Exhibit 10.4

 

 

 

 

SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT

 

 

made by

 

each of the Grantors (as defined herein)

 

in favor of

 

 

WELLS FARGO ENERGY CAPITAL, INC.,

 

as Administrative Agent

 

 

Dated as of November 30, 2010

 

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINITIONS

1

 

 

 

Section 1.01

 

Definitions

1

Section 1.02

 

Other Definitional Provisions; References

3

 

 

 

ARTICLE II

GUARANTEE

3

 

 

 

Section 2.01

 

Guarantee

3

Section 2.02

 

Payments

4

 

 

 

 

ARTICLE III

GRANT OF SECURITY INTEREST

4

 

 

 

 

Section 3.01

 

Grant of Security Interest

4

Section 3.02

 

Transfer of Pledged Securities

6

Section 3.03

 

Grantors Remains Liable under Accounts, Chattel Paper and Payment Intangibles

6

 

 

 

 

ARTICLE IV

ACKNOWLEDGMENTS, WAIVERS AND CONSENTS

7

 

 

 

 

Section 4.01

 

Acknowledgments, Waivers and Consents

7

Section 4.02

 

No Subrogation, Contribution or Reimbursement

9

 

 

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

10

 

 

 

 

Section 5.01

 

Representations in Credit Agreement

10

Section 5.02

 

Benefit to the Guarantor

10

Section 5.03

 

Solvency

10

Section 5.04

 

Title; No Other Liens

10

Section 5.05

 

Perfected Second Priority Liens

10

Section 5.06

 

Legal Name, Organizational Status, Chief Executive Office

11

Section 5.07

 

Prior Names, Addresses, Locations of Tangible Assets

11

Section 5.08

 

Pledged Securities

11

Section 5.09

 

Goods

11

Section 5.10

 

Instruments and Chattel Paper

11

Section 5.11

 

Truth of Information; Accounts

12

Section 5.12

 

Governmental Obligors

12

Section 5.13

 

Patents and Trademarks

12

 

 

 

 

ARTICLE VI

COVENANTS

12

Section 6.01

 

Covenants in Credit Agreement

12

Section 6.02

 

Maintenance of Perfected Security Interest; Further Documentation

12

Section 6.03

 

Maintenance of Records

13

Section 6.04

 

Right of Inspection

14

Section 6.05

 

Further Identification of Collateral

14

Section 6.06

 

Changes in Locations, Name, etc.

14

Section 6.07

 

Compliance with Contractual Obligations

14

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

Section 6.08

 

Limitations on Dispositions of Collateral

15

Section 6.09

 

Pledged Securities

15

Section 6.10

 

Limitations on Modifications, Waivers, Extensions of Agreements Giving Rise to
Accounts

16

Section 6.11

 

Analysis of Accounts, Etc.

16

Section 6.12

 

Instruments and Tangible Chattel Paper

17

Section 6.13

 

Maintenance of Equipment

17

Section 6.14

 

Patents and Trademarks

17

Section 6.15

 

Commercial Tort Claims

18

Section 6.16

 

Letter-of-Credit Rights

19

 

 

 

 

ARTICLE VII

REMEDIAL PROVISIONS

19

 

 

 

 

Section 7.01

 

Pledged Securities

19

Section 7.02

 

Collections on Accounts, Etc.

20

Section 7.03

 

Proceeds

20

Section 7.04

 

Colorado UCC and Other Remedies

21

Section 7.05

 

Private Sales of Pledged Securities

22

Section 7.06

 

Waiver; Deficiency

23

Section 7.07

 

Non-Judicial Enforcement

23

 

 

 

 

ARTICLE VIII

THE ADMINISTRATIVE AGENT

23

 

 

 

 

Section 8.01

 

Administrative Agent’s Appointment as Attorney-in-Fact, Etc.

23

Section 8.02

 

Duty of Administrative Agent

25

Section 8.03

 

Execution of Financing Statements

25

Section 8.04

 

Authority of Administrative Agent

26

 

 

 

 

ARTICLE IX

SUBORDINATION OF INDEBTEDNESS

26

 

 

 

 

Section 9.01

 

Subordination of All Guarantor Claims

26

Section 9.02

 

Claims in Bankruptcy

26

Section 9.03

 

Payments Held in Trust

27

Section 9.04

 

Liens Subordinate

27

Section 9.05

 

Notation of Records

27

 

 

 

 

ARTICLE X

MISCELLANEOUS

27

 

 

 

 

Section 10.01

 

Waiver

27

Section 10.02

 

Notices

27

Section 10.03

 

Payment of Expenses, Indemnities, Etc.

28

Section 10.04

 

Amendments in Writing

28

Section 10.05

 

Successors and Assigns

28

Section 10.06

 

Invalidity

29

Section 10.07

 

Counterparts

29

Section 10.08

 

Survival

29

Section 10.09

 

Captions

29

 

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TABLE OF CONTENTS

(continued)

 

 

 

 

Page

 

 

 

 

Section 10.10

 

No Oral Agreements

29

Section 10.11

 

Governing Law; Submission to Jurisdiction

29

Section 10.12

 

Acknowledgments

30

Section 10.13

 

Additional Grantors

31

Section 10.14

 

Set-Off

31

Section 10.15

 

Releases

31

Section 10.16

 

Reinstatement

32

Section 10.17

 

Acceptance

32

Section 10.18

 

Intercreditor Agreement

33

 

SCHEDULES:

 

1.                                       Notice Addresses of Guarantors

 

2.                                       Description of Pledged Securities

 

3.                                       Filings and Other Actions Required to
Perfect Security Interests

 

4.                                       Legal Name, Location of Jurisdiction of
Organization, Organizational Identification Number, Taxpayor Identification
Number and Chief