaa)	"Person" means and includes any individual, a partnership, a corporation, a joint stock company, a trust, business trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof;
	(bbbbb)	"Plan" means an "employee benefit plan" (as such term is defined in Section 3(3) of ERISA) established by the Guarantor or any ERISA Affiliate;
	(ccccc)	"Potential Preferred Claims" means the aggregate of any rights, claims or preferences whether statutory in nature or otherwise and whether secured or unsecured including any right or claim which any unpaid supplier of inventory may have pursuant to the Bankruptcy and Insolvency Act (Canada), which rights, claims or preferences rank in priority to Royal's Security;
	(ddddd)	"Prime Rate" means the rate of interest per annum in effect from time to time that is equal to the greater of:

			(1)	Royal's Prime Rate; and
			(2)	the CDOR Rate plus 100 basis points per annum;

(eeeee)

"Purchase Money Obligations" means:

			(1)	any Lien existing and assumed at the time of acquisition by the Borrower or any of its Subsidiaries on any property acquired in an arm's length transaction;
			(2)	any Lien on any property acquired by the Borrower or any of its Subsidiaries in an arm's length transaction to secure the whole or any part of the purchase price of such property or monies borrowed to pay such purchase price;

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			(3)	any extensions, renewals, replacements or substitutions of any Lien or other security interest described in §(1) and §(2) above provided that the principal amount of the indebtedness secured thereby outstanding on the date of the extension, renewal, replacement or substitution is not increased to an amount greater than the amount outstanding on the date the mortgage, lien, charge or other encumbrance was first granted or assumed on the property,
			provided that the aggregate amounts due under any Lien referred to above do not exceed the cost of the asset encumbered by any such Lien and any such Liens are secured only by the property so owned or acquired and not by any other assets and may be discharged or caused to be discharged upon payment in full of the amount permitted to be secured under §(1) to §(3) inclusive above;

	(fffff)	"Rating Agencies" means Moody's Investors Services, Inc. and Standard Poor's Rating Services, a division of McGraw-Hill Companies, Inc. and "Rating Agency" means either of them as the context requires;
	(ggggg)	"Ratings" means the applicable rating of the Guarantor's long term senior unsecured debt as determined by the Rating Agencies as applied in Schedule A to determine applicable interest and fee rates;
	(hhhhh)	"Release" includes discharge, spray, injection, inoculation, abandonment, deposit, spill, leak, seep, pour, emission, emptying, throwing, dumping, placement and exhaust, and when used as a verb has a similar meaning;
	(iiiii)	"Reportable Event" means any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC;
	(jjjjj)	"Royal" means Royal Bank of Canada its successors and permitted assigns;
	(kkkkk)	"Royal's Prime Rate" means the floating annual rate of interest publicly announced from time to time by Royal as its reference rate then in effect for determining interest rates on Cdn$ commercial loans made by Royal in Canada;
	(lllll)	"Royal's Security" means all of the security referred to in §5.1;
	(mmmmm)	"Royal's U.S. Base Rate" means the floating annual rate of interest publicly announced from time to time by Royal as its reference rate then in effect for determining interest rates on US$ commercial loans made by Royal in Canada;
	(nnnnn)	"Section 427 Security" means the assignment by the Borrower to Royal pursuant to Section 427 of the Bank Act (Canada) covering all of the Borrower's Inventory;
	(ooooo)	"Security Agreement" means the security agreement and hypothec (Province of Quebec) dated for reference November 30, 2001 to be provided by the Borrower, in form and content satisfactory to Royal, wherein the Borrower grants to and in favour of Royal, subject to no prior financial charges except for Permitted Encumbrances and, subject only to the Section 427 Security, a first mortgage charge and security interest in and upon the Borrower's Inventory and the Borrower's trade accounts receivable, as amended, modified, supplemented, extended, renewed or replaced from time to time;

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	(ppppp)	"Shareholders' Equity" means, as of any date of determination for the Guarantor and its Subsidiaries on a consolidated basis, shareholders' equity as of that date determined in accordance with GAAP, but excluding (a) up to US$10,000,000 in cash losses associated with the closure of the pulp mill located in Chetwynd, British Columbia, and (b) up to US$50,000,000 in non-cash gains or losses arising from (i) the pulp mill located in Samoa, California, (ii) the pulp mill located in Chetwynd, British Columbia, (iii) the 65% interest in a joint venture in Ireland that has an oriented strand board (OSB) mill, and (iv) the Guarantor's industrial panel products segment;
	(qqqqq)	"Spot Buying Rate" means:

			(1)	in respect of conversions from Canadian Funds to U.S. Funds or vice versa the Bank of Canada noon spot rate for Canadian Funds against U.S. Funds or U.S. Funds against Canadian Funds (as quoted or published from time to time by the Bank of Canada), as the case may be, on the relevant date of determination, and
			(2)	in respect of conversions to Canadian Funds or U.S. Funds of currencies other than Canadian Funds or U.S. Funds, Royal's spot buying rate in Canadian Funds or U.S. Funds, as the case may be, for purchasing any such foreign currency on the relevant date of determination;

	(rrrrr)		"Standby Fees" means the standby fees payable by the Borrower to Royal pursuant to §3.28;
	(sssss)		"Stock" means all shares, options, warrants, general or limited partnership interests, units or other equivalents (regardless of how designated) of or in a corporation, general partnership, limited partnership, limited liability company, unlimited liability company, joint stock company, or equivalent entity whether voting or nonvoting, including common stock and preferred stock;

	(ttttt)	"Subordination Agreement" means the subordination agreement dated for reference November 30, 2001 among the Borrower, the Guarantor, certain Guarantor Affiliates and Royal wherein all Indebtedness owing by the Borrower to such Guarantor Affiliates and to the Guarantor except for trade accounts payable (including payables for management services) incurred in the ordinary course of business prior to receipt from Royal of a notice of default, in the case of a default in respect of which Royal is required to give notice before it becomes an Event of Default or, an Event of Default, is expressly made subordinate and subject in right of payment as therein provided to the prior payment in full of all indebtedness of the Borrower to Royal under this Agreement;
	(uuuuu)	"Subsidiary" of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the Voting Shares or other equity interests (in the case of Persons other than corporations) is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof;
	(vvvvv)	"Sufficient Copies" means three copies or such other reasonable number of copies of reports, financial statements, certificates and other material required to be delivered by the Borrower or the Guarantor, as the case may be, to Royal pursuant to the Agreement as advised by Royal from time to time in writing;

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	(wwwww)	"Swap Contract" means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement;
	(xxxxx)	"Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include Royal);
	(yyyyy)	"Timber Notes Receivable" means, collectively, (i) the promissory notes in the principal amount of approximately US$50,000,000 by Sierra Pacific Industries in favor of L-P SPV, Inc., a Delaware corporation, and (ii) the promissory notes in the principal amount of approximately US$354,000,000 by Simpson Timber Company in favor of L-P SPV2, LLC, a Delaware limited liability company;
	(zzzzz)	"Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a) (16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding that Pension Plan pursuant to Section 412 of the Code for the applicable plan year;
	(aaaaaa)	"U.S.A." means United States of America;
	(bbbbbb)	"U.S. Advance" means any advance or conversion under the Credit Facility requested by the Borrower in U.S. Funds and advanced in U.S. Funds by Royal or determined as such pursuant to §4.12;
	(cccccc)	"U.S. Base Rate" means the rate of interest per annum in effect from time to time that is equal to the greater of:

			(1)	Royal's U.S. Base Rate; and
			(2)	the Federal Funds Effective Rate plus 50 basis points per annum;

	(dddddd)	"U.S. Funds" and "US$" means lawful currency of the U.S.A. in same day immediately available funds, or, if such funds are not available, the form of money of the U.S.A. that is customarily used in the settlement of international banking transactions on the day payment is due;
	(eeeeee)	"Voting Shares" means shares of any class entitled to vote in all circumstances.

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1.2  Applicable Law

        The Agreement shall be construed in accordance with and governed by the laws of the Province of British Columbia and the laws of Canada applicable in the Province of British Columbia.

1.3  Severability

        If any one or more of the provisions contained in the Agreement is invalid, illegal or unenforceable in any respect in any jurisdiction, the validity, legality and enforceability of such provision shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained in the Agreement shall not in any way be affected or impaired thereby.

1.4  Successors and Assigns

        The Agreement shall enure to the benefit of and be binding on each of the parties to the Agreement and their respective successors and permitted assigns.

1.5  Included Words

        Where the singular or the masculine are used in the Agreement, the same shall be deemed to include the plural or the feminine or vice versa and a body politic or corporate where the context or the parties so require.

1.6  Headings and Marginal References

        The division of the Agreement into paragraphs and subparagraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of the Agreement.

1.7  Cross References

        Unless otherwise stated, a reference in the Agreement to a numbered or lettered paragraph, subparagraph or schedule refers to the paragraph, subparagraph or schedule bearing that number or letter in the Agreement.

1.8  Use of Word "Including"

        The word "including", when following any general term or statement, is not to be construed as limiting the general term or statement to the specific terms or matters set forth immediately following such word or to similar items or matters, but such general term or statement shall be construed as referring to all items or matters that could reasonably fall within the broadest possible scope thereof.

1.9  Expiration of Summary of Terms and Conditions

        On the Closing Date, all of the terms and conditions of the "Draft Summary of Terms and Conditions" dated October 25, 2001 agreed to by the Borrower, the Guarantor and Royal in connection with the development of the Credit Facility shall be deemed to be merged herein and to expire and shall thereafter have no force and effect.

1.10 Currency

        Unless otherwise specified all statements of, or references to, dollar amounts in the Agreement without currency specification shall mean Canadian Funds.

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1.11 Payment Dates and Interest Calculation

        If the date for a payment to Royal of any sum owing hereunder or the date of advance, renewal or conversion of any sum by Royal hereunder is not, in the case of Eurocurrency Funds, a Banking Day, and, in all other cases, a Business Day, such payment, advance, renewal or conversion, as the case may be, shall, except in some circumstances as hereafter provided in respect of Eurocurrency Funds, be due or made upon the next immediately succeeding Banking Day or Business Day, as the case may be. In the case of Eurocurrency Funds if the immediately succeeding Banking Day is in the next following month, the date for payment, renewal or conversion shall be the next immediately preceding Banking Day. Interest shall be payable for the day a Canadian Advance, Eurocurrency Advance or U.S. Advance is made but not for the day of any payment on the amount paid if payment is received by Royal prior to 10:00 a.m. local time at Vancouver, British Columbia.

1.12 Accounting Terms

        Accounting terms which are not specifically defined herein shall have the meaning accorded thereto and shall be construed in accordance with GAAP. If at any time any change in GAAP would affect the computation of any Financial Ratio and there is a request pursuant to §1.03(b) of the Guarantor Agreement or a like request by the Borrower or Royal pursuant to this Agreement to negotiate in good faith to amend any such ratio to preserve the original intent thereof in light of such change in GAAP, the applicable parties under each agreement shall enter into such negotiations, provided that, until so amended:

(a)

the applicable Financial Ratios shall continue to be computed in accordance with GAAP prior to such agreed change therein;



(b)

the Borrower and the Guarantor or either, as the case may be, shall provide to Royal financial statements and other documents required under this Agreement or the Guarantor Agreement or as may be reasonably requested by Royal setting forth a reconciliation between calculations of the applicable Financial Ratio made before and after giving effect to such change in GAAP; and



(c)

no change to any Financial Ratio agreed to pursuant to §1.03(b) of the Guarantor Agreement shall be effective in respect of its application in this Agreement without the prior written consent of Royal.

1.13 Schedules

        The Schedules to the Agreement shall form an integral part of the Agreement, and are as follows:

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2.    REPRESENTATIONS AND WARRANTIES

2.1  Representations and Warranties

        Each of the Borrower and the Guarantor represents and warrants to Royal as set forth in this Section 2 of the Agreement. All representations and warranties shall survive all Borrowings and no investigation at any time made by or on behalf of Royal shall diminish in any respect whatsoever its right to rely thereon.

2.2  Status of the Borrower

        The Borrower is a corporation, duly incorporated, validly existing, in good standing with respect to the filing of annual returns under the laws of the Province of British Columbia and is duly qualified, in good standing and authorized to do business in all jurisdictions where the character of the properties owned by it or the nature of the business transacted by it makes such qualification necessary.

2.3  Status of Guarantor

        The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, one of the States of the United States of America.

2.4  Power and Authority

        Each of the Borrower and the Guarantor has all requisite corporate power and authority to own its respective properties, has obtained or will obtain, all material Governmental Approvals required at the date hereof to carry on its respective business as now conducted and proposed to be conducted and to enter into and perform its obligations under the Agreement and all instruments and agreements delivered pursuant hereto and thereto.

2.5  Due Authorization

        The Agreement, the Guarantee and every instrument or agreement delivered pursuant hereto has been duly and validly authorized by all requisite actions by the Borrower and the Guarantor and each of such documents has been duly executed by the Borrower and the Guarantor if it is a party thereto and when delivered will be a legal, valid and binding obligation of the Borrower and the Guarantor, as the case may be, enforceable in accordance with its respective terms save as enforcement may be limited by:

(a)

applicable bankruptcy, insolvency, moratorium, reorganization and similar laws at the time in effect affecting the rights of creditors generally;



(b)

equitable principles which may limit the availability of certain remedies, including the remedy of specific performance; and



(c)

the inability of the courts of Canada to give judgement for payment in foreign currencies.

2.6  No Contravention

        The execution, delivery and performance of the Agreement by the Borrower and the Guarantor and the Guarantee by the Guarantor will not contravene any material provision of any regulation, order or permit applicable to the Borrower or the Guarantor, as the case may be, or cause a conflict with or contravention of its respective Charter or cause a breach of or constitute a default under or require any consent under any agreement or instrument to which the Borrower or the Guarantor, as the case may be, is a party or by which it is bound except such as have been obtained.

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2.7  No Breach

        Neither the Borrower nor the Guarantor is in default under any agreement or instrument to which it is a party in any way which materially adversely affects its ability to perform its respective obligations under the Agreement or the Guarantee, as the case may be, and there are no suits or judicial proceedings or proceedings before any governmental commission, board or other agency pending or to the knowledge of the Borrower or the Guarantor, as the case may be, threatened against it which could reasonably be expected to give rise to a judgement or liability which, if satisfied, would have a materially adverse effect on the ability of the Borrower to meet its obligations under the Agreement or the Guarantor to meet its obligations under the Guarantee.

2.8  Leases and Licences

        Each of the Borrower and the Guarantor has all leases, licences, permits and consents as are essential for the due carrying on of its respective business in the manner in which its business is carried on and all such leases, licences, permits and consents are in full force and effect and no proceedings relating thereto are pending or known to the Borrower or the Guarantor, as the case may be, to be threatened in any way which would have a material adverse effect on the ability of the Borrower or the Guarantor to meet its respective obligations under the Agreement or the Guarantor to meet its obligations under the Guarantee.

2.9  No Financial Default

        Neither the Borrower nor the Guarantor is in default in any way which materially adversely affects its ability to perform its obligations under the Agreement or the Guarantee, as the case may be, under any guarantee, bond, debenture, note or other instrument evidencing any indebtedness or under the terms of any instrument pursuant to which any of the foregoing has been issued or made and delivered and to the knowledge of the Borrower and the Guarantor there exists no state of facts which, after notice or lapse of time or both or otherwise, would constitute such a default in any way which materially adversely affects its ability to perform its obligations under the Agreement or the Guarantee, as the case may be.

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2.10 Disclosure of Material Facts

        Each of the Borrower and the Guarantor has disclosed to Royal in writing all facts (other than facts which are a matter of public knowledge or record) which materially adversely affect, or so far as it can now reasonably foresee, will materially adversely affect its ability to perform its obligations under the Agreement and, in the case of the Guarantor, under the Guarantee.

2.11 Consents and Approvals

        All consents, approvals, authorizations, declarations, registrations, filings, notices and other actions whatsoever required as at the date hereof by the Borrower and the Guarantor in order to execute and deliver the Agreement and the Guarantee, as the case may be, and all agreements or instruments delivered pursuant thereto, and the consummation of the transactions contemplated hereby, have been obtained, made or taken or will have been obtained, made or taken or waived by Royal on or prior to the Closing Date.

2.12 Title

        The Borrower has good and marketable title to or the right to use all of the assets necessary for the operation of its business except for Permitted Encumbrances.

2.13 Borrower's Financial Statements Furnished

        The Borrower has furnished Royal with its most recent unaudited financial statements for the fiscal year ended December 31, 2000 and the fiscal quarter ended September 30, 2001, all such financial statements have been prepared in accordance with GAAP applied on a consistent basis, except as stated therein or in the notes thereto, the balance sheets as therein contained present fairly in all material respects the consolidated financial position of the Borrower and its Subsidiaries as at the dates thereof and the consolidated statements of income present fairly in all material respects the results of the operations of the Borrower and its Subsidiaries for the period indicated.

2.14 No Change in Borrower's Financial Condition

        Since September 30, 2001 there has been no material adverse change in the financial condition of the Borrower from that shown on the consolidated financial statements of the Borrower as at that date, except as disclosed to Royal, and any such change will not materially adversely affect the ability of the Borrower to perform its obligations under the Agreement.

2.15 Guarantor's Financial Status

        The Guarantor has furnished Royal with its most recent annual and quarterly consolidated financial statements, all such financial statements have been prepared in all material respects in accordance with United States Securities and Exchange Commission requirements except as stated therein or in the notes thereto, each balance sheet as therein contained presents fairly, in all material respects, the financial position of the Guarantor and its subsidiaries as at the date thereof.

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2.16 No Change in Guarantor's Financial Condition

        Since the date of the most recent quarterly financial statements of the Guarantor and its Subsidiaries referred to in the preceding paragraph (a) there has been no change in the consolidated financial condition of the Guarantor and its Subsidiaries as shown on the Guarantor's balance sheet as at that date sufficient to impair the Guarantor's ability to perform its obligations under the Agreement or the Guarantee except as disclosed to Royal, and (b) the business, operations and assets of the Guarantor and its Subsidiaries on a consolidated basis have not been materially adversely affected as a result of any act or event including, without limitation, fire, explosion, casualty, flood, drought, riot, storm, condemnation, act of God, accident, labour trouble, expropriation or act of any government.

2.17 Financial Statements Not Misleading

        The consolidated financial statements referred to above or any other statement or report furnished to Royal by or on behalf of the Borrower or the Guarantor in connection with the negotiation or confirmation of the transactions contemplated herein do not contain, as at the time such statements or reports were furnished, any untrue statement of a material fact or any omission of a material fact necessary to make the statements contained therein not materially misleading, it being understood by Royal that such statements were prepared by the Guarantor and certain of them do not contain explanatory footnotes, and all such statements and reports, taken as a whole together with the Agreement do not contain any untrue statement of material fact or omit a material fact necessary to make the statements contained therein not materially misleading.

2.18 Taxes

        Each of the Borrower and the Guarantor has filed all material income tax returns which were required to be filed, paid or made provisions for payment of all material taxes (including interest and penalties) which are due and payable, and provided adequate reserves established in accordance with GAAP for the payment of any tax, the payment of which is being disputed.

2.19 Environmental Law Compliance

        The Borrower is in compliance with all Environmental Law in respect of which non-compliance would have a material adverse effect on the ability of the Borrower to perform its obligations under the Agreement.

2.20 Insurance

        Each of the Borrower and the Guarantor:

(a)

has insured by financially sound and reputable insurers all assets and property of a character customarily insured by Persons engaged in the same or a similar business, similarly situated, including inventory and business interruption insurance, in such amounts as are customarily insured for by such Persons, or



(b)

maintains a program of self-insurance, with reserves, in accordance with sound business practices.

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2.21 ERISA Compliance by Guarantor

(a)

each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state laws. Each Plan that is intended to qualify under the Section 401(a) of the Code has received a favourable determination letter from the IRS or an application for such a letter is currently being or will be processed by the IRS with respect thereto and such application is or will be within a remedial amendment period and, to the Guarantor's knowledge, nothing has occurred which would prevent, or cause the loss of, such qualification which is not correctable without cost or at a cost that is immaterial. The Guarantor and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.



(b)

there are no pending or, to the Guarantor's knowledge, threatened claims, actions or lawsuits, or action by any Governmental Body, with respect to any Plan that could be reasonably expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could be reasonably expected to result in a Material Adverse Effect.



(c)





(1)

no ERISA Event has occurred within the past 12 years or is reasonably expected to occur;



(2)

except as specifically disclosed in Schedule D, no Pension Plan has any Unfunded Pension Liability;



(3)

neither the Guarantor nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA, with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA);



(4)

neither the Guarantor nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, could be reasonably expected to result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and



(5)

neither the Guarantor nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.

3.    THE CREDIT FACILITY

3.1 Establishment of the Credit Facility

        Relying on each of the representations and warranties set out in Section 2 and subject to the terms and conditions set forth herein, Royal agrees to make available to the Borrower:

(a)

a 364 day committed, revolving operating credit facility in the principal amount of $25,000,000 or the Equivalent Amount in U.S. Funds, and



(b)

a line of credit of up to $35,000,000 or the Equivalent Amount in US$ to cover Swap Termination Values and liabilities of the Borrower or, with the consent of Royal, any of its Subsidiaries in respect of EFT Transfers and PDS Services including overdrafts and cash management debts and liabilities,

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to be used by the Borrower (and, in the case of §3.1(b), with the consent of Royal, any Subsidiaries of the Borrower in respect of EFT Transfers and PDS Services) for its general corporate purposes which shall include the refinancing by the Borrower of its existing credit facility with Royal.

3.2  Nature of the Credit Facility

        Unless terminated earlier pursuant to §8.2 the Credit Facility shall be available to the Borrower up to the stated principal amount on a continuing and revolving basis from the Closing Date until the Maturity Date except for any and all cancellations of the available amount of the Credit Facility made pursuant to §3.27.

3.3  Extension of Maturity Date

        Royal in its sole discretion may, at the request of the Borrower, extend the Maturity Date for successive periods of 364 days. If the Borrower is desirous of extending the Maturity Date it shall so notify Royal not more than 90 days and not less than 60 days prior to the then current Maturity Date and Royal shall, within 30 days of receipt of such extension notice, advise the Borrower of its determination in response to any such request. If Royal determines that it will extend the Maturity Date for 364 days the current Maturity Date shall be extended to that date which is 364 days past the current Maturity Date. The Borrower and the Guarantor acknowledge that the rates of interest, Standby Fees, acceptance fees, EFT Transfer Fees, PDS Service Fees, Documentary Credit Fees and any other fees payable by the Borrower under the Agreement are subject to confirmation by Royal at the time of each request for an extension of the Maturity Date.

3.4  Currencies and Other Options Available Under the Credit Facility

        Subject to the provisions of the Agreement:

(a)

the Borrower may, at its option utilize the credit facility established pursuant to §3.1(a) by way of Canadian Advances, U.S. Advances, Documentary Credits or, if available, Eurocurrency Advances or Bankers' Acceptances, and



(b)

the Borrower and, with the consent of Royal, any of its Subsidiaries may, at the discretion of Royal, avail themselves of Royal's facilities in respect of EFT Transfers and PDS Services and Royal at its discretion, may make Canadian Advances or U.S. Advances available to the Borrower or, on the instructions of the Borrower, to its Subsidiaries to provide for Swap Termination Values, and cover for liabilities in respect of EFT Transfers and PDS Services. Any liabilities in respect of EFT Transfers and PDS Services including overdrafts and cash management debts and liabilities, shall be obligations under the credit facility established pursuant to §3.1(b) and shall be secured by the collateral charged under Royal's Security and otherwise be subject to the applicable provisions hereof.

3.5  Swap Contracts

        The Borrower may request that Royal enter into Swap Contracts with the Borrower from time to time. Royal may decline such request or may agree to enter into Swap Contracts provided:

(a)

the Borrower agrees to the terms and conditions of the current applicable Master Agreement or such other similar or standard form of agreement appropriate to the type of Swap Contract requested by the Borrower as may be required by Royal and enters into and delivers such agreement to Royal;



(b)

the Borrower pays all required fees in connection with a Swap Contract and indemnifies Royal against any loss, cost or expense incurred by Royal including any Swap Termination Values;

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(c)

the Borrower indemnifies Royal against any loss, cost or expense suffered or incurred by Royal as a result of acting upon instructions given or agreements made over the telephone or by electronic transmission of any type with persons reasonably believed by Royal to have been acting on the Borrower's behalf;



(d)

the Borrower agrees that if there is any inconsistency at any time between the terms of the Agreement and any Master Agreement, the terms of such Master Agreement shall prevail.

3.6  Interest on Advances Under the Credit Facility

        The Borrower shall pay to Royal at its Branch of Account interest on Advances from Royal at the rates determined by reference to the pricing formula set forth in Schedule A. Interest shall be calculated and paid as follows:

(a)

Canadian Advances shall bear interest in Canadian Funds, which interest shall accrue from day to day while such advances are outstanding and shall be computed on the basis of a year of 365 days and for actual days elapsed and shall be payable and compounded monthly in arrears on the 20th day of each month or such other date as may be agreed to by the Borrower and Royal;



(b)

U.S. Advances shall bear interest payable in U.S. Funds, which interest shall accrue from day to day while such advances are outstanding and shall be computed on the basis of a year of 365 days and for actual days elapsed and shall be payable and compounded monthly in arrears on the 20th day of each month or such other date as may be agreed to by the Borrower and Royal;



(c)

Eurocurrency Advances shall bear interest in U.S. Funds, which interest shall accrue from day to day while such advances are outstanding and shall be computed on the basis of a year of 360 days and for actual days elapsed and shall be payable as set forth in §3.15 hereof.

3.7  Interest and Fee Rate Adjustments

        Adjustments to rates of interest and the acceptance fees prescribed in §3.6 and §4.11 respectively and the Standby Fees and Documentary Credit Fees prescribed in §3.28 and §3.31 respectively resulting from changes, if any, to the Ratings shall be effective and payable from and including the Interest and Fee Rate Adjustment Date. The Borrower agrees to pay to Royal and Royal agrees to repay to the Borrower the amount resulting from an adjustment of Schedule A rates and fees in respect of Bankers' Acceptance, Documentary Credits and Eurocurrency Advances resulting from a Rating Change prior to the maturity of such Borrowing Options. The Borrower will pay interest, acceptance fees, Standby Fees, Documentary Credit Fees and other fees from the Closing Date until the first Interest and Fee Rate Adjustment Date determined by reference to a BB/Ba2 or higher Rating.

3.8  Interest on Eurocurrency Advances Spanning More Than One Applicable Interest Rate

        If the Borrower takes a Eurocurrency Advance under the Credit Facility before the date of an increase or decrease in a percentage rate of interest to be added to the London Interbank Offered Rate to be paid on Eurocurrency Advances under the Credit Facility, which Eurocurrency Advance matures after the date of the said increase or decrease in the rate of interest, the rates of interest for the Eurocurrency Interest Period of the said Eurocurrency Advance shall be calculated by using the interest rates applicable from time to time for the number of days the Eurocurrency Advance is outstanding during the respective interest rate periods.

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3.9  Interest Act of Canada

        For the purpose of the Interest Act of Canada, the yearly rate of interest to which interest calculated on the basis of a year of 360 or 365 days is equivalent, is the rate of interest determined as herein provided multiplied by the number of days in such year divided by 360 or 365, as the case may be.

3.10 Manner of Making Advances

        Advances under the Credit Facility (other than deemed advances in relation to Bankers' Acceptances and Documentary Credits) shall be disbursed to the Borrower by Royal crediting the account maintained by the Borrower at its Branch of Account or elsewhere as may be agreed to between the Borrower and Royal.

3.11 Amounts and Notice for Canadian Advances and U.S. Advances

        One Business Day's notice to Royal is required from the Borrower of its intention to take a Canadian Advance or a U.S. Advance which advances shall be for minimum amounts of $100,000 or US$100,000, as the case may be.

3.12 Notice for Eurocurrency Advances

        The Borrower shall give the following prior irrevocable notice to Royal before the time stipulated in §3.18 of its intention to take Eurocurrency Advances:

(a)

for Eurocurrency Advances for aggregate amounts of less than US$10,000,000 no notice prior to the Interest Determination Date is required;



(b)

at least two Banking Days' notice prior to the Interest Determination Date is required in the case of Eurocurrency Advances for aggregate amounts of US$10,000,000 or more.

3.13 Eurocurrency Notice Particulars

        Each notice under §3.12 shall specify:

(a)

the amount of each Eurocurrency Advance requested by the Borrower, which shall be in minimum amounts of US$1,000,000;



(b)

the Drawdown Date; and



(c)

the Eurocurrency Interest Period for which the London Interbank Offered Rate is to be applied.

        Unless Royal is unable to make a Eurocurrency Advance because funds are not available to it or it determines not to make a Eurocurrency Advance pursuant to §3.33, it shall make the requested Eurocurrency Advance in accordance with the notice requesting such advance and shall advise the Borrower on the Interest Determination Date of the London Interbank Offered Rate.

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3.14 Conversions of Borrowings under §3.1(a)

        The Borrower may, upon giving notice to Royal of its intention to effect a conversion, convert all or any portion of its Borrowings under the credit facility established pursuant to §3.1(a) from one Borrowing Option to another Borrowing Option, provided that:

(a)

Borrowings in Canadian Funds plus the Equivalent Amount in Canadian Funds of Borrowings in U.S. Funds after a conversion do not exceed the amount available under §3.1(a) of the credit facility;



(b)

a conversion involving Eurocurrency Funds is in a minimum amount of US$1,000,000 and a conversion involving Bankers' Acceptances is in a minimum amount of $500,000 or any greater amount in whole multiples of $100,000;



(c)

a Eurocurrency Advance may be converted only on its Eurocurrency Maturity Date (unless Royal has agreed to a conversion prior to such date and the Borrower has paid the Compensation Amount determined by Royal and advised to the Borrower) and if the Borrower fails to notify Royal as to conversion or renewal of a maturing Eurocurrency Advance as required hereunder it shall be deemed for all purposes to be a U.S. Advance on its Eurocurrency Maturity Date;



(d)

the Borrower shall not be entitled to convert to Eurocurrency Funds unless such Eurocurrency Funds are available in accordance with §3.22;



(e)

any Bankers' Acceptance may be converted only on the maturity date thereof and provided the Borrower gives Royal the same notice of request for conversion as specified in §4.3;



(f)

the Borrower shall give Royal notice for conversion of all or a portion of its Borrowings, which notice shall be governed by the same terms established for requests for advances under §3.11 and §3.12, and shall specify:



(1)

the amount of Borrowings to be converted;



(2)

the Drawdown Date;



(3)

the Borrowing Option sought by the Borrower and, if the Borrowing Option sought is Eurocurrency Advances, the Eurocurrency Interest Period together with the Drawdown Date, and, if the Borrowing Option sought is Canadian Advances whether the conversion is to Bankers' Acceptances and if so, the number of days to maturity of the Bankers' Acceptances;

(g)

if the conversion is from one currency to a different currency, the Borrower shall have repaid or shall, at the time of conversion, contemporaneously repay to Royal the full amount advanced under the Borrowing Option being converted. Any such repayment shall be in the currency of the Advance being repaid;



(h)

no requested conversion would, on the date a conversion is requested, result in Borrowings under the credit facility established pursuant to §3.1(a) exceeding the amount available under §3.1(a) of the credit facility.

        Subject to the foregoing, including the availability of Eurocurrency Funds, if the conversion request referred to in §3.14(f) specifies a conversion into Eurocurrency Funds, Royal shall make the requested Eurocurrency Advance in accordance with the conversion request.

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3.15 Payment of Interest on Eurocurrency Advances

        Interest on a Eurocurrency Advance for a Eurocurrency Interest Period of three months or less shall be paid on the Eurocurrency Maturity Date. If a Eurocurrency Interest Period exceeds three months, interest shall be paid every three months (not in advance) during the Eurocurrency Interest Period, until the Eurocurrency Maturity Date, upon which date the balance of interest thereon shall be paid.

3.16 Default Interest

        Default interest payable in the currency of the amount which is overdue shall be paid on all interest, fees and other amounts payable hereunder which are overdue. Default interest with respect to interest, fees and other amounts payable in Canadian Funds shall be at the Prime Rate and with respect to interest, fees and other amounts payable in U.S. Funds shall be at the U.S. Base Rate, as the case may be. Default interest on overdue interest, fees and other amounts shall be compounded monthly and shall be paid on demand both before and after maturity, default and judgement. Default interest shall be computed from and including the date interest, fees or any other amounts payable pursuant to the Agreement become due and shall be paid for so long as such amount or amounts remains unpaid.

3.17 Indemnity for Out-of-Pocket Expenses

        The Borrower agrees to indemnify Royal against any out-of-pocket loss or expense which it may sustain or incur as a consequence of the Borrower's failure to effect, repay or prepay a Borrowing as specified in any notice of Borrowing delivered by the Borrower pursuant to the Agreement.

3.18 Effective Time for Section 3 Notices

        For the purposes of Section 3 and §4.3 of the Agreement, notices from the Borrower to Royal must be received by Royal prior to 9:00 a.m. local time at Vancouver, British Columbia to be effective on the date on which they are given. Notices received after that local time will take effect from the next Banking Day or Business Day, as the case may be.

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3.19 Increased Costs

        Subject to §3.21, if, after the Closing Date, the implementation or introduction of or any change in any applicable law, regulation, treaty, or official directive or regulatory requirement now or hereafter in effect (whether or not having the force of law), or any change in the interpretation or application thereof by any court or by any judicial or governmental authority charged with the interpretation or administration thereof, or if compliance by Royal with any request from any central bank or other fiscal, monetary, or other authority (whether or not having the force of law):

(a)

subjects Royal to any tax, changes the basis of taxation of payments due to Royal or increases any existing tax, on payments of principal, interest, or other amounts payable by the Borrower to Royal under the Agreement (except for taxes on the overall net income of Royal imposed by the jurisdiction in which it is incorporated or resident or from which it is acting for the purposes of the Agreement, and except for taxes on Royal's capital or other similar taxes);



(b)

imposes, modifies, or deems applicable any reserve, special deposit, capital adequacy, regulatory, or similar requirement (including a requirement which affects Royal's allocation of capital resources) against assets or liabilities held by, or deposits in or for the account of, or loans by, or any other acquisition of funds for loans or commitments to fund loans or obligations concerning any Bankers' Acceptances accepted by Royal, or



(c)

imposes on Royal any other condition with respect to the Agreement,

and the result of (a), (b) or (c) is, in the reasonable determination of Royal acting in good faith, to increase the cost to Royal or to reduce the income receivable by Royal in respect of a Borrowing or Standby Fees payable, or to reduce the rate of return on the overall capital of Royal, the Borrower shall, upon receipt of a certificate from Royal as described below ("Certificate"), pay to Royal that amount which compensates Royal for such additional cost, reduction in income or rate of return ("Additional Amount") from the date of the Certificate. The Borrower will pay the Additional Amount on the next following 20th day of the month and on the 20th day of each month thereafter until the earlier of (a) the date on which the Additional Amount has been paid in full, and (b) the date on which the Borrower has repaid and/or converted all Borrowings with respect to which a Certificate has been delivered. Royal shall deliver a Certificate to the Borrower which shall set forth the amount of the Additional Amount and the basis for its calculation which will, in the absence of manifest or demonstrable error, be conclusive evidence of the amount of the Additional Amount. Royal will use its reasonable efforts to reduce the amount of the Additional Amount payable hereunder provided that Royal will have no obligation to expend its own funds, to suffer any economic hardship or to take any action detrimental to its interest in connection therewith.

3.20 Borrower's Option on Receipt of an Increased Costs Certificate

        If Royal delivers the Certificate and the Borrower has paid the Additional Amount required to be paid by the Certificate in accordance with the Certificate, then, with respect to Canadian Advances or U.S. Advances, at any time thereafter, and, with respect to Eurocurrency Advances or Bankers' Acceptances, on the maturity thereof, and in all cases, with two Business Days' prior written irrevocable notice to Royal, the Borrower may:

(a)

within 60 days, prepay in full without bonus or penalty all Borrowings, with respect to which a Certificate has been delivered, interest, fees and other amounts payable hereunder in connection with such Borrowings, or



(b)

convert those Borrowings with respect to which the Certificate has been delivered to another basis of Borrowing in accordance with the Agreement.

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3.21 Increased Costs Limitation

        Royal agrees that:

(a)

the increased costs payable by the Borrower pursuant to §3.19 or §4.14 shall not include:



(1)

those resulting from any law, regulation, treaty, or official directive or regulatory requirement or amendments thereto of which Royal had knowledge prior to the Closing Date,



(2)

any tax, penalty or other charges payable by Royal due to its failure to pay or delay in paying any amount required to be paid by it referred to in §3.19(a) or §4.14;




(b)

it will not charge the Borrower for any increased costs payable by it referred to in §3.19 or §4.14 if it is not at the same time passing similar costs on to substantially all of its customers to whom Royal is, by agreement, entitled to pass on such costs;



(c)

it will use all reasonable efforts to minimize amounts payable by the Borrower hereunder including all reasonable efforts to obtain refunds or credits.

3.22 Eurocurrency Funds Not Available

        Eurocurrency Advances shall be made hereunder to the extent that Eurocurrency Funds are readily and lawfully available to Royal on the dates upon which the Borrower requests Eurocurrency Advances for the Eurocurrency Interest Periods and in the amounts requested.

3.23 Payment of Compensation Amount

        If the Borrower prepays, repays or converts a Eurocurrency Advance or if pursuant to §8.2 Royal converts a Eurocurrency Advance on a date earlier than the Eurocurrency Maturity Date, the Borrower shall forthwith pay to Royal the Compensation Amount.

3.24 Borrower's Right to Revolve the Credit Facility

        In addition to the Borrower's right to cancel the available amount of the Credit Facility pursuant to §3.27 the Borrower may from time to time reduce its Borrowings by making repayments to Royal which the Borrower may re-borrow subject to the terms of the Agreement, provided that:

(a)

repayments and re-borrowings of Canadian Advances, U.S. Advances or Eurocurrency Advances, as the case may be, shall be in the same minimum amounts and whole multiples as prescribed for a Borrowing;



(b)

repayments and re-borrowings of Eurocurrency Advances may only be made on the Eurocurrency Maturity Date of the Eurocurrency Advance being repaid unless the Borrower pays the Compensation Amount as contemplated in §3.23;



(c)

the Borrower gives to Royal the same prior irrevocable notice prior to a proposed repayment date that it is required to give pursuant to §3.11 in relation to a requested Drawdown Date for taking a Canadian Advance or U.S. Advance, as the case may be.

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3.25 Repayment of Credit Facility

        On the Maturity Date the Borrower shall repay to Royal the whole of the outstanding amount of the Credit Facility together with interest, fees and other amounts due hereunder to such date including the Face Amounts of all Bankers' Acceptances and the amounts of all Guarantee Letters, Letters of Credit or Eurocurrency Advances issued pursuant to the Agreement which have not matured or expired.

3.26 Currency of All Payments

        All repayments made by the Borrower pursuant to the Agreement shall be made in the currency of the advance being repaid. The Borrower may designate whether repayments are to be applied to Canadian Advances, U.S. Advances, Eurocurrency Advances or Bankers' Acceptances. Repayments may be applied to a Bankers' Acceptance only to the extent that the repayment is to be made on a date on which a Bankers' Acceptance becomes due and is in an amount equal to the amount of the Bankers' Acceptance then due. Repayments may be applied to Eurocurrency Advances only:

(a)

if such repayment is made on the Eurocurrency Maturity Date for the Eurocurrency Advance repaid, or



(b)

if such repayment is made on a date other than the Eurocurrency Maturity Date for the Eurocurrency Advance which is in effect being prepaid, if the Borrower pays the Compensation Amount as provided in §3.23.

3.27 Borrower's Right to Cancel Available Amount of Credit Facility

        If the Borrower delivers to Royal three Business Days' prior irrevocable notice, the Borrower may, without penalty, cancel the available amount of the Credit Facility or a portion thereof in minimum increments of $1,000,000 or any greater amount in whole multiples of $100,000. Such cancellation shall be effective on the later of the effective Business Day set out in such notice and the third Business Day after such notice. No cancellation under this §3.27 shall be effective in respect of any portion of the Credit Facility which has been advanced or utilized until such advance or utilization has been repaid or reduced and all interest and fees accruing thereon have been paid. Any such amount so cancelled shall permanently reduce the available amount of the Credit Facility thereafter available for Borrowings by a like amount.

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3.28 Standby Fees

        Subject to §3.29, the Borrower shall pay to Royal a Standby Fee on the amount of the Credit Facility established pursuant to §3.1(a) not utilized by the Borrower from and including the Closing Date to and including the Maturity Date. In determining the amount of the Credit Facility established pursuant to §3.1(a) not utilized by the Borrower, advances of U.S. Funds shall be deemed to be the Equivalent Amount thereof in Canadian Funds. The Standby Fee shall be paid in Canadian Funds calculated on a daily basis and shall be at the rates for Standby Fees set forth in Schedule A (computed on the basis of a year of 365 days), accruing from and including the Closing Date. Standby Fees, adjusted to reflect any change in the Ratings for the immediately preceding fiscal quarter, shall be paid quarterly, in arrears, commencing on January 1, 2002 and thereafter on the first Business Day of each ensuing third month until the Maturity Date on which the Credit Facility is repaid by the Borrower at which time the Borrower will pay to Royal all accrued and unpaid Standby Fees.

3.29 Standby Fees Waived

        If Royal terminates its obligations to make advances pursuant to §8.2(a) the Borrower shall cease to be obligated to pay Standby Fees from the Business Day next following the effective date of such termination.

3.30 Arrangement Fee

        The Borrower shall pay to Royal an arrangement fee of $93,750 on the Closing Date.

3.31 Documentary Credits

        Royal may permit the Borrower to utilize the Credit Facility to obtain from it Letters of Credit and Guarantee Letters in Canadian Funds or U.S. Funds provided that:

(a)

if a Letter of Credit or Guarantee Letter is issued by Royal for the account of the Borrower, the amount, determined in Canadian Funds, of the face amount of such Letter of Credit or Guarantee Letter shall, for the purpose of calculating the available amount of the Credit Facility for use by the Borrower, be deemed to be a utilization by the Borrower of the Credit Facility for the amount of and for the term of such Letter of Credit or Guarantee Letter;

(b)

the Borrower will pay to Royal its Documentary Credit Fee determined by reference to the pricing formula for Documentary Credits set forth in Schedule A determined as a percentage per annum of the face amount determined in Canadian Funds, U.S. Funds, as the case may be, of Documentary Credits issued by Royal. Documentary Credit Fees shall be calculated on the basis of the number of days a particular Documentary Credit will be outstanding and shall be paid by the Borrower in Canadian Funds on Documentary Credits denominated in Canadian Funds and in U.S. Funds on Documentary Credits denominated in U.S. Funds. Documentary Credit Fees shall be paid in advance for the first three months or less and thereafter every three months or such lesser period;

(c)

the Borrower will execute and deliver to Royal or confirm its prior execution and delivery to Royal of Royal's standard form of application and agreement concerning Letters of Credit and Guarantee Letters and the Borrower agrees to comply therewith and be bound thereby. If any of the terms of Royal's standard form of application and agreement conflict with the Agreement, the terms of the Agreement shall prevail;

(d)

all other reasonable out-of-pocket disbursements and costs incurred by Royal in relation to the issuance of or payment pursuant to any Letter of Credit or Guarantee Letter issued on behalf of the Borrower shall be repaid to Royal by advances under the Credit Facility if such funds are available thereunder and, if not available thereunder, shall be repaid upon demand to the Borrower from Royal;

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(e)

Documentary Credits shall be for maximum periods of one year (unless otherwise agreed by Royal) and shall not mature on a date which is beyond the Maturity Date.

        Royal shall pay on each Documentary Credit in accordance with its terms, whereupon the amount of such payment shall be deemed for all purposes to be a Canadian Advance or, in the case of Documentary Credits denominated U.S. Funds, a U.S. Advance, as the case may be. The Borrower acknowledges to Royal that Royal has the sole discretion to refuse to make Documentary Credits available to the Borrower.

3.32 Evidence of Indebtedness

        Royal shall open and maintain on its books at its Branch of Account, accounts and records evidencing Borrowings and other amounts owing by the Borrower to Royal under the Agreement. Royal shall record therein the amount of each Borrowing made available by way of Canadian Advances, U.S. Advances or Eurocurrency Advances and each payment of principal and interest on account thereof and shall record Documentary Credits and Bankers' Acceptances issued, accepted, purchased and cancelled by it and all other amounts becoming due to it under the Agreement including interest, acceptance fees, Documentary Credit Fees, Standby Fees and other fees and amounts and all payments on account thereof. Such accounts and records maintained by Royal shall constitute, in the absence of manifest or demonstrable error, prima facie evidence of the indebtedness of the Borrower to Royal pursuant to the Agreement, the date Royal made each Borrowing available to the Borrower and the amounts the Borrower has paid from time to time on account of principal and interest on the Borrowings, acceptance fees, Documentary Credit Fees, Standby Fees and other fees and amounts payable pursuant to the Agreement and all other amounts owing hereunder.

3.33 Substitute Basis of Borrowing for Eurocurrency Advances

        If Royal determines, acting reasonably, (which determination shall be final, conclusive, and binding upon the Borrower) that:

(a)

adequate and fair means do not exist for ascertaining the rate of interest on a Eurocurrency Advance;

(b)

the cost to Royal of making, funding, or maintaining Eurocurrency Advances does not accurately reflect the effective cost to it thereof or that the costs to it are increased or the income receivable by it is reduced in respect of a Eurocurrency Advance;

(c)

the making or the rollover of any Eurocurrency Advance or a portion of any Eurocurrency Advance by it has become impracticable by reason of circumstances which materially and adversely affect the London interbank market, or

(d)

deposits in U.S. dollars are not available to it in the London interbank market in sufficient amounts in the ordinary course of business during the applicable Eurocurrency Interest Period for it to make, fund, or maintain the Eurocurrency Advance during such Eurocurrency Interest Period,

then Royal may promptly notify the Borrower in writing of such determination setting forth the basis of its determination and shall not thereafter be obligated to provide such Eurocurrency Advance. The Borrower shall, within ten days of receipt of notice of Royal's determination, notify Royal as to the substitute basis of Borrowing available under the Agreement which it has selected for such Eurocurrency Advance. If the Borrower has not so notified Royal, such Eurocurrency Advance shall automatically be converted to a U.S. Advance for all purposes under the Agreement at the Eurocurrency Maturity Date or the Drawdown Date, as the case may be.

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3.34 Illegality for Eurocurrency Advances

        If the introduction of or any change in applicable law, regulation, treaty, or official directive, or regulatory requirement (whether or not having the force of law), or the interpretation or application thereof by any court or by any governmental or other authority or entity charged with the administration thereof, or if a judicial decision is rendered, which now or hereafter makes it unlawful, or prohibited for Royal (as determined by Royal in its sole and absolute discretion, acting reasonably) to make, fund, or maintain any Eurocurrency Advance or any portion thereof or to perform its obligations with respect to Eurocurrency Advances under the Agreement, Royal may, by written notice to the Borrower, suspend its obligations under the Agreement with respect to such Eurocurrency Advance affected by such illegality or prohibition for the duration of the period of such illegality or prohibition and the Borrower shall repay such Eurocurrency Advance forthwith (or at the end of such period as Royal in its sole and absolute discretion, acting reasonably, may determine), together with all accrued but unpaid interest, fees, costs and Compensation Amount as may be applicable to the date of payment or the Borrower may convert, without novation, such Borrowings or a portion thereof together with accrued interest to the date of conversion (or without such accrued interest if the Borrower elects to pay the same to Royal) into such other form or forms of Borrowings as the Borrower may request by not more than two Banking Days notice to Royal. For the period from the date of such notice until the Borrower elects to convert to another form or forms of Borrowing, the Borrowing affected by such illegality or prohibition shall, if not repaid, be converted into a U.S. Advance and thereafter Royal shall, if such illegality affects then outstanding Eurocurrency Advances, be obligated to extend its Eurocurrency Advances in such other Borrowing Options as the Borrower may request.

3.35 Exchange Rate Fluctuations

        If, due to exchange rate fluctuations or for any other reason, Borrowings calculated by Royal on the first Business Day of each month are in excess of the available amount of the Credit Facility, the Borrower shall, if so requested by Royal, within three Business Days of such request, provide to Royal full cash collateral in the amount of such excess or otherwise repay a portion of Borrowings in an amount equal to or greater than such excess. The rate of exchange to determine the amount of such excess shall be the Spot Buying Rate.

3.36 Determination of Available Amount of the Credit Facility

        The available amount of the Credit Facility shall always be determined in Canadian Funds with Borrowings by way of U.S. Advances or Eurocurrency Advances converted to Canadian Funds by determining the Equivalent Amount of any such U.S. Advances or Eurocurrency Advances.

4.    BANKERS' ACCEPTANCES

4.1 Issuing Bankers' Acceptances

        Subject to §4.3, and provided the Borrower has not been notified by Royal by at least one Business Day preceding the proposed date for issuance of a Bankers' Acceptance that Royal, because general market conditions have caused it to become impracticable to accept Drafts, is no longer accepting Drafts in the ordinary course of its business, the Borrower may utilize the Credit Facility by issuing Bankers' Acceptances. Each Bankers' Acceptance accepted by Royal shall be deemed to be a utilization of the Credit Facility for the term of such Bankers' Acceptance in an amount equal to the Face Amount.

4.2  Calculation of Borrowings

        For the purposes of the Agreement, the Face Amount of a Bankers' Acceptance shall be used when calculations are made to determine the amount of Borrowings.

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4.3  Notice

        The Borrower shall give Royal the following irrevocable notice prior to presenting its Drafts for acceptance:

(a)

prior to 9:00 a.m. local time at Vancouver, British Columbia on the Business Day of presentation for Bankers' Acceptances aggregating less than $10,000,000;

(b)

prior to 9:00 a.m. local time at Vancouver, British Columbia two Business Days immediately preceding the Business Day of presentation for Bankers' Acceptances aggregating $10,000,000 or more.

        The Borrower shall also notify Royal by giving the same amount of prior notice of the method it proposes for payment of Bankers' Acceptances on maturity as set out in §4.9.

4.4  Form of Undertaking

        The Borrower shall execute and deliver to Royal its form of undertaking in respect of Bankers' Acceptances and, to the extent any such authorization or undertaking is not inconsistent with the provisions of the Agreement, agrees to comply therewith. All Drafts presented by the Borrower for acceptance pursuant to §4.1 shall be drawn on Royal's prescribed forms.

4.5  Power of Attorney Respecting Bankers' Acceptances

        In order to facilitate the issuance of Bankers' Acceptances, the Borrower authorizes Royal and for this purpose appoints Royal its lawful attorney, to complete, sign and endorse Drafts issued in accordance with §4.1 on its behalf in handwritten or by facsimile or mechanical signature or otherwise and, once so completed, signed and endorsed, and following acceptance of them as Bankers' Acceptances under the Agreement, to purchase, discount or negotiate such Bankers' Acceptances in accordance with the provisions of Part 4 of the Agreement. Drafts so completed, signed, endorsed and negotiated on behalf of the Borrower by Royal shall bind the Borrower as fully and effectively as if so performed by an authorized officer of the Borrower.

4.6  Negotiation and Purchase of Drafts

        Royal shall negotiate Drafts as prescribed by the DBNA and shall fund or discount Bankers' Acceptances and may purchase the same for its own account, by remitting the determined amount of Discount Proceeds to the Borrower. The Discount Proceeds shall be remitted in immediately available funds to the Branch of Account on or before 10:00 a.m. local time Vancouver, British Columbia on the applicable Drawdown Date.

4.7  Issuance and Maturity

        Each Bankers' Acceptance shall be issued and shall mature on a Business Day.

4.8  Failure to Provide Notice

        If the Borrower fails to provide to Royal the notice required by §4.3 or, having given notice of its intention to present a Draft for acceptance or to convert from or to Bankers' Acceptances, fails to act in accordance with such notice, then Royal may, in its discretion, decline to accept Bankers' Acceptances presented without notice or not in accordance with the notice provided.

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4.9  Payment to Borrower

        Subject to the notice of method of payment of maturing Bankers' Acceptances referenced by §4.3 the Borrower shall provide payment for each Bankers' Acceptance issued by it by payment to Royal of the Face Amount thereof by 10:00 a.m. local time at Vancouver, British Columbia on the maturity date of the Bankers' Acceptance at its Branch of Account. If the Borrower fails to provide payment to Royal of an amount equal to the Face Amount of a Bankers' Acceptance on its maturity, then Royal shall pay the Face Amount of such Bankers' Acceptance which payment shall be determined for all purposes to be a Canadian Advance.

4.10 No Days of Grace

        The Borrower shall not claim from Royal any days of grace for the payment at maturity of any Bankers' Acceptances.

4.11 Acceptance Fees

        As an acceptance fee for the acceptance by Royal of the Borrower's Drafts against the Credit Facility the Borrower shall pay in advance to Royal at or prior to the time of such acceptance an acceptance fee at the applicable rate set forth in Schedule A. Acceptance fees shall be calculated in relation to the Face Amount of each Bankers' Acceptance and on the basis of the number of days from and including the date of acceptance to and including the day immediately preceding the date of maturity. Acceptance fees payable from the Closing Date until the first Interest and Fee Rate Adjustment Date shall be determined by reference to the BB/Ba2 or higher Rating.

4.12 Calculation of Acceptance Fees

        Acceptance fees shall be computed on the basis of a year of 365 days and shall be adjusted from time to time in accordance with §3.7.

4.13 Change of Acceptance Fee During Term of Bankers' Acceptance

        In the event of the acceptance by Royal of a Bankers' Acceptance before the date of a change of the rates for acceptance fees as set forth in Schedule A which Bankers' Acceptance matures or becomes due and payable after such date, the acceptance fee shall be calculated by using the applicable rates for Bankers' Acceptances for the number of days the Bankers' Acceptance is outstanding during the fee period. Adjustments and payments, if any, to the rates of acceptance fees resulting from the application of this §4.13 shall be made and paid, as the case may be, in accordance with §3.7.

4.14 Increased Costs

        If at any time any reserve requirement in respect of Bankers' Acceptances is imposed upon Royal by any Canadian governmental regulatory authority which results in an increase in the net cost to Royal of maintaining the Bankers' Acceptances outstanding and Royal has not claimed an Additional Amount from the Borrower pursuant to §3.19 in relation to outstanding Bankers' Acceptances it shall have the right, subject to §3.21 to adjust the amount of the acceptance fee as necessary to compensate it for such cost increase, and the Borrower shall pay to Royal the amount of any such adjustment upon receipt of written notice thereof from Royal, which notice shall include details of Royal's calculations of the effect of such reserve requirements on its acceptance fees. The Borrower shall have the right to review the accuracy of such calculations.

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4.15 DBNA

        The Borrower agrees with Royal that all Drafts will conform with the required characteristics of a "depository bill" as described in §4 of the DBNA. It is the intention of Royal that the amended Drafts (if requested) shall be deposited with a "clearing house" as defined in the DBNA. Royal, in consultation with the Borrower, shall establish and notify the Borrower of the procedures, consistent with the terms of the Agreement and the DBNA as are reasonably necessary to accomplish Royal's said intention including amendments to Drafts, by:

(a)

inserting a phrase in the Drafts held by Royal to the effect that the Bankers' Acceptance is issued pursuant to the DBNA;



(b)

removing any reference to authorization of a Bankers' Acceptance, and



(c)

removing any reference to bearer.

4.16 Maturity Date Restriction

        No Bankers' Acceptance issued under the Credit Facility shall mature on a date which is beyond the current Maturity Date.

5.    SECURITY FOR BORROWINGS

5.1 Security for Borrowings

        As general and continuing security for the performance of all obligations of the Borrower hereunder and the prompt payment when due by the Borrower of Borrowings under the Credit Facility and interest thereon and all other money for the time being and from time to time owing by the Borrower hereunder, including Standby Fees, Documentary Credit Fees and other fees, default interest, fees for Swap Contracts, Swap Termination Values, fees and liabilities in respect of EFT Transfers and PDS Services, the Borrower shall, subject to the provisions of this Agreement, execute and deliver, or cause to be executed and delivered to Royal the following:

(a)

the Security Agreement;



(b)

the Section 427 Security;



(c)

the Borrower Subsidiaries' Guarantees;



(d)

the Borrower Subsidiaries' Security Agreements;



(e)

the Subordination Agreement;



(f)

the Borrower Guarantees; and



(g)

the Guarantee.

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5.2  Conflict Between the Agreement and Royal's Security

        Except for the choice of law provisions in the Guarantee and those provisions in Royal's Security describing the collateral over which security is taken or which allow for dispositions of such collateral free from such security, which shall prevail, if there is any discrepancy or inconsistency between the terms of the Agreement and the terms of Royal's Security the terms of the Agreement shall prevail. Royal acknowledges and agrees that, notwithstanding anything to the contrary herein or in any other document, Royal shall have no security interest in or other interest in or any rights or remedies with respect to, and waives and releases any such security interest or other interest it might otherwise have in:

(a)

any of the assets of the Guarantor described in Schedule "B" to the Security Agreement or in Schedule "B" to either of the Borrower Subsidiaries' Security Agreements or in Schedule "A" to the Assignment under the Section 427 Security ("Receivables Assets"); and



(b)

any inventory (within the meaning of the term "Inventory" as used in such security agreements) or property (within the meaning of such term as used in the Section 427 Security) and related property and assets the sale or transfer of which gave rise to any Receivables Assets.

5.3  Restrictions on Demanding Payment

        Notwithstanding that the Guarantee, the Borrower Subsidiaries' Guarantees and the Borrower Guarantees are expressed to be payable on demand, Royal will not demand payment thereof except after an Event of Default.

6.    CREDIT FACILITY CONDITIONS PRECEDENT

6.1 Conditions Precedent to Initial Borrowings

        Royal shall not be obliged to make an initial advance of the Credit Facility or to accept an initial Draft presented by the Borrower pursuant to Section 4 of the Agreement, whichever shall first occur unless, on the Closing Date, all representations and warranties contained in Section 2 are true and correct, no Event of Default has occurred and is continuing and upon each of the following conditions being satisfied:

(a)

delivery by the Borrower to Royal of the following:



(1)

duly executed copies of the Agreement together with all documents which the Borrower has covenanted to deliver under the Agreement and any other documents or instruments as in the opinion of counsel for Royal are reasonably necessary or appropriate to render effective the Agreement;



(2)

a certificate of good standing for the Borrower from the Office of the British Columbia Registrar of Companies;



(3)

a certified copy of a resolution or resolutions of the board of directors of the Borrower or a duly constituted and authorized committee of the board of directors of the Borrower authorizing the Borrower to execute, deliver and perform its obligations under the Agreement and Royal's Security and the instruments, agreements, certificates, papers and other documents contemplated herein and therein and the manner in which and by whom the foregoing documents are to be executed and delivered;



(4)

an incumbency certificate of the Borrower setting forth the names of its directors and officers and specimen signatures of the individuals who sign the Agreement and Royal's

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Security and the instruments, agreements, certificates, papers and other documents provided for or contemplated therein;

(5)

satisfactory evidence concerning those policies of insurance of the Borrower insuring Inventory of the Borrower and its Material Canadian Subsidiaries and Royal shall be satisfied as to the amounts, terms and coverage provided thereby;



(6)

a certificate signed by the Chief Financial Officer or other responsible person certifying:



(A)

that the Guarantor is not in default under the Guarantor Credit Agreement;



(B)

there is no material litigation pending or threatened against the Borrower other than as disclosed in the September 30, 2001 quarterly report;



(C)

there has been no material adverse change in the financial conditions and operations of Guarantor or any of its Subsidiaries since the date of the Guarantor's most recent financial statements referred to in §2.15 of the Agreement;




(7)

a favourable opinion of counsel for the Borrower (in form and content satisfactory to the solicitors for Royal) to the effect that:



(A)

the Borrower and each of the Borrower Subsidiaries validly exists as a company under the British Columbia Company Act and is, according to the records of the office of the Registrar of Companies for the Province of British Columbia, in good standing with respect to the filing of its annual reports;



(B)

the Borrower and each of the Borrower Subsidiaries have the corporate power and capacity to borrow money and grant security therefore in the manner contemplated by the Agreement and Royal's Security and to enter into, observe and perform the terms and obligations on its part to be observed and performed under the Agreement and Royal's Security;



(C)

the Borrower has duly authorized, executed and delivered the Agreement and that Royal's Security to which it is a party and each of the Borrower Subsidiaries have duly authorized, executed and delivered that Royal's Security to which it is a party, the Agreement and such Royal's Security constitute valid, binding and enforceable obligations of the Borrower and the Borrower Subsidiaries (as applicable) in accordance with its terms, save as enforcement may be limited by:



(i)

applicable bankruptcy, insolvency, moratorium or reorganization or other laws affecting creditors' rights generally;



(ii)

the unavailability of equitable remedies such as the remedy of specific performance and injunction in any particular instance;



(iii)

the inability of the Courts of Canada to give judgement for payment in foreign currencies; and



(iv)

such other qualifications and limitations as counsel for Royal may accept acting reasonably;




(D)

so far as they are aware in their capacity as counsel for the Borrower in respect of this transaction, there are no actions, proceedings or investigations pending or threatened against the Borrower which question the validity of the Agreement or Royal's Security or the validity of any act to be taken pursuant thereto,

and, in addition, dealing with such other matters incidental to the transactions contemplated by the Agreement as Royal may reasonably and properly require;

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(8)

an opinion of Messrs. Bull, Housser & Tupper, counsel for Royal (in form and content satisfactory to Royal but subject to the usual assumptions and qualifications) to the effect that the Agreement and Royal's Security have been executed by all parties thereto and delivered to Royal and that such items of Royal's Security which require registration or filing have been registered or filed in all places and offices in British Columbia and elsewhere (as may be determined by counsel for Royal) where such registration or filing is necessary;




(b)

delivery by the Guarantor to Royal of the following:



(1)

the duly executed Guarantee and Subordination Agreement;



(2)

a certificate of good standing for the Guarantor;



(3)

a certified copy of a resolution or resolutions of the Guarantor's board of directors or a duly constituted and authorized committee of the Guarantor's board of directors authorizing the Guarantor to execute, deliver and perform its obligations under the Agreement and the instruments, agreements, certificates, papers and other documents contemplated herein, including the Guarantee and the Subordination Agreement and the manner in which and by whom the foregoing documents are to be executed and delivered;



(4)

an incumbency certificate of the Guarantor setting forth the names of its directors and officers and specimen signatures of the individuals who sign the Agreement, the Guarantee, the Subordination Agreement and the other instruments, agreements, certificates, papers and other documents provided for or contemplated therein;



(5)

a favourable opinion of counsel for the Guarantor (in form and content satisfactory to the solicitors for Royal) substantially to the effect that:



(A)

the Guarantor is a corporation duly organized and existing under the laws of the State of Delaware, U.S.A., and is in good standing in that jurisdiction;



(B)

the Guarantor has all requisite corporate power and capacity to guarantee the obligations of the Borrower, to enter into, observe and perform its obligations under the Agreement, the Guarantee and the Subordination Agreement;



(C)

the Guarantor has taken all necessary corporate action to authorize the execution, delivery and performance of its obligations under the Agreement, the Guarantee and the Subordination Agreement;



(D)

each of the Agreement, the Guarantee and the Subordination Agreement has been duly authorized, executed and delivered by the Guarantor and constitutes legal, valid and binding obligations of the Guarantor, enforceable against the Guarantor in accordance with its respective terms, save as enforceability may be limited by:



(i)

applicable bankruptcy, insolvency, fraudulent transfer, moratorium or reorganization or other similar laws affecting creditors' rights generally, and



(ii)

general principles of equity and the unavailability of the remedies of specific performance and injunction in any particular instance;




(E)

so far as they are aware in their capacity as counsel to the Guarantor, there is no action, suit, proceeding or investigation pending or threatened against the Guarantor which questions the validity of the Agreement, the Guarantee or the Subordination Agreement or the validity of any act to be taken pursuant thereto;

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(F)

so far as they are aware in their capacity as counsel to the Guarantor, neither the execution and delivery of the Agreement, the Guarantee or the Subordination Agreement by the Guarantor nor the fulfilment or compliance with the terms thereof:



(i)

contravenes or results in a breach of any of the terms, conditions or provisions of the Charter of the Guarantor, or



(ii)

contravenes or results in any breach of or constitutes a default under any material agreement to which the Guarantor is a party or by which it is bound;




(c)

the Borrower shall have paid all fees and expenses then due to Royal including the arrangement fee due under §3.30 and any reasonable legal fees invoiced prior to the Closing Date;



(d)

Royal shall be satisfied with the arrangement to effect the repayment in full of all indebtedness of the Borrower under the 1997 LP Canada Credit Agreement and the termination of that agreement prior to or concurrently with the closing of the transactions contemplated under the Agreement.

6.2  Conditions Precedent to Subsequent Borrowings

        It shall be a condition of each advance, renewal or conversion that the representations and warranties contained in Section 2 hereof shall be true on and as of the date of each advance, renewal or conversion and that Royal is satisfied that there has been no material adverse change in the financial condition or operation of the Borrower. The Borrower will, upon request of Royal, deliver to Royal a certificate or certificates of an officer on behalf of the Borrower to that effect.

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7.    COVENANTS OF THE BORROWER AND THE GUARANTOR

7.1 Borrower's Covenants

        The Borrower covenants and agrees with Royal as follows:

Positive Covenants of Borrower

(a)

that it will duly and punctually pay or cause to be paid all amounts required to be paid by it to Royal pursuant to the Agreement, including principal, interest, default interest, Documentary Credit Fees, fees for Bankers' Acceptances, Swap Termination Values, Standby Fees, fees for Swap Contracts and any other fees and amounts, on the day, at the place, in the Currencies and in the manner set forth herein;



(b)

that it will duly observe and perform or cause to be observed and performed each and all of the covenants and agreements required by it to be observed and performed as set forth in the Agreement and Royal's Security;



(c)

that it will maintain Insurance Coverage at all times and will forthwith notify Royal upon the happening of any loss which could reasonably be expected to have a material adverse effect on the financial condition or operations of the Borrower and if Insurance Coverage is provided by third party insurers, it shall duly and punctually pay all premiums and other sums of money for maintaining such insurance;



(d)

that it will and it will cause each of its Subsidiaries to file all material tax returns including income tax returns, corporation capital tax returns and other tax filings in all required jurisdictions;



(e)

that it will and it will cause each of its Subsidiaries to pay all material taxes (except taxes in dispute which are being contested in good faith) including interest and penalties and will pay or make adequate reserves for the ultimate payment of any tax payment which is being contested;



(f)

that it will and it will cause each of its Subsidiaries to actively and diligently contest or cause to be contested in good faith, by appropriate and timely proceedings, or effect a timely and provident settlement of any action, suit, litigation or other proceeding the result of which could reasonably be expected to have a material adverse effect on the financial condition or operations of the Borrower;



(g)

that it will and it will cause each of its Subsidiaries to effect a timely and provident settlement of or bring an application to stay any writ of execution, attachment or similar process issued or levied against all, or a substantial portion of, its property or the property of any of its Subsidiaries in connection with any judgement against it or any of its Subsidiaries in an amount which materially adversely affects the financial condition or operations of the Borrower;



(h)

that it will and it will cause each of its Subsidiaries to observe and comply with the provisions of all applicable laws, regulations, bylaws, ordinances and orders of any Governmental Body dealing in relation to its business or the business of any of its Subsidiaries with pollution of the environment, toxic and hazardous materials and waste and other environmental hazards, unless the failure to so observe and comply would not, in the judgement of the Borrower, reasonably exercised, materially adversely affect the ability of the Borrower to meet its obligations under the Agreement;

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(i)

that it will, as soon as practical after it becomes aware thereof, provide Royal with prompt notice of:



(1)

any spills of Contaminants which are required to be reported to any Governmental Body, and



(2)

of any investigations, control orders, stop orders, injunctions, prosecutions or lawsuits under any federal, provincial, municipal or other laws relating to pollution of the environment, the handling of toxic or hazardous materials and waste or any other environmental or public health and safety laws,

and which, in either such case, would, in the judgement of the Borrower, reasonably exercised, have a material adverse effect on the business or financial condition of the Borrower or any of its Subsidiaries and which would materially adversely affect the ability of the Borrower to meet its obligations under the Agreement;

(j)

that it will cause its Chief Financial Officer, such other senior officer as may be appropriate or its auditor, to meet with Royal to discuss and explain, as the case may be, any of its affairs, finances and accounts and to provide such other information pertaining to its business and operations together with such reports and documents as Royal may reasonably require;



(k)

that it will permit representatives and independent contractors of Royal to visit and inspect any of its or its Subsidiaries' properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their corporate affairs, finances and accounts with directors, officers, and independent chartered accountants, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower except that, when an Event of Default exists, Royal may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice;



(l)

that it will maintain and it will cause each of its Subsidiaries to maintain in full force and effect all material leases, licences, permits, consents and regulatory approvals necessary for the due carrying on of their respective businesses;



(m)

that it will maintain and it will cause each of its Subsidiaries to maintain their respective corporate existences as validly subsisting corporations;



(n)

that it will give to Royal prompt notice of any Event of Default or any event that with notice or lapse of time would be an Event of Default;



(o)

that it will use Borrowings solely for the purposes set forth in §3.1 and for no other purpose;

Negative Covenants of the Borrower

(p)

that, without the prior written consent of Royal, it will not, and it will cause each of its Subsidiaries not to grant, create, assume, suffer or permit any Lien on any of its assets or operations except for Permitted Encumbrances;



(q)

that, without the prior written consent of Royal, it will not, nor will it permit any Subsidiary to merge, amalgamate, enter into any corporate reorganization or otherwise modify its corporate structure in any way which would materially adversely affect its asset base or consolidated cash flow or impair the ability of the Borrower to observe and perform its obligations under the Agreement;

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(r)

that, without the prior written consent of Royal, it will not and it will cause each of its Subsidiaries not to, sell (including sale and lease-back transactions), alienate, lease or otherwise dispose of or part with possession of any of its property or assets except for:



(1)

dispositions of inventory or current assets in the ordinary course of business and on commercially reasonable terms it being acknowledged that sales and transfers of inventory and related property and assets to the Guarantor are in the ordinary course of business;



(2)

dispositions of individual items of property or assets in any fiscal year having an aggregate value of $5,000,000 or less based on the greater of net book value or the value determined by the value of the sale or disposition, or



(3)

dispositions of assets as approved by Royal;




(s)

that, without the prior written consent of Royal, it will not nor will it permit any Borrower Subsidiary to borrow money or otherwise incur Indebtedness, except for:



(1)

normal day-to-day trade credit agreements;



(2)

Indebtedness between any of the Borrower, the Guarantor and any Canadian Subsidiary of the Guarantor;



(3)

borrowings pursuant to the Agreement;



(4)

normal indebtedness incurred in the ordinary course of business in respect of amounts due or accruing due to Governmental Bodies;



(5)

Purchase Money Obligations;



(6)

Capital Leases;



(7)

Indebtedness under the notes issued under the Forex Indenture;



(8)

Indebtedness owing to Société en Commandite Sodexfor pursuant to an agreement of purchase and sale dated April 14, 1999; and



(9)

Indebtedness referred to in Schedule G;




(t)

that, without the prior written consent of Royal, it will not and it will not permit any of its Subsidiaries to make or permit the existence of any Contingent Obligation (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) except for Permitted Encumbrances and Permitted Guarantees;



(u)

that it will not allow the aggregate of the principal amount of Borrowings under the credit facility established pursuant to §3.1(a) to exceed at any time the Borrowing Base set out in the then current Borrowing Base Report;

Reporting Covenants of Borrower

(v)

that it will and it will cause each of its Subsidiaries to at all times keep or cause to be kept proper books of account and that it will furnish to Royal within 90 days after the close of each fiscal year Sufficient Copies of its annual review engagement consolidated financial statements;



(w)

except for the year end fiscal quarter, it will furnish to Royal within 45 days of the close of each fiscal quarter Sufficient Copies of its quarterly unaudited consolidated financial statements signed by its Chief Financial Officer;



(x)

that it will provide to Royal on or prior to the date reasonably stipulated by Royal Sufficient Copies of financial and operating statements, budgets, business and capex plans together with such other information, reports and documents as Royal may reasonably request;

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(y)

that the Borrower will deliver to Royal as soon as practical and no later than 30 days following each ensuing fiscal quarter-end:



(1)

a Borrowing Base Report in substantially the form of Schedule E and certified as provided therein by its Chief Financial Officer setting out the calculations of Eligible Inventory, Good Accounts Receivable (Cdn$), Good Accounts Receivable (US$) and Potential Preferred Claims as at the last day of the immediately preceding month-end, and certifying the accuracy thereof;



(2)

a calculation of the Borrowing Base; and



(3)

a calculation of the Current Ratio;




(z)

that, except for the year-end fiscal quarter, within 45 days of the close of each fiscal quarter and within 120 days of the close of each fiscal year, it will deliver to Royal a certificate signed by its Chief Financial Officer in substantially the form of Schedule C setting forth the calculation of the Current Ratio together with particulars of all Permitted Guarantees and Purchase Money Obligations incurred or acquired during the relevant fiscal quarter and certifying the accuracy of the calculations thereof and that the Borrower and each of its Subsidiaries is not in default under any financial arrangement in any way which materially adversely affects the financial condition or operations of the Borrower or if the Borrower or any of its Subsidiaries is in such default, specifying the defaults;

Financial Covenants of Borrower

(aa)

the Borrower will maintain at all times a Current Ratio of not less than 1.15 to 1.0.

7.2  Guarantor's Covenants

        The Guarantor covenants with Royal as follows:

Positive Covenants of Guarantor

(a)

that it will duly observe and perform or cause to be observed and performed each and all of the covenants and agreements required by it to be performed and observed as set forth in the Agreement and the Guarantee;



(b)

that it will at all times maintain such insurance as is usually maintained by others in the business of the same nature as the business of the Guarantor and each Subsidiary, as the case may be, or maintain a program of self-insurance, with reserves, in accordance with sound business practices;



(c)

that it will, maintain its web site and post in a timely manner copies of all public documents filed with the U.S. Securities and Exchange Commission (with the exception of Forms S-8);



(d)

that it will give Royal at least 15 days' notice of its intention to transfer, mortgage, pledge, charge or otherwise encumber or grant a security interest in any shares of the Borrower in which it has a legal or beneficial interest;



(e)

it will provide Royal with copies of all certificates, notices and other information it is required to deliver to the administrative agent pursuant to §6.02 and §6.03 of the Guarantor Credit Facility;

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Negative Covenants of Guarantor

(f)

that, except for the Permitted Securitization, Liens permitted by the Guarantor Credit Agreement and Liens to finance the normal day-to-day operations of the Guarantor, it will not, without the consent in writing of Royal, sell, lease, sell and lease back, exchange, transfer or otherwise dispose of:



(1)

in a transaction or a series of transactions, all or substantially all its property and assets and the property and assets of its Subsidiaries on a consolidated basis;



(2)

during any calendar year, any of its fixed or capital assets with a fair market value exceeding on a cumulative basis for such year for the Guarantor and its Subsidiaries 10% of the total consolidated assets of the Guarantor (determined as of the immediately preceding December 31), or



(3)

any of its material assets except for full, fair and reasonable consideration;




(g)

that it will not, without the consent in writing of Royal, merge or consolidate with any other Person or liquidate or dissolve except for:



(1)

mergers or consolidations with any other Person if the Guarantor (or the resulting corporation in a consolidation) will be the surviving corporation and the Guarantor (or such resulting corporation) will not be in default under any of the terms of the Guarantor Credit Agreement immediately after the merger or consolidation, and



(2)

the merger with or dissolution into the Guarantor or with or into any other Subsidiary by any Subsidiary;

Reporting Covenants of Guarantor

(h)

that it will promptly give notice to Royal of:



(1)

all litigation when the aggregate amount of claims pending is US$50,000,000 or more and any litigation which involves a claim of US$15,000,000 or more and the Guarantor or a Subsidiary is a defendant;



(2)

any dispute which may exist between the Guarantor or any Subsidiary and any governmental regulatory body or any threatened action by any governmental agency to acquire or condemn any of the properties of the Guarantor or any Subsidiary where, in either case, the amount involved is US$30,000,000 or more;



(3)

any strike involving 1,000 or more employees of the Guarantor or any Subsidiary which has continued for 30 days;



(4)

any proceeding or order before any court or administrative body requiring the Guarantor or any Subsidiary to comply with any statute or regulation regarding protection of the environment if such compliance would require expenditures in the amount of US$50,000,000 or more or if such violation involves the possibility of the imposition of a fine of US$10,000,000 or more;



(5)

the occurrence of any of the following events affecting the Guarantor or any ERISA Affiliate (but in no event more than 10 days after such event), and deliver to Royal a copy of any notice with respect to such event that is filed with a governmental authority and any notice delivered by a governmental authority to the Guarantor or any ERISA Affiliate with respect to such event:



(A)

an ERISA Event,

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(B)

a material increase in the Unfunded Pension Liability of any Plan,



(C)

the adoption of, or the commencement of contributions to, any Plan subject to Section 412 of the Code by the Guarantor or any ERISA Affiliate, or



(D)

the adoption of any amendment to a Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability, and




(6)

any Default or Event of Default (both as defined in the Guarantor Credit Agreement) known to the Guarantor.

Each notice under this Section shall be accompanied by a written statement by the Chief Financial Officer of the Guarantor setting forth details of the occurrence referred to therein and stating what action the Guarantor or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under §7.2(h)(6) shall describe with particularity any and all clauses or provisions of the Guarantor Credit Agreement that have been breached or violated;

(i)

that it will at all times maintain its corporate existence and will carry on and conduct its business in a proper and efficient manner and it will and will cause each of its Subsidiaries to at all times keep or cause to be kept proper books of account and that it will furnish to Royal at the Branch of Account within 90 days after the close of each fiscal year Sufficient Copies of its annual consolidated audited financial statements reported on by its auditor and accompanied by their signed report which shall contain no material qualifications as to the scope of their examination except as to the furnishing of information to them, and, except for the year end fiscal quarter, within 45 days of the close of each fiscal quarter Sufficient Copies of its quarterly consolidated unaudited financial statements including a consolidated summary balance sheet, a consolidated summary statement of income, a consolidated statement of cash flows and a consolidated statement of stockholders' equity, signed by its Chief Financial Officer;



(j)

that it will, contemporaneously with delivery to the agent pursuant to the Guarantor Credit Agreement, deliver Sufficient Copies of the Compliance Certificate to Royal;



(k)

that it will promptly after the same are available, provide Sufficient Copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Guarantor, and copies of all annual, regular, periodic and special reports and registration statements which the Guarantor filed with the Securities and Exchange Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to Royal pursuant to this Agreement;



(l)

that, at least 15 days before each fiscal year end, it will provide Sufficient Copies of its Business Plan to Royal;



(m)

that, except for the year-end fiscal quarter, within 45 days of the close of each fiscal quarter and within 90 days of the close of each fiscal year, it will deliver to Royal a certificate signed by its Chief Financial Officer in substantially the form attached as Schedule C setting forth the calculations of the amounts and ratios comprised in the financial covenants set out in §7.2(n), (o), (p) and (q);

Financial Covenants of Guarantor

(n)

it will not permit Shareholders' Equity as of the end of any fiscal quarter of the Guarantor to be less than the sum of (a) US$1,003,850,000, and (b) an amount, not less than 0, equal to 50% of the cumulative Consolidated Net Income earned in all fiscal quarters after the fiscal

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quarter ended June 30, 2001, and (c) an amount equal to 100% of the aggregate increases in Shareholders' Equity after the closing date of the Guarantor Credit Agreement by reason of the issuance and sale of capital stock of the Guarantor (including upon any conversion of debt securities of the Guarantor into such capital stock);

(o)

it will not permit the Debt to Capitalization Ratio measured as of the end of each fiscal quarter ending on the dates listed below, to exceed the percentage set forth opposite such dates:

(p)

it will not permit Consolidated EBITDDA, for any period of four consecutive quarters ending on a date listed below, to be less than the ratio set forth opposite such date:

(q)

it will not permit the Collateral Coverage Ratio, as measured as of the last day of any fiscal quarter, to be less than 2.0 to 1.0.

7.3  Environmental Law

        Nothing in the Agreement shall abridge or affect the rights of Royal in respect of the Borrower pursuant to any Environmental Law.

8.    EVENTS OF DEFAULT

8.1 Definition of Event of Default

        The occurrence of any one or more of the following events constitutes an Event of Default hereunder:

(a)

if the Borrower makes default in any payment of principal, interest, acceptance fees, Documentary Credit Fees, default interest, Standby Fees, Swap Termination Values, fees for Swap Contracts, any other fees or other like amounts when the same becomes due under the

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Agreement and such default shall have continued for a period of five Business Days after notice has been given by Royal to the Borrower;

(b)

if the Borrower makes default in any payment of a Compensation Amount, Additional Amount or like payment when the same becomes due under the Agreement and such default shall have continued for a period of ten Business Days after notice has been given by Royal to the Borrower;



(c)

if the Borrower makes, suffers or permits a material default in observing or performing any other covenant or condition of the Agreement, any Swap Contract or any other material agreement with Royal and such default shall have continued for a period of five Business Days after notice in writing has been given by Royal to the Borrower specifying such default;



(d)

if there is a default by the Borrower (other than a default under the Agreement) which results in the acceleration of payment by the Borrower or any of its Material Canadian Subsidiaries of obligations for borrowed money in excess of $5,000,000;



(e)

if any representation, warranty or statement made by the Borrower, the Borrower Subsidiaries in the Borrower Subsidiaries' Guarantees and the Borrower Subsidiaries' Security Agreements or the Guarantor herein or in the Guarantee or in any certificate pursuant to the Agreement or the Guarantee shall, in Royal's opinion, prove to have been materially incorrect on the date as of which it was made in any respect materially adverse to Royal and Royal shall have so notified the Borrower;



(f)

if an order be made or an effective resolution be passed for the winding-up of the Borrower or, without the prior written consent of Royal, any of its Material Canadian Subsidiaries or if the Borrower or any of its Subsidiaries on its own behalf shall make an assignment for the benefit of its creditors or if the Borrower or any of its Subsidiaries shall be declared bankrupt or make an authorized assignment or if a custodian or receiver be appointed under the Bankruptcy and Insolvency Act or if a compromise or arrangement (including a compromise, arrangement, reorganization or other like restructuring commenced by the Borrower which adversely affects its creditors under any Federal or Provincial statute including the Companies' Creditors Arrangement Act or the British Columbia Company Act) is proposed by the Borrower or any of its Subsidiaries to creditors generally or any significant class of creditors, or if a receiver, receiver-manager or other officer with like powers shall be appointed, or if an encumbrancer shall take possession of the property of the Borrower or any of its Subsidiaries or any part thereof, which is, in the reasonable opinion of Royal, material to the business of the Borrower and its ability to perform its obligations under the Agreement or if a distress or execution or any similar process be levied or enforced against a substantial or essential part of such property and remain unsatisfied for a period of thirty days, unless such distress, execution or similar process is in good faith disputed by the Borrower or any such Subsidiary and, if so required by Royal, the Borrower or any such Subsidiary provides adequate security to pay in full the amount claimed;



(g)

if the Agreement or any of Royal's Security shall at any time cease to be in full force and effect (other than by expiration or termination in accordance with its terms for reasons other than the default of the Borrower) or if a Court of competent jurisdiction shall declare the Agreement to be null and void or if the Borrower shall contest the validity or enforceability thereof or if the Borrower shall deny that it has any further liability or obligation hereunder or if any of Royal's Security for any reason ceases, other than in accordance with its terms, to constitute valid and subsisting security upon any material part of the property and assets of the Borrower or its Subsidiaries as described therein;

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(h)

if a writ of execution, attachment or similar process has been issued or levied against all, or a substantial portion of, the property of the Borrower or any of its Subsidiaries in connection with any judgement against the Borrower or any of its Subsidiaries in any amount in excess of $1,000,000 which materially affects the property of the Borrower or any of its Subsidiaries, and no application has been brought to stay such writ of execution, attachment or similar process which application has, in the reasonable opinion of Royal, a reasonable chance of success;



(i)

if it shall become illegal or unlawful for the Borrower or any of its Subsidiaries to carry on its business or to perform its obligations under the Agreement;



(j)

if the Borrower or any of its Subsidiaries (except for Louisiana-Pacific Acquisition, Inc.) suspends or ceases or threatens to suspend or cease business;



(k)

if the Borrower or any of its Subsidiaries shall sell or otherwise dispose of or threaten to sell or otherwise dispose of, all or a substantial part of its undertaking, property and assets, whether in one transaction or in a series of related transactions;



(l)

if there is an Event of Default (as defined in the Guarantor Credit Agreement).

8.2  Remedies

        Upon the occurrence of any Event of Default and at any time thereafter, provided the Event of Default has not been waived by Royal or the Borrower has not theretofore remedied all outstanding Events of Default within the prescribed time period or such longer period of time as Royal may permit, Royal may, by notice to the Borrower:

(a)

terminate its obligations hereunder to make any further advances under the Credit Facility, accept Drafts of the Borrower, enter into Swap Contracts or issue Documentary Credits;



(b)

declare Borrowings under the Credit Facility, interest, Standby Fees, Documentary Credits, fees, costs including Swap Termination Values and any other moneys owing to Royal by the Borrower under the Agreement, including amounts owing or liabilities in respect of Documentary Credits, Bankers' Acceptances, EFT Transfers and PDS Services which have not yet matured, to be immediately due and payable on the date which is fifteen Business Days after Royal delivers such notice to the Borrower, or that earlier date on or after delivery of such notice when Royal determines in its reasonable discretion that the business or operations of the Borrower may be materially prejudiced, endangered or adversely affected ("Acceleration Date") and such moneys and liabilities shall forthwith become due and payable on the Acceleration Date without presentment, demand, protest or other notice of any kind to the Borrower, all of which are hereby expressly waived;



(c)

enforce all rights and remedies granted under Royal's Security provided that any enforcement shall not be commenced until after the Acceleration Date;



(d)

convert any portion of the Credit Facility denominated in Eurocurrency Funds together with unpaid interest thereon, into U.S. Funds or Canadian Funds;



(e)

convert U.S. Advances to Canadian Funds;



(f)

terminate any Swap Contract in accordance with its terms.

        The Borrower expressly acknowledges and agrees that the date which is fifteen Business Days after Royal delivers such notice to the Borrower affords and will afford a reasonable period of time to make payment of the outstanding balance advanced under the Credit Facility, interest, Standby Fees, Documentary Credits, Swap Termination Values, outstandings in respect of EFT Transfers and PDS Services, fees, costs and other moneys owing by the Borrower under the Agreement. Royal acknowledges and agrees that interest, if any, earned or received by it as a result of the redeployment

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or other application of moneys paid by the Borrower pursuant to a demand made under §8.2(b) in respect of Bankers' Acceptances or Documentary Credits which have not yet matured shall be credited or otherwise applied for the benefit of the Borrower.

        If there are Documentary Credits or Bankers' Acceptances outstanding on the Acceleration Date the Borrower shall at such time deposit (at interest to be credited to the Borrower at Royal's rate for term deposits appropriate to the currency, amount and terms of any such Documentary Credits or Bankers' Acceptances, as the case may be) in one or more cash collateral account to be opened and maintained by Royal amounts in Canadian Funds, U.S. Funds or both, as the case may be, equal to the aggregate of the Face Amounts of all such unmatured Bankers' Acceptances and the amount of the Documentary Credits, as the case may be. Amounts held in such cash collateral accounts shall be applied by Royal to the payment of maturing Bankers' Acceptances and payment obligations, if any, pursuant to Documentary Credits, as the case may be, and any balances in such accounts shall be applied to repay other obligations of the Borrower in accordance with §8.5 of the Agreement.

8.3  Remedies Cumulative

        No remedy conferred on Royal under the Agreement is intended to be exclusive. Each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or equity or by statute or otherwise. The exercise or commencement of exercise by Royal of any one or more of such remedies shall not preclude the simultaneous or later exercise by Royal of any or all other such remedies.

8.4  Waivers

        Royal may, by written instrument at any time and from time to time waive any breach by either the Borrower or the Guarantor of any of the covenants or Events of Default herein. No course of dealing between either the Borrower or the Guarantor and Royal nor any delay in exercising any rights hereunder shall operate as a waiver of any rights of Royal.

8.5  Application of Payments Following Acceleration

        After the Acceleration Date, Royal may apply any moneys received by it towards repayment of Borrowings under the Credit Facility as it deems appropriate. Royal agrees to use reasonable efforts to apply moneys received by it to first repay Borrowings under the Borrowing Options which do not have redeployment costs associated with payment prior to the maturity dates of such Borrowings.

8.6  Royal May Perform Covenants

        If the Borrower shall fail to perform any of its obligations under any covenant contained in the Agreement Royal may, after an Event of Default, upon five Business Days' prior notice to the Borrower, perform any such covenant capable of being performed by it and, if any such covenant requires the payment or expenditure of money, it may make such payment or expenditure with its own funds. All amounts so paid by Royal hereunder shall be repaid by the Borrower and shall bear interest at the rates set forth in §3.6 from and including the date paid by Royal hereunder to but excluding the date such amounts are repaid in full by the Borrower.

9.    GENERAL

9.1  Waiver

        No failure or delay on the part of Royal in exercising any right, power or privilege hereunder shall impair such right, power or privilege or operate as a waiver thereof nor shall any single or partial

50

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exercise of such right, power or privilege preclude any further exercise thereof or the exercise of any other right, power or privilege hereunder.

9.2  Effect of Amendment, Modification or Waiver

        No amendment, modification or waiver of any condition of the Agreement or consent to any departure by the Borrower therefrom shall, in any event, be effective unless the same shall be in writing signed by Royal. No notice to or demand on the Borrower shall by reason thereof entitle the Borrower to any other or further notice or demand in similar or other circumstances unless specifically provided for in the Agreement.

9.3  Time of the Essence

        Time shall be of the essence hereof.

9.4  Further Assurances

        Each of the Borrower, the Guarantor and Royal will do, execute and deliver, or will cause to be done, executed and delivered, all such further acts, documents (including certificates, declarations, affidavits, reports and opinions) and things as Royal, the Borrower or the Guarantor may reasonably require for the purpose of giving effect to the Agreement.

9.5  Set-Off

        In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, Royal is authorized at any time or from time to time after the Acceleration Date, without notice to the Borrower or to any other Person, any such notice being expressly waived by the Borrower, to set-off, compensate and to appropriate and to apply any and all deposits, matured or unmatured, general or special, held for or in the name of the Borrower and any other indebtedness or liability at any time owing or payable by Royal to or for the credit of or the account of the Borrower against and on account of the obligations and liabilities of the Borrower due and payable to Royal under the Agreement including all claims of any nature or description arising out of or connected with the Agreement, irrespective of currency and whether or not Royal has made any demand under the Agreement and although these obligations, liabilities or claims of the Borrower are contingent or unmatured. Royal and the Borrower acknowledge and agree that this paragraph is not intended to create and shall not be construed as creating and does not create a security interest in any property of the Borrower.

9.6  Judgement Currency

        If for the purposes of obtaining judgement in any court in any jurisdiction or for any other purpose hereunder it becomes necessary to convert into the currency of such jurisdiction ("Judgement Currency") any amount due hereunder in any currency other than the Judgement Currency, then such conversion shall be made at the Spot Buying Rate prevailing on the Business Day before the day on which judgement is given. In the event that there is a change in the Spot Buying Rate prevailing between the Business Day before the day on which the judgement is given and the date of payment of the amount due, the Borrower shall, on the date of payment, pay such additional amounts (if any) as may be necessary to ensure that the amount paid on such date is the amount in the Judgement Currency which, when converted at the Spot Buying Rate prevailing on the date of payment, is the amount then due under the Agreement in such other currency. Any additional amount due from the Borrower under this §9.6 shall be due as a separate debt and shall not be affected by judgement being obtained for any other sums due under or in respect of the Agreement.

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9.7  Account Debit Authorization

        The Borrower authorizes and directs Royal to automatically debit, by mechanical, electronic or manual means, the bank accounts of the Borrower maintained with Royal for all amounts payable under the Agreement, including but not limited to the repayment of principal and the payment of interest, fees and all charges for the keeping of such bank accounts.

9.8  Expenses

        Except as otherwise provided in the Agreement all statements, certificates, opinions and other documents or information required to be furnished to Royal by the Borrower under the Agreement shall be supplied by the Borrower without cost to Royal. In addition, the Borrower agrees to pay promptly to Royal on demand, all reasonable legal fees and other reasonable expenses which are incurred from time to time by Royal in respect of the documentation, preparation, registration, execution and enforcement of the Agreement (including any value added, goods and services, Provincial Sales Tax, business transfer tax or other similar taxes payable in connection with the execution, delivery or enforcement of the Agreement).

9.9  Survival of Representations and Warranties

        The representations and warranties made in Section 2 of the Agreement shall survive the execution and delivery of the Agreement and the Closing Date and continue in full force and effect until the full payment and satisfaction of all monies due hereunder.

9.10 Notice

        Unless otherwise specified, any notice, demand, request, consent or other communication required or permitted to be given to a party under this Agreement or to a party under any of Royal's Security shall be in writing and may be delivered personally or sent by facsimile, to the address or facsimile number of the party set out beside its name at the foot of this Agreement to the attention of the Person there indicated or to such other address, facsimile number or other Person's attention as the party may have specified by notice in writing given under this Section. Any notice, demand, consent, request or other communication shall be deemed to have been given:

(a)

if delivered personally, when received;



(b)

if sent by facsimile, on the Business Day when the appropriate confirmation of receipt has been received if the confirmation of receipt has been received before 3:00 p.m. on that Business Day or, if the confirmation of receipt has been received after 3:00 p.m. on that Business Day, on the next succeeding Business Day; and



(c)

if sent by facsimile on a day which is not a Business Day, on the next succeeding Business Day on which confirmation of receipt has been received.

9.11 General Indemnity

        The Borrower hereby indemnifies and holds harmless Royal and its directors, officers, employees and agents from and against all losses, damages, expenses (including reasonable fees, charges and disbursements of counsel) and liabilities (including those arising from any litigation or other proceedings) related to or arising out of any default hereunder by the Borrower or any misrepresentation in connection with this Agreement provided that no Person shall be indemnified in respect of matters arising from such person's gross negligence or wilful misconduct.

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9.12 Counterparts

        The Agreement and all documents contemplated by or delivered under or in connection with the Agreement may be executed and delivered in any number of counterparts or facsimile counterparts with the same effect as if all parties had all signed and delivered the same document and all counterparts when executed and delivered (by facsimile or otherwise) will be construed together to be an original and will constitute one and the same agreement.

9.13 Reasonable Consent or Approval of the Parties

        The parties hereto acknowledge and confirm that:

(a)

where either of them is required to exercise its discretion or grant its approval or consent pursuant to a provision in the Agreement, it shall act reasonably in the exercise of its discretion and will not unreasonably withhold or delay the granting of its approval or consent, and



(b)

the Borrower may rely on any consent, approval, calculation or determination provided to it by Royal pursuant to the Agreement.

9.14 Evidence of London Interbank Offered Rate

        If it is necessary at any time to prove the London Interbank Offered Rate applicable to any particular Eurocurrency Advance, a certificate in writing from any duly authorized officer of Royal shall be prima facie evidence (absent any manifest error) of such rate.

9.15 Entire Agreement

        Save as provided herein and in the instruments and documents contemplated or provided for hereunder, the Agreement contains the whole agreement between the parties with respect to the Credit Facility and there are no other terms, conditions, representations or warranties with respect thereto except as contained herein.

9.16 No Deduction for Taxes

        Provided Royal has not assigned its obligations under the Agreement or its rights to receive payments in respect thereof or changed the booking location of Borrowings, all payments required to be made by the Borrower pursuant to the Agreement whether for principal, interest, acceptance fees, Standby Fees, Documentary Credit Fees, Swap Termination Values, fees for Swap Contracts or any other fees or otherwise shall be made free and clear of and without deduction, withholding or reserve for or on account of taxes, imposts, levies or other charges of any nature or kind whatsoever, unless otherwise agreed by Royal.

9.17 Participations and Assignments

        Subject to §9.18, Royal may, with the consent of the Borrower, which consent shall not be unreasonably withheld, subject to the provisions of this §9.17 at any time grant participations in, sell, assign, transfer or otherwise dispose of all or any portion of the Credit Facility or Borrowings ("Facility Disposition") to any financial institution carrying on business in, and for the purpose of the Income Tax Act (Canada) residing in, Canada; provided no Facility Disposition may be made which would result in an increase in the cost of the Credit Facility to the Borrower. In all cases an assignment shall be of at least $5,000,000 with increments of $1,000,000 and a participation shall be of at least $2,500,000 with increments of $500,000. No Facility Disposition shall be effective until Royal shall have received an instrument (in form and substance satisfactory to Royal) in which the transferee or assignee, as the case may be, shall agree to be bound by all of the terms of the Agreement as fully as though it were an

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original party hereto except that any participant shall not be entitled to grant subparticipations. The Borrower hereby agrees that, upon compliance with the foregoing, any purchaser, assignee or transferee of all or any portion of any amount owed by the Borrower under the Agreement:

(a)

shall be entitled to the benefits of the provisions of the Agreement as fully as though it were an original party to the Agreement; and



(b)

may, subject to the terms of the Agreement, exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all amounts owed by the Borrower to such purchaser, assignee or transferee as fully as if such purchaser, assignee or transferee had made advances in the amount of the obligation which is sold, assigned or transferred to it.

9.18 Assignment After Default

        Notwithstanding anything to the contrary herein contained, where an Event of Default has occurred and is continuing and has not been waived, nothing in the Agreement shall limit or otherwise restrict the right of Royal to assign all or any part of its rights and obligations under or with respect to the Agreement. Without limiting the generality of the foregoing, any such assignment shall not require the consent of the Borrower nor be restricted to financial institutions resident in Canada.

9.19 Obligations of Borrower Re Facility Disposition

        The Borrower shall, at the request and at the expense of Royal, execute and deliver to such party or parties as Royal may designate any and all further instruments, use its reasonable efforts to obtain any and all further authorizations or approvals and make any and all further registrations, filings or notifications, as may be necessary or desirable to give full force and effect to such Facility Disposition. The term "Royal" as used in the Agreement shall include all purchasers, assignees and transferees permitted hereunder of all or any portion of any amount owed to Royal under the Agreement. Except as specifically set forth in this §9.19 nothing in the Agreement expressed or implied, is intended to or shall confer on any Person other than the respective parties hereto and thereto and their permitted successors and assignees any benefit or any legal or equitable right, remedy or other claim under the Agreement. For the purposes of this §9.19, the Borrower hereby authorizes Royal to provide on a confidential basis to any eligible prospective purchaser, assignee, transferee or participant all financial information, reports, budgets, projections and documents, including the Agreement made available to Royal from time to time.

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        IN WITNESS WHEREOF the parties hereto have caused the Agreement to be duly executed on December    , 2001.

LOUISIANA-PACIFIC CANADA LTD.		)		Address for Notice
		)		c/o Louisiana-Pacific Corporation
		)		Suite 1200, 805 S.W. Broadway
		)		Portland, Oregon
		)		U.S.A. 97205
Per: Authorized Signatory		)
		)		Phone: (503) 821-5100
		)		Fax: (503) 821-5322
		)		Attention: Vice-President and C.F.O.
Per: Authorized Signatory		)
		)		With a copy to Louisiana-Pacific Canada Ltd.
		)		2100—1075 West Georgia Street
		)		Vancouver, British Columbia
		)		V6E 3G2
		)
		)		Phone: (604) 631-3131
		)		Fax: (604) 631-3232
		)
		)
LOUISIANA-PACIFIC CORPORATION		)		Address for Notice
		)		Suite 1200, 805 S.W. Broadway
		)		Portland, Oregon
		)		U.S.A. 97205
Per: Authorized Signatory		)
		)		Phone: (503) 821-5100 Fax: (503) 821-5322
Per: Authorized Signatory		)
		)
		)
ROYAL BANK OF CANADA
		)		RBC Capital Markets
		)		Suite 2100, Park Place
		)		666 Burrard Street
		)		Vancouver, British Columbia
		)		V6C 3B1
		)		Attention: Managing Director
By: Gerry Derbyshire Managing Director		)
		)
		)		Phone: (604) 257-7100
		)		Fax: (604) 665-6465

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SCHEDULE A

INTEREST AND FEE RATES

        Pursuant to §3.6, §3.28 and §4.11, the following interest rates and fees (each expressed in basis points per annum) shall be effective and payable based on the applicable Rating of the Rating Agencies of the Guarantor's long term senior unsecured debt:

        Canadian Advances, U.S. Advances and Eurocurrency Advances shall bear interest at the Prime Rate, U.S. Base Rate and London Interbank Offered Rate ("LIBOR") respectively plus the following applicable margins.

Ratings of Rating Agencies		Acceptance Fee		LIBOR Margin		Prime Rate and U.S. Base Rate Margins		Documentary Credit Fees		Standby Fees
BB/Ba2 or higher		300.0		300.0		200.0		200.0		50.0
BB-/Ba3 or lower		375.0		375.0		275.0		275.0		62.5

        If the Guarantor's long term senior unsecured debt:

(a)

is rated differently by one category by one of the Rating Agencies, then the rates of interest and fees chargeable by Royal will be determined by the higher of the two Ratings;

(b)

when there is a difference of more than two categories between the Ratings of the Rating Agencies, then the rates of interest and fees chargeable by Royal will be determined by reference to the Rating which is immediately above the lowest rating.

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SCHEDULE B

GUARANTEE
(Particular Guarantee)

To: ROYAL BANK OF CANADA

        FOR VALUE RECEIVED and in order to induce Royal Bank of Canada ("Royal") to extend or continue credit to Louisiana-Pacific Canada Ltd., a British Columbia corporation which is at the date hereof a wholly owned subsidiary of the undersigned ("Customer"), the undersigned hereby guarantees, absolutely and unconditionally, the punctual payment when due to Royal of all debts and liabilities at any time owing by the Customer to Royal pursuant to the credit agreement dated for reference November 30, 2001 and all schedules thereto among the Customer, the undersigned and Royal (as amended, restated, modified, supplemented, extended, renewed or replaced from time to time the "Credit Agreement") and the Borrower Guarantees (as defined in the Credit Agreement) whether now existing or hereafter incurred, whether created directly or acquired by Royal by assignment or otherwise, whether matured or unmatured, whether absolute or contingent, whether characterized as principal, premium, interest, additional interest, facility fees, fees, expenses or otherwise, whether the Customer be bound alone or with any others and whether as principal or surety, including, without limitation, all debts and liabilities now or at any time owing by the Customer to Royal relating to Swap Termination Values with respect to a Swap Contract, EFT Transfers and PDS Services (all such debts and liabilities being hereinafter called the "Liabilities"); the liability of the undersigned hereunder (but not the Liabilities) being limited to the lesser, in the aggregate, of,:

(a)

the Liabilities, or



(b)

the sum of $60,000,000 Canadian Funds. In calculating Canadian Funds the Equivalent Amount in Canadian Funds of U.S. Funds outstanding under the Credit Agreement (if any) shall be determined and included. Interest shall be paid by the undersigned from the date of demand for payment at the rate per annum equal to the Prime Rate on Canadian Funds and the U.S. Base Rate on U.S. Funds.

PROVIDED, however, that, regardless of the amount of the Liabilities of the Customer to the Bank, the liability of the undersigned hereunder is further limited (to the extent permitted by applicable law) to the greater of (a) the maximum liability that the undersigned can incur hereunder without rendering itself insolvent or (b) the amount in U.S. Funds of the value received by the undersigned as a result of the financial accommodations made available by Royal to the Customer. The terms "value" and "insolvent", as used in this proviso shall have the same meanings as in 11 U.S.C. § § 548(a)(2)(A) and (B), respectively. If for any reason this Guarantee would be otherwise avoidable as a fraudulent transfer (whether under state law or the U.S. federal Bankruptcy Code), then the terms "value" and "insolvent" as used herein shall be defined and the limitation on the liability of undersigned shall be deemed to operate in such a manner as to prevent this Guarantee from being avoided as a fraudulent transfer while preserving the liability of undersigned hereunder to the fullest extent legally permissible. Nothing in this proviso shall otherwise effect the maximum aggregate amount payable hereunder as set forth in subparagraphs (a) and (b) of the immediately preceding paragraph.

        Words with an initial capital letter unless otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

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THE UNDERSIGNED HEREBY FURTHER AGREES WITH ROYAL AS FOLLOWS:

1.

From time to time, before or after any default by the Customer or any notice of termination of this Guarantee, (a) any collateral security (which term as used herein includes other guarantees) at any time held by or available to Royal in respect of the Liabilities or in respect of any guarantee of the Liabilities may be sold, exchanged, subordinated, surrendered or released in whole or in part and in any order, (b) any obligation of the Customer or of any guarantor of the Liabilities may be changed, altered, renewed, extended, continued, accelerated, surrendered, compromised, subordinated, waived or released in whole or in part, or any default with respect thereto waived, (c) Royal may set off, may refrain from setting off and may release in whole or in part any balance of any deposit account or credit on its books in favour of the Customer or of any such guarantor, may take or refrain from taking or from perfecting any collateral security and may exercise or refrain from exercising any rights against the Customer or others, (d) Royal may extend or refrain from extending further credit in any manner whatsoever to, may accept compositions from and may otherwise generally deal with, the Customer and others and with any collateral security as Royal may see fit and (e) Royal may apply all monies at any time received from the Customer or others or from any collateral security in such manner, in such amounts and against such part of the Liabilities as Royal deems best and change any such application in whole or in part as Royal may see fit; the whole without in any way limiting, diminishing or affecting the liability of the undersigned under this Guarantee and without imposing any obligation or trust upon Royal, and no loss of or in respect of any collateral security, whether caused by the fault of Royal or otherwise, shall in any way limit, diminish or affect the liability of the undersigned under this Guarantee.

2.

This is a guarantee of payment and not of collection, and Royal shall not be obligated to initiate, pursue or exhaust any form of recourse or obtain any judgment against the Customer or others (including other guarantors) or to realize upon or exhaust any collateral security held by or available to it or any deposit account or credit on its books before being entitled to payment from the undersigned hereunder. The liability of the undersigned hereunder shall not be limited, diminished or affected by (a) any failure by Royal to file or enforce any claim against the estate (in administration, bankruptcy or otherwise) of the Customer or others, (b) the fact that recovery from the Customer or any other person other than the undersigned is barred by any statute of limitations or for any other reason or (c) any other circumstance which might otherwise constitute a legal or equitable discharge of a guarantor. The undersigned renounces all benefits of discussion and division and waives diligence, presentment, protest, notice of dishonor or protest or default, demand for payment upon the Customer, notice of acceptance of this Guarantee, notice of any addition to or increase or decrease in the Liabilities and all other notices and demands whatsoever. The undersigned shall have no right to be subrogated to any rights of Royal until Royal shall have received payment in full of the Liabilities.

3.

This Guarantee is a continuing guarantee, will not be discharged until payment in full of all of the Liabilities (subject in all instances to the first two full paragraphs of this Guarantee) and cancellation of this instrument by Royal and will remain in full force and effect notwithstanding any interruption in the business relations between the Customer and Royal or any increase or decrease from time to time in the amount of the Liabilities. The undersigned may, by notice in writing delivered to Royal, terminate the undersigned's liability under this Guarantee in respect of any Liabilities thereafter incurred but not in respect of any Liabilities theretofore incurred even though not then matured, provided, however, that notwithstanding receipt of any such notice, Royal may fulfill and perform any commitments or obligations (express or implied) made prior to the receipt of such notice, including payment of any Bankers' Acceptance or Documentary Credit (as defined in the Credit Agreement) and any resulting Liabilities shall be covered by this Guarantee.

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4.

The liability of the undersigned under this Guarantee shall be reinstated and revived with respect to any amount at any time paid to or for the account of Royal in respect of the Liabilities and which thereafter is restored or returned by Royal to the Customer or any trustee or receiver for the Customer upon the bankruptcy, insolvency or reorganization of the Customer or for any other reason, all as though such amount had not been paid to Royal.

5.

This Guarantee shall not be affected by a change in the name of the Customer, or by the acquisition of the Customer's business by any person, firm or corporation, or by any change whatsoever in the objects, capital structure or constitution of the Customer, or by any merger, amalgamation or consolidation of the Customer with any corporation, or by any dissolution or liquidation of the Customer, but shall notwithstanding the happening of any such event continue to apply to all the Liabilities whether theretofore or thereafter incurred, and in this instrument the word "Customer" shall include all successors of the Customer.

6.

All moneys, advances, renewals and credits in fact borrowed or obtained from Royal by the Customer pursuant to the Credit Agreement shall be included in the Liabilities, notwithstanding (a) any lack or limitation of status or of power, (b) any incapacity, disability or lack of authority of the Customer or of any of the directors, officers, partners or agents thereof, (c) that the Customer may not be a legal or suable entity or that a Liability may not be enforceable or (d) any invalidity, irregularity, defect or informality in the borrowing or obtaining of such monies, advances, renewals or credits; the whole whether known to Royal or not. The undersigned shall reimburse Royal for all reasonable expenses (including the reasonable fees and disbursements of its counsel) incurred by Royal in collecting or compromising any of the Liabilities.

7.

This Guarantee is in addition to and not in substitution for (a) any other guarantee, by whomsoever given, at any time held by Royal and (b) any present or future obligation to Royal, incurred otherwise than under a guarantee, of the undersigned or of any other obligor, whether bound with or apart from the Customer; excepting any guarantee surrendered for cancellation upon delivery of this instrument.

8.

All payments hereunder with respect to any Liability shall be made to Royal at the Branch of Account of Royal and shall be in the lawful currency in which such Liability is payable ("Primary Currency"). Without in any manner limiting the obligations of the undersigned contained in the preceding sentence, if any sum is paid to and received by Royal hereunder in a currency other than the Primary Currency (such other currency being hereinafter referred to as the "Alternative Currency"), whether by judgment (and notwithstanding the rate of exchange actually applied in giving such judgment) or otherwise, the obligations of the undersigned hereunder shall nevertheless be discharged only to the extent of the net amount of Primary Currency that Royal in accordance with its normal banking procedures is able to purchase with such amount of Alternative Currency. If Royal is not able to purchase sufficient Primary Currency with such amount of Alternative Currency to discharge such Liability in full, the obligations of the undersigned to Royal shall not be discharged with respect to such difference, and any such undischarged amount will be due as a separate debt and shall not be affected by payment of or judgment being obtained for any other sums due hereunder; provided that the foregoing shall, in all instances, be subject to the first two full paragraphs of this Guarantee.

9.

The undersigned shall be bound by any account settled between Royal and the Customer in good faith, and if no such account has been so settled immediately before demand for payment under this Guarantee, any account stated by Royal with supporting documentation provided by Royal to the undersigned shall be accepted by the undersigned as conclusive evidence, absent manifest or demonstrable error, of the amount which at the date of the account so stated is due by the Customer to Royal.

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10.

Possession of this instrument by Royal shall be conclusive evidence against the undersigned that this instrument was not delivered in escrow or pursuant to any agreement that it should not be effective until any conditions precedent or subsequent had been complied with, unless at the time of receipt of this instrument by Royal the undersigned obtains from the Manager of the branch or agency of Royal receiving this instrument a letter setting out the terms and conditions under which this instrument was delivered and the conditions, if any, to be observed before it becomes effective.

11.

This instrument covers all agreements between the undersigned and Royal relative to this Guarantee, and neither the undersigned nor Royal shall be bound by any representation or promise made by any person relative hereto which is not embodied herein.

12.

This Guarantee and agreement shall extend to and inure to the benefit of Royal and its successors and permitted assigns and every reference herein to the undersigned is a reference to and shall be construed as including the undersigned and the successors and assigns of the undersigned to and upon all of whom this Guarantee and agreement shall extend and be binding.

13.

The obligations of the undersigned hereunder shall not in any way be changed, reduced or terminated as a result of (a) any change or reduction in or termination of the obligations of any other guarantor of the Liabilities, or (b) the failure of any other person to execute this or any other guarantee of the Liabilities.

14.

Royal shall not be obligated to exercise any right, power or privilege hereunder, and no failure to exercise and no delay in exercising, on the part of Royal, any such right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No notice to or demand on the undersigned shall be deemed to be a waiver of the right of Royal to take further action without notice or demand as provided herein. No waiver shall be applicable except in the specific instance for which given, nor in any event shall any modification or waiver of any provision of this Guarantee and agreement be effective unless in writing and signed by Royal.

15.

This Guarantee shall be governed by and construed in accordance with the laws of the State of Oregon, United States of America. No defence given or allowed by the laws of any other State or Country shall be interposed in any action hereon unless such defence is also given or allowed by the laws of the State of Oregon. The undersigned irrevocably submits to the jurisdiction of all Federal and State courts located in the City of Portland and State of Oregon and consents that any order, process or notice of motion or other application to any of said courts or a judge thereof may be served upon the undersigned within or without the court's jurisdiction at the undersigned's applicable address for notice in accordance with Section 9.10 of the Credit Agreement entitled "Notice" provided a reasonable time for appearance is allowed.

16.

The waivers and authorizations of the undersigned contained herein are given in its capacity as a Guarantor hereunder and such waivers and authorizations shall not waive any rights the undersigned may have solely in its capacity as a party to the Credit Agreement.

17.

Waiver of Jury Trial. EACH PARTY TO THIS GUARANTEE, AND BY ITS ACCEPTANCE OF THIS GUARANTEE, ROYAL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A JURY TRIAL OF ANY DISPUTE RELATING TO THIS GUARANTEE AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

18.

This Guarantee may be executed in any number of counterparts as may be necessary and delivered by facsimile each of which so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and all signatures need not appear on any one counterpart.

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19.

This Guarantee is dated for reference November 30, 2001.

        Executed at                        , on the            day of December, 2001.

LOUISIANA-PACIFIC CORPORATION
By:  

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By:  

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SCHEDULE C

Officer's Compliance Certificate
(7.1(z)) and (7.2(m))

        I,                        , of the City of Portland, in the State of Oregon, hereby certify on behalf of Louisiana-Pacific Corporation and Louisiana-Pacific Canada Ltd. and without personal liability as follows:

        1.    That I am Chief Financial Officer of Louisiana Pacific Corporation and Louisiana-Pacific Canada Ltd.

        2.    All capitalized terms used herein and not otherwise defined herein shall have the same meaning as ascribed thereto in the Credit Agreement (as hereinafter defined).

        3.    That I am familiar with and have examined the provisions of the 2001 LP Canada Credit Agreement dated for reference November 30, 2001 ("Credit Agreement") as amended, modified, supplemented, extended, consolidated, restated, renewed or replaced from time to time among Louisiana-Pacific Canada Ltd., as Borrower, Louisiana-Pacific Corporation, as Guarantor, and Royal Bank of Canada ("Royal") and to best of my knowledge having made reasonable investigations of corporate records and inquiries of other officers and senior personnel of the Borrower and the Guarantor and relying on the foregoing, as of the date of this Certificate: (a) the representations and warranties of the Borrower and the Guarantor contained in the Credit Agreement are true and correct, (b) none of the covenants of the Borrower and the Guarantor contained in the Credit Agreement has been breached, and (c) during the next fiscal quarter of the Borrower and the Guarantor there is no reason to believe that either the Borrower or the Guarantor will be in default of the financial ratios prescribed respectively in 7.1(aa) and 7.2(n), (o), (p) and (q).

        4.    That as of                        , being the date to which this Certificate applies, the financial ratios and information called for under the Credit Agreement were:

A.    Covenants of the Borrower

(a)

the Current Ratio of the Borrower is            to            ;



(b)

particulars of Permitted Guarantees and Purchase Money Obligations:

B.    Covenants of Guarantor

(a)

Shareholders' Equity is $                  ;



(b)

the Debt to Capitalization Ratio is            to            ;



(c)

Consolidated EBITDDA is



(d)

the Collateral Coverage Ratio is            to            ;

and I further certify without personal liability that:

        5.    The foregoing calculations are correct and accurate;

        6.    [SPECIFY ANY DEFAULT];

        7.    I am authorized to give this certificate;

        8.    I am aware that Royal is entitled to rely upon the accuracy of the information herein contained.

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        This Certificate has been executed at the City of Portland, in the State of Oregon, this            day of            , 2001.

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Chief Financial Officer
Louisiana-Pacific Corporation and
Louisiana-Pacific Canada Ltd.

2

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SCHEDULE D

UNFUNDED PENSION LIABILITIES

        The Guarantor sponsors the Louisiana-Pacific Corporation Retirement Account Plan. Originally this was a defined benefit pension plan covering certain hourly employees of the Guarantor. Effective January 1, 2000, this was converted to a cash balance plan covering most non-bargained employees. As of January 1, 2000, on an ongoing basis, the Plan has an unfunded liability of approximately US$23,000,000. As of January 1, 2000, on a plan termination basis, the Plan has an unfunded liability of approximately US$25,000,000.

        The Company sponsors the ABTco, Inc. Retirement Plan. This is a defined benefit plan covering bargained and non-bargained employees of ABTco. As of January 1, 2000, on an ongoing basis, the Plan has an unfunded liability of approximately US$0. As of January 1, 2000, on a plan termination basis, the Plan has an unfunded liability of approximately US$5,000,000.

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SCHEDULE E

BORROWING BASE REPORT

(§7.1(y))

(1)

The Borrowing Base of Louisiana-Pacific Canada Ltd. and its Material Canadian Subsidiaries was [$    ] on the last day of the fiscal quarter ended [    ] calculated as follows (words with initial capital letters have the meaning ascribed to them in the Agreement):

	(a)		Good Account Receivable (Cdn$)		$
	(b)		75% of (a)					$
	(c)		The Equivalent Amount in Canadian Funds of Good Accounts Receivables (US$)		$
	(d)		75% of line (c)					$
	(e)		Eligible Inventory—Logs		$
	(f)		Eligible Inventory—Lumber, Engineered Wood Products and other finished products		$
	(g)		Eligible Inventory—Chips		$
	(h)		Eligible Inventory—Raw materials, supplies, spare parts, etc.		$
	(i)		Total of (e), (f), (g) and (h)		$
	(j)		50% of line (i)					$
	(k)		Line (b) plus line (d) plus line (j)					$
	(l)		Potential Preferred Claims					$
	(m)		Borrowing Base (line (k) minus line (l))					$
	(n)		Total Borrowings					$
	(o)		Line (m) minus line (n)					$

(2)

I certify the foregoing to be a true and correct report on the matters disclosed and reported herein as of the stated fiscal quarter-end.

(3)

I further certify as follows:

(a)

that the representations and warranties contained in the Agreement are true and correct as of the date of this Borrowing Base Report;

(b)

that the covenants contained in the Agreement have not been breached as of the date of this Borrowing Base Report and, during the next fiscal quarter of the Borrower, there is no reason to believe that any of such covenants will be breached;

(c)

that, as of the stated fiscal quarter-end, Inventory locations and values were as follows:

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(d)

that during the stated fiscal quarter total sales of Inventory were $            of which $            was in respect of sales of Inventory to Louisiana-Pacific Corporation.



(e)

that I will forthwith advise Royal on becoming aware of any inaccuracy in the matters certified in §3(c) and §3(d);



(f)

that as of the stated fiscal quarter end the Current Ratio of the Borrower is                        to                         ;



(g)

the aggregate of Borrowings as at the date of this report was $            . Borrowings in US$ were converted to Cdn$ at                        .

		By:
			Name/Title:

DATED this            day of            

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SCHEDULE F

PERMITTED ENCUMBRANCES

		Secured Party		Description of Lien
1.		Sodexfor		Lien on all the assets of Louisiana-Pacific Canada Ltd. Chambord and Lac Bouchette plants, pursuant to Purchase and Sale Contract, dated April 14, 1999.
2.		IBM		Lien on Louisiana-Pacific Canada Ltd. AS400 equipment, pursuant to Order for Leased or Financed Articles, dated December, 1999.
3.		Finning Ltd.		Lien on Louisiana-Pacific Canada Ltd. log loader and three forklifts, pursuant to lease agreements dated October 1, 1998, September 2, 1998 and October 1, 1999.
4.		Marjak Leasing		Lien on 1998 Bobcat Series 753 pursuant to lease agreement dated December 11, 1997.
5.		Bank of Montreal		Lien on Instrument described as Bank of Montreal pledge of Instrument and Assignment of Proceeds.

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SCHEDULE G

OTHER PERMITTED INDEBTEDNESS

Credit Facilities

        1.    Indebtedness under the Credit Agreement by and among Louisiana-Pacific Canada Ltd., Louisiana-Pacific Corporation and Royal Bank of Canada, dated for reference January 15, 1997.

        2.    Indebtedness under the Agreement dated April 14, 1999 between 9073-3742 Quebec Inc., as purchaser (a predecessor of Acquisition Louisiana-Pacific Inc.) and Société en Commondite Sodexfor.

        3.    Indebtedness under the Lease Agreement dated December 13, 1999 between Louisiana-Pacific Canada Ltd. and International Business Machines.

        4.    Indebtedness under the Lease Agreements dated September 2, 1998, October 1, 1998 and October 1, 1999 between Louisiana-Pacific Canada, Ltd. and Finning Ltd.

Senior Installment Notes

        5.    Louisiana Pacific Canada, Ltd. Senior Installment Notes, variable rate, payable through 2003.

Other Indebtedness

        6.    Forward contracts between Louisiana-Pacific Canada, Ltd. and Bank of America for settlement September 27, 2002 and September 29, 2003.

        7.    Forward contracts between Louisiana-Pacific Canada, Ltd. and Goldman Sachs for settlement September 27, 2002 and September 29, 2003.

        8.    Indebtedness described by §5 on Schedule F.

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2001 LP CANADA CREDIT AGREEMENT

Dated for Reference November 30, 2001

AMONG:

LOUISIANA-PACIFIC CANADA LTD.

AND

LOUISIANA-PACIFIC CORPORATION

AND

ROYAL BANK OF CANADA

BULL, HOUSSER & TUPPER
BARRISTERS & SOLICITORS
#3000 - 1055 WEST GEORGIA
VANCOUVER, B.C. V6E 3R3
(604) 687-6575
Attention: Barry Dryvynsyde

        File # 8929978

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TABLE OF CONTENTS
SCHEDULE A
INTEREST AND FEE RATES
SCHEDULE B
GUARANTEE (Particular Guarantee)
SCHEDULE C
Officer's Compliance Certificate (7.1(z)) and (7.2(m))









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LOUISIANA-PACIFIC CORPORATION
EXECUTIVE LOAN PROGRAM


As Amended and Restated November 3, 2001

        1.    Purpose.    To provide loans to company executives for the purchase by them of shares of company stock. Such purchases shall be of shares of treasury stock held by the company.

        2.    Covered Executives.    (a) The CEO, all Vice Presidents and all other employees who are "executive officers" of the company under Section 16 of the Securities Exchange Act of 1934, (b) Business Team Leaders and (c) other executives as designated by the CEO.

        3.    Loan Amount.    Equal to the total cost of the shares of company stock purchased in one transaction by the executive from the company during the 60-day period following the effective date of this Executive Loan Program (the "Loan Program") for such executive. The loan shall be made upon written notification to the company by the executive of the number of shares he or she desires to purchase. Such shares shall be sold to the executive on the date such notification is received by the company at a price equal to the closing price of company stock on the New York Stock Exchange (NYSE) on such date or, if there is no trading on the NYSE on such date, the next preceding day on which there was such trading, and the necessary loan documents for the loan in an amount equal to the cost of such shares shall be executed by the parties as of such date.

        4.    Maximum Loan Amount.    Three (3) times an executive's annual base pay as of the effective date of the Loan Program for such executive.

        5.    Minimum Purchase and Loan.    To qualify for the loan, the executive must purchase a minimum of 10,000 shares of company stock.

        6.    Maximum Total Loans.    The lesser of $20 million or 1.7 million shares of company stock.

        7.    Interest on Loan.    The interest rate shall be the lowest prevailing rate that will avoid imputed interest under Section 7872 of the Internal Revenue Code.

        8.    Accrued Interest.    Annual accrued interest shall be added to the principal amount each year and shall be paid when the principal amount becomes due.

        9.    Term of Loan.    Six years following the expiration of the 60-day period referred to in paragraph 3 above, except five years following the expiration of such 60-day period for those executives who become covered executives on or after November 24, 2000, unless earlier terminated as provided below.

        10.    Security.    Loans shall be unsecured.

        11.    Termination of Employment.    The outstanding amount of principal and accrued interest under the loan shall be paid within 30 days following an executive's resignation or involuntary termination of employment.

        12.    Loan Forgiveness.    The provisions of this Paragraph 12 apply to those executives with outstanding loans under the Loan Program on or after November 24, 2000.

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        (a)    Length of Service Forgiveness.    If the executive remains continuously employed by the company until January 23, 2004, January 23, 2005 or January 23, 2006 ("Applicable Forgiveness Dates"), the following percentages of the original loan principal amount and the amount of accrued interest as of such date shall be forgiven:

In the event that, after January 23, 2001 and before January 23, 2006, the executive terminates employment with the company by reason of death, disability or involuntary termination by the company without cause, the executive shall be forgiven a prorated amount of the loan principal and accrued interest forgiveness percentages set forth above based upon his actual period of employment by the company during the period January 23, 2001 (or his last Applicable Forgiveness Date, if later) to the next Applicable Forgiveness Date following such termination. The provisions of paragraph 11 of the Loan Program shall apply to the remaining unforgiven loan principal and accrued interest amounts.

        (b)    Stock Price Forgiveness.    In addition to any loan principal and interest forgiveness provided under paragraph 12(a) above based upon length of service, if the company stock has traded on the NYSE at or above the price per share ("Price") set forth below (to be appropriately adjusted for any stock dividends or splits or recapitalizations that hereafter occur) for at least five consecutive trading days during the 12-month period immediately preceding an Applicable Forgiveness Date on which the executive remains employed by the company, the following additional percentages of the original loan principal amount and the amount of accrued interest as of such date shall be forgiven:

        (c)    Certain Terminations after November 2, 2001.    In the event the executive terminates employment with the company after November 2, 2001 by reason of death, disability, involuntary termination by the company without cause or termination by the executive for good reason following a Change in Control, the executive shall be forgiven (i) an amount of original loan principal equal to the excess of the executive's cost basis in the shares of company stock purchased under the Loan Program over the fair market value of such shares on such employment termination date, to the extent such amount exceeds the amount of original loan principal forgiveness made under paragraphs 12(a) and 12(b) above on or before such date plus any amounts paid outside of the Loan Program as severance that are determined by the amount of loss on company stock purchased under the Loan Program and (ii) 100 percent of the executive's accrued loan interest under the Loan Program as of such employment termination date. For purposes of this paragraph 12(c), the following definitions shall apply:

        (1)  "cause" shall mean (i) knowing and significant misconduct including, without limitation, knowing violation of laws or regulations, that demonstratively injures or damages the company or (ii) knowing and continued failure to perform, after notice and opportunity to correct, the key duties of his or her position with the company.

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        (2)  "good reason" shall mean (I) a diminution in the executive's position, authority, duties or responsibilities, (ii) a reduction in the executive's base salary or annual incentive opportunity, (iii) a reduction in other employee benefits of the executive not generally applicable to all employees in a similar position or (iv) a requirement that the executive's employment be based at a location more than 25 miles from its current location.

        (3)  "Change in Control" shall have the same meaning as set forth in Section 2.5 of the Louisiana-Pacific Corporation Deferred Compensation Plan as in effect November 3, 2001.

        (4)  "fair market value" shall mean the mean between the high and low trading prices per share of company stock on the New York Stock Exchange on the applicable termination of employment date or, if the company stock was not traded on that date, on the next preceding day on which such stock is traded.

        (d)    Stock Ownership.    Notwithstanding paragraphs (a), (b) and (c) above, no amount of loan principal or interest shall be forgiven on a forgiveness date if the executive no longer owns on such date, directly or beneficially, all of the shares of company stock originally purchased under the Loan Program.

        14.    Loan Forgiveness—Income Taxes.    In the event of loan forgiveness under Paragraph 12 above, the executive shall be required to make arrangements satisfactory to the company for payment of all withholding and payroll taxes due in connection with such forgiveness. At the option of the executive, or at the option of the company if no other arrangement for tax payment by the executive is made, income and other taxes that become payable by the executive with respect to such loan forgiveness and which are required to be withheld and paid over by the company may be satisfied by the transfer by the executive to the company of shares of company stock purchased under the Loan Program equal in fair market value to the amount of the tax obligation.

        15.    Dividends.    Dividends paid on company stock that is subject to a loan under the Loan Program shall be paid to the executive. Shares issued as a result of a stock dividend or split or recapitalization shall be issued in the name of the executive and held pursuant to the custody agreement referred to in Paragraph 15 below.

        16.    Loan Documents.    As a condition of receiving the loan or any extension thereof, the executive shall execute a promissory note and such other agreements as may be required by the company including, subject to applicable law, a custody agreement with respect to the stock purchased under the Loan Program and agreement authorizing the company to deduct any loan amount due and payable from any amounts owed by the company to the executive as compensation or otherwise.

        17.    Securities Laws.    Purchases and sales of company stock pursuant to the Loan Program shall comply in all respects to federal and state securities laws and L-P's policies on insider trading.

        18.    Effective Date.    The Loan Program is effective November 24, 1999 as to executives who are covered executives under Paragraph 2 above during the period November 24, 1999 to January 23, 2000. The Loan Program is effective November 24, 2000 for all other executives who are covered executives under Paragraph 2 above during the period November 24, 2000 to January 23, 2001.

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LOUISIANA-PACIFIC CORPORATION EXECUTIVE LOAN PROGRAM As Amended and Restated November 3, 2001

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LOUISIANA-PACIFIC CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN

Amended and Restated Effective October 1, 2001

        1.    Purpose of the Plan.    This Plan shall be known as the "Louisiana-Pacific Corporation 2000 Employee Stock Purchase Plan." The purpose of the Plan is to permit employees of Louisiana-Pacific Corporation (the "Company") and of its Subsidiaries (as hereinafter defined) to obtain or increase a proprietary interest in the Company by permitting them to make installment purchases of shares of the Company's Common Stock (as hereinafter defined) through payroll deductions. The Plan is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Internal Revenue Code of 1986 (the "Code").

        2.    Definitions.    

        (a)    Common Stock.    The Company's $1 par value common stock as presently constituted and shares of common stock which may be issued by the Company in exchange for or reclassification thereof.

        (b)    Offering Dates.    

          (i)  First Offering Date. November 1, 2000.

        (ii)  Second Offering Date. November 1, 2002.

        (iii)  Third Offering Date. November 1, 2003.

        (c)    Offering Periods.    

          (i)  First Offering Period. The period beginning on November 1, 2000, and ending on November 30, 2000.

        (ii)  Second Offering Period. The period beginning on November 1, 2002, and ending on November 30, 2002.

        (iii)  Third Offering Period. The period beginning on November 1, 2003, and ending on November 29, 2003.

        (d)    Purchase Dates.    

          (i)  First Purchase Date. December 31, 2001, or any earlier date of purchase pursuant to subscriptions entered into during the First Offering Period.

        (ii)  Second Purchase Date. December 31, 2003, or any earlier date of purchase pursuant to subscriptions entered into during the Second Offering Period.

        (iii)  Third Purchase Date. December 31, 2004, or any earlier date of purchase pursuant to subscriptions entered into during the Third Offering Period.

        (e)    Purchase Periods.    

          (i)  First Purchase Period. The period beginning on January 1, 2001, and ending on December 31, 2001.

        (ii)  Second Purchase Period. The period beginning on January 1, 2003, and ending on December 31, 2003.

        (iii)  Third Purchase Period. The period beginning on January 1, 2004, and ending on December 31, 2004.

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        (f)    Purchase Price.    The lesser of (i) the Maximum Purchase Price or (ii) the mean between the reported high and low sale prices of Common Stock on the New York Stock Exchange—Composite Transactions on the applicable Purchase Date or on the last day preceding such date on which such Exchange shall have been open. The Purchase Price per share shall be subject to adjustment in accordance with the provisions of Section 17 of this Plan.

        (g)    Maximum Purchase Price.    85 percent of the mean between the reported high and low sale prices of Common Stock on the New York Stock Exchange—Composite Transactions on the last day preceding the applicable Offering Date on which such Exchange shall have been open.

        (h)    Eligible Employees.    Those persons who on the applicable Offering Date are employees of the Company or a Subsidiary except those who, immediately prior to the applicable Offering Date, would be deemed under Section 423(b)(3) of the Code to own stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any other corporation that constitutes a parent or subsidiary corporation of the Company within the meaning of that section.

        (i)    Participant.    An Eligible Employee who subscribes for the purchase of shares of Common Stock under the Plan in accordance with the Plan.

        (j)    Subsidiary.    A corporation of which, on the applicable Offering Date, the Company or a subsidiary of the Company owns at least 51 percent of the total combined voting power of all classes of stock and whose employees are authorized to participate in the Plan by the Board of Directors of the Company or the Plan Administrator. Designations of participating corporations may be made from time to time from among a group consisting of the Company and its subsidiary corporations (including corporations that become subsidiaries of the Company after the adoption and approval of the Plan).

        (k)    Plan Administrator.    The Vice President, Human Resources, of the Company, or such other person or persons that the Company may designate.

        3.    The Offering.    The number of shares of Common Stock subject to the Plan shall be 1,500,000, subject to adjustment as provided in Section 17 below. During each Offering Period the Company may offer, at the applicable Purchase Price, for subscription by Eligible Employees in accordance with the terms of the Plan, such number of authorized and unissued or treasury shares of its Common Stock subject to the Plan as may be determined by the Plan Administrator.

        4.    Subscriptions.    

        (a)    Shares Subject to Subscription.    During each Offering Period, each Eligible Employee shall be entitled to subscribe for the number of whole shares of Common Stock offered during such Offering Period designated by him in accordance with the terms of the Plan; provided, however, that the minimum number of such shares that may be subscribed for shall be the number of whole shares that can be purchased, at the Maximum Purchase Price for such Offering Period, with $600, and the maximum number of such shares that may be subscribed for shall be the number of whole shares that can be purchased, at the Maximum Purchase Price for such Offering Period, with $21,240.

        (b)    Further Limitation on Subscriptions.    Notwithstanding Section 4(a) above, the maximum number of shares that may be subscribed for by an Eligible Employee shall be further limited and reduced to the extent that the number of shares owned by such Eligible Employee immediately after any Offering Date for purposes of Section 423(b)(3) of the Code plus the maximum number of shares set forth in Section 4(a) above would exceed 5 percent of the total combined voting power or value of all classes of stock of the Company or a parent or subsidiary corporation of the Company within the meaning set forth in Section 423(b)(3) of the Code. Notwithstanding any other provision in the Plan, the minimum number of shares that may be purchased by a Participant shall not be less than 25 shares on any Purchase Date.

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        (c)    Subscription Agreements.    Subscriptions pursuant to the Plan shall be evidenced by the completion and execution of subscription agreements in the form provided by the Company and delivery of such agreements to the Company, at the place designated by the Company, prior to the expiration of each Offering Period. Except as provided in the Plan, no subscription agreement shall be subject to termination or reduction during the Offering Period to which it relates without written consent of the Company.

        (d)    Over Subscription.    In the event that the aggregate number of shares subscribed pursuant to the Plan as of any Purchase Date shall exceed the number of shares offered for sale during the Offering Period related to such Purchase Date, then each subscription for such Offering Period pursuant to which a purchase is effected shall be reduced to the number of shares that such subscription would cover in the event of a proportionate reduction of all subscriptions for such Offering Period outstanding on such Purchase Date so that the aggregate number of shares subject to all such subscriptions would not exceed the number of shares offered for sale during such Offering Period. In making such reductions, fractions of shares shall be disregarded and each subscription shall be for a whole number of shares.

        5.    Approval of Stockholders.    The Plan shall be submitted for approval by stockholders of the Company prior to February 4, 2001. Subscriptions shall be subject to the condition that, prior to such date, the Plan shall be approved by the stockholders of the Company in the manner contemplated by Section 423(b)(2) of the Code and Treasury Regulation Section 1.423-2(c). If not so approved prior to such date, the Plan shall terminate, all subscriptions hereunder shall be canceled and be of no further force and effect, and all Participants shall be entitled to the prompt refund in cash of all sums withheld from and paid by them pursuant to the Plan.

        6.    Payment of Purchase Price.    Except as otherwise specifically provided in the Plan, the Purchase Price of all shares purchased hereunder shall be paid in equal installments (in the currency in which the Participant is paid) through payroll deduction from the Participant's compensation during the applicable Purchase Period, without the right of prepayment. Each installment shall be in an amount (in the currency in which the Participant is paid) calculated as of the Offering Date to be equal to the Maximum Purchase Price multiplied by the number of shares subscribed for divided by the number of annual pay periods for such Participant, with appropriate adjustment of future payroll deductions for a Participant whose payroll period changes. A Participant shall pay the amount of any difference between the Purchase Price and the amount so withheld in cash not later than the applicable Purchase Date; there shall be an appropriate reduction in the number of shares to be purchased by a Participant who fails to make such a required payment.

        7.    Application of Funds; Participants' Accounts.    All amounts withheld from and paid by Participants hereunder shall be deposited in the Company's general corporate account to be used for any corporate purposes; provided, however, that the Company shall maintain a separate bookkeeping account for each Participant hereunder reflecting all amounts withheld from and paid by such Participant with respect to each Purchase Period under the Plan. No interest shall be credited to such separate accounts.

        8.    Issuance of Shares.    Shares purchased under the Plan shall, for all purposes, be considered to have been issued, sold and purchased at the close of business on the applicable Purchase Date. Prior to each applicable Purchase Date, no Participant shall have any rights as a holder of any shares covered by a subscription agreement. Promptly after each Purchase Date, the Company shall issue and deliver to the Participant a stock certificate or certificates representing the whole number of shares purchased by him during the Purchase Period ending with such Purchase Date and refund to the Participant in cash any excess amount in his account relating to such Purchase Period. Alternatively, instead of paper stock certificates, the Company may distribute shares in book-entry form, where the Participant is provided with a statement that reflects the number of shares registered electronically in his name on

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the Company's books. No adjustment shall be made for dividends or for other rights for which the record date is prior to the applicable Purchase Date, except as may otherwise be provided in Section 17; provided, however, that the number of shares to be issued and delivered to a Participant upon a Purchase Date shall be reduced by the number of shares and fractions thereof equal in value, determined as of said Purchase Date, to the amount of any required withholding by the Company of U.S. federal and state taxes from the Participant's income attributable to the purchase of said shares. Notwithstanding the foregoing, shares to be otherwise delivered as aforesaid following a Purchase Date may, at the option of the Company, be held in the possession of the Company for the benefit of a Participant for up to one year following a Purchase Date for the purpose of satisfying U.S. federal and state income tax withholding and reporting obligations of the Company on the income of the Participant attributable to the sale of the purchased shares within said one-year period. In the event purchased shares are so held by the Company, such shares shall be, upon written instruction from the Participant, sold or transferred by gift in accordance with such instructions; provided, however, that in the case of an instruction by the Participant to sell all or a portion of said shares, the Company shall effect the sale for the Participant on the New York Stock Exchange at a discount brokerage rate with the proceeds, less any applicable tax withholding, promptly remitted to the Participant.

        9.    Right to Terminate Subscription.    Each Participant shall have the right, at any time after the expiration of each Offering Period and prior to the applicable Purchase Date, to terminate his subscription relating to such Offering Period by written notice to the Company and receive a prompt refund in cash of the total amount in his account with respect to the applicable Purchase Period.

        10.    Right to Reduce Number of Shares.    Each Participant shall have the right, at any time after the expiration of each Offering Period and prior to the applicable Purchase Date, to make, by written notice to the Company, a one-time-only reduction in the number of shares covered by his subscription agreement relating to such Offering Period (but not below the minimum number of shares provided in Section 4(b)). Upon such reduction of shares, an appropriate reduction shall be made in the Participant's future payroll deductions during the applicable Purchase Period and the excess amount in the Participant's account with respect to such Purchase Period resulting from such reduction shall be promptly refunded to the Participant in cash or, at the option of the Participant, shall be applied in equal amounts against all future installment payments of the Maximum Purchase Price of the reduced number of shares to be purchased during the applicable Purchase Period.

        11.    Termination of Employment.    Subject to Section 4(b), upon termination of employment of a Participant for any reason other than retirement, disability or death, including by reason of the sale of the Subsidiary by which the Participant is employed such that the Company or a Subsidiary of the Company no longer owns at least 51 percent of the total combined voting power of all classes of stock of the Subsidiary, a Participant shall have, during the period of 30 days following his termination date, but prior to the applicable Purchase Date, the right with respect to each Purchase Period for which he has an account under the Plan to elect to receive either a refund in cash of the total amount of his account relating to such Purchase Period or the whole number of shares that can be purchased at the applicable Purchase Price with such amount together with any remaining cash in his account relating to such Purchase Period. Each election must be in writing and delivered to the Company within the aforementioned period. If the Participant elects to receive shares, the Purchase Date shall be the date the Participant's election is delivered to the Company. In the event the Participant does not make a timely election with respect to any Purchase Period for which he has an account under the Plan, he shall be deemed to have elected to receive a cash refund of the amount of his account relating to such Purchase Period.

        12.    Retirement; Disability.    A Participant who retires or whose employment is terminated by reason of any injury or illness of such a serious nature as to disable the Participant from resuming employment with the Company shall have all of the rights described in Section 11 above and shall have the additional right to elect, in the manner described in Section 11, to prepay in cash in a lump sum

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the entire unpaid balance of the Purchase Price of the shares covered by his subscription agreement relating to the applicable Purchase Period and to receive such shares. The Purchase Date for this purpose shall be the date on which both the Participant's election and the lump-sum cash payment shall have been delivered to the Company. For purposes of the Plan, a termination of employment at or after age 60 for any reason shall be considered retirement.

        13.    Death.    In the event of the death of a Participant while in the employ of the Company or a Subsidiary and prior to full payment of the Maximum Purchase Price for the shares covered by his subscription with respect to each Purchase Period, or the death of a retired or disabled Participant prior to the exercise of his rights described in Section 12 above, his personal representative shall have, during the period of three months following termination of the Participant's employment, but prior to the applicable Purchase Date, the rights described in Section 12. In the event of the death of a Participant who previously terminated employment by reason other than retirement or disability prior to full payment of the Maximum Purchase Price for the shares covered by his subscription with respect to a Purchase Period and prior to the exercise of his rights described in Section 11, his personal representative shall have the rights described in Section 11, except that his personal representative shall have a period of three months following termination of the Participant's employment to make the applicable election.

        14.    Termination, Retirement or Death Prior to Stockholder Approval.    Notwithstanding Sections 11, 12, and 13, if the Plan shall not have been approved by stockholders of the Company as described in Section 5 prior to the time for the exercise of any rights described in Sections 11, 12 or 13, the Participant or his personal representative shall only have, under said Sections, the right to receive a refund in cash of the total amount in his account with respect to each Purchase Period.

        15.    Temporary Layoff; Leaves of Absence.    A Participant's installment payments with respect to each Purchase Period shall be suspended during any period of absence from work due to temporary layoff or leave of absence without pay. If such Participant returns to active employment within the applicable Purchase Period, installment payments shall resume and the Participant shall be entitled to elect either to make up the deficiency in his account with respect to such Purchase Period immediately with a lump-sum cash payment, or to have future installments with respect to such Purchase Period uniformly increased to make up the deficiency, or to have an appropriate reduction made in the number of shares covered by his subscription agreement with respect to such Purchase Period to eliminate the deficiency. The election (together with the lump-sum cash payment, if applicable) must be delivered to the Company within 10 days of the Participant's return to active employment but prior to the applicable Purchase Date. If the Participant fails to make a timely election, the appropriate reduction of shares shall be made in accordance with the above. If the Participant does not return to active employment within the applicable Purchase Period, he shall have the right to elect to receive either a refund in cash of the total amount of his account with respect to such Purchase Period or the whole number of shares which can be purchased at the applicable Purchase Price with such amount together with any remaining cash in his account with respect to the Purchase Period. The election must be in writing and delivered to the Company prior to, and shall be effective as of, the applicable Purchase Date. In the event the Participant does not make a timely election with respect to any Purchase Period, he shall be deemed to have elected to receive the cash refund with respect to that Purchase Period.

        16.    Insufficiency of Compensation.    In the event that for any payroll period, for reasons other than termination of employment for any reason, temporary layoff or leave of absence without pay, a Participant's compensation (after all other proper deductions from his compensation) becomes insufficient to permit the full withholding of his installment payment, the Participant may pay the deficiency in cash when it becomes due. In the event that, in a subsequent payroll period, the Participant's compensation becomes sufficient to make the full installment payment and there still remains a deficiency in his account, the deficiency must then be eliminated through the election of one

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of the alternatives described in Section 15. The Participant must deliver his election to the Company within 10 days of the end of such subsequent payroll period but prior to the applicable Purchase Date. In the event that on the applicable Purchase Date there remains a deficiency in such a Participant's account or, in the event a Participant described above fails to make a timely election, the appropriate reduction of shares shall be made in accordance with Section 15.

        17.    Effect of Certain Stock Transactions.    If at any time prior to the Fourth Purchase Date the Company shall effect a subdivision of shares of Common Stock or other increase (by stock dividend or otherwise) of the number of shares of Common Stock outstanding, without the receipt of consideration by the Company or another corporation in which it is financially interested and otherwise than in discharge of the Company's obligation to make further payment for assets theretofore acquired by it or such other corporation or upon conversion of stock or other securities issued for consideration, or shall reduce the number of shares of Common Stock outstanding by a consolidation of shares, then (a) in the event of such an increase in the number of such shares outstanding, the number of shares then remaining subject to the Plan and the number of shares of Common Stock then subject to Participants' subscription agreements shall be proportionately increased and the Maximum Purchase Price and the Purchase Price per share for each Purchase Period affected by such event shall be proportionately reduced and (b) in the event of such a reduction in the number of such shares outstanding, the number of shares then remaining subject to the Plan and the number of shares of Common Stock then subject to subscription agreements shall be proportionately reduced and the Maximum Purchase Price and the Purchase Price per share for each Purchase Period affected by such event shall be proportionately increased. Except as provided in this Section 17, no adjustment shall be made under the Plan or any subscription agreement by reason of any dividend or other distribution declared or paid by the Company.

        18.    Merger, Consolidation, Liquidation or Dissolution.    In the event of any merger or consolidation of which the Company is not to be the survivor (or in which the Company is the survivor but becomes a subsidiary of another corporation), or the liquidation or dissolution of the Company, each Participant shall have the right immediately prior to such event to elect to receive the number of whole shares that can be purchased at the Purchase Price applicable to each Purchase Period with respect to which such Participant has subscribed for purchase of Common Stock with the full amount that has been withheld from and paid by him pursuant to the subscription agreement relating to such Purchase Period, together with any remaining excess cash in his account relating to such Purchase Period. If such election is not made with respect to the amount in a Participant's account for any Purchase Period, the Participant's subscription agreement shall terminate and he shall receive a prompt refund in cash of the total amount in such account.

        19.    Limitation on Right to Purchase.    Notwithstanding any provision of the Plan to the contrary, if at any time a Participant is entitled to purchase shares of Common Stock on a Purchase Date, taking into account such Participant's rights, if any, to purchase Common Stock under the Plan and all other stock purchase plans of the Company and of other corporations that constitute parent or subsidiary corporations of the Company within the meaning of Sections 424(e) and (f) of the Code, the result would be that, during the then current calendar year, such Participant would have first become entitled to purchase under the Plan and all such other plans a number of shares of Common Stock of the Company that would exceed the maximum number of shares permitted by the provisions of Section 423(b)(8) of the Code, then the number of shares that such Participant shall be entitled to purchase pursuant to the Plan on such Purchase Date shall be reduced by the number that is one more than the number of shares that represents the excess, and any excess amount in his account resulting from such reduction shall be promptly refunded to him in cash.

        20.    Interest.    Any person who becomes entitled to receive any amount of cash refund from any account maintained for him pursuant to any provision of the Plan shall be entitled to receive in cash, at the same time, simple interest on the amount of such refund at the rate of 5 percent per annum. Any

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refund shall be deemed to be made from the most recent payment or payments made by the Participant pursuant to the Plan.

        21.    Non-Assignability.    None of the rights of an Eligible Employee under the Plan or any subscription agreement entered into pursuant hereto shall be transferable by such Eligible Employee otherwise than by will or the laws of descent and distribution, and during the lifetime of an Eligible Employee such rights shall be exercisable only by him.

        22.    Shares Not Purchased.    Shares of Common Stock subject to the Plan that are not subscribed for during the First Offering Period and shares subscribed for pursuant to the First Offering Period that thereafter cease to be subject to any subscription agreement hereunder shall remain subject to and reserved for use in connection with later Offering Periods. Shares of Common Stock subject to the Plan that are not subscribed for during the Second Offering Period and shares subscribed for during the Second Offering Period that thereafter cease to be subject to any subscription agreement hereunder shall remain subject to and reserved for use in connection with later Offering Periods. Shares of Common Stock subject to the Plan that are not subscribed for during the Third Offering Period and shares subscribed for during the Third Offering Period that thereafter cease to be subject to any subscription agreement hereunder shall remain subject to and reserved for use in connection with the Fourth Offering Period.

        23.    Construction; Administration.    All questions with respect to the construction and application of the Plan and subscription agreements thereunder and the administration of the Plan shall be settled by the determination of the Plan Administrator or of one or more other persons designated by it, which determinations shall be final, binding and conclusive on the Company and all employees and other persons. All Eligible Employees shall have the same rights and privileges under the Plan. The Purchase Price, the Maximum Purchase Price, and the amount in each Participant's account shall be denominated in United States dollars and amounts received from or paid to any Participant in any other currency shall be converted into United States dollars at the exchange rate in effect on the date of receipt or payment.

        24.    Termination or Amendment.    The Plan may be terminated or amended in any way by the Board of Directors at any time prior to approval of the Plan by the stockholders of the Company pursuant to Section 5. Subsequent to such approval of the Plan by the stockholders of the Company, the Plan may be terminated or amended by the Plan Administrator, provided that no such termination or amendment shall (a) adversely affect the rights of employees under subscription agreements theretofore entered into pursuant to the Plan, (b) increase the maximum number of shares of Common Stock offered under the Plan or decrease the price per share, except pursuant to Section 17, or (c) violate applicable federal or state law.

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LOUISIANA-PACIFIC CORPORATION 2000 EMPLOYEE STOCK PURCHASE PLAN Amended and Restated Effective October 1, 2001

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Exhibit 21

LOUISIANA-PACIFIC CORPORATION
AND SUBSIDIARIES

							Domicile
Louisiana-Pacific Corporation							Delaware
	Domestic Subsidiaries
		CP Investment Corp.					Oregon
		GreenStone Industries, Inc.					Delaware
		Ketchikan Pulp Company					Washington
		Louisiana-Pacific International, Inc.					Oregon
		Louisiana-Pacific Timber Company					Oregon
			L-PSPV, Inc.				Delaware
		LP Receivables Corporation					Delaware
		LPS Corporation					Oregon
			L-P Redwood, LLC				Delaware
				L-P SPV2, LLC			Delaware
		New Waverly Transportation, Inc.					Texas
	Foreign Subsidiaries
		Louisiana-Pacific Canada Pulp Co.					Nova Scotia, Canada
		3047525 Nova Scotia Company					Nova Scotia, Canada
		3047526 Nova Scotia Company					Nova Scotia, Canada
			Louisiana-Pacific Limited Partnership				New Brunswick, Canada
				Louisiana-Pacific Canada Ltd.			British Columbia, Canada
					Louisiana-Pacific B.C. Forest Products Limited		British Columbia, Canada
					LP Engineered Wood Products Ltd.		British Columbia, Canada
		Louisiana Pacific de Mexico, S.A. de C.V.					Mexico
		Louisiana-Pacific Coillte Ireland Limited					Ireland
		Louisiana-Pacific South America S.A.					Chile
		Louisiana-Pacific Chile S.A.					Chile
	Less Than 51% Owned
		Samoa Pacific Cellulose, LLC
		Slocan-LP OSB Corp.
		US GreenFiber, LLC

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LOUISIANA-PACIFIC CORPORATION AND SUBSIDIARIES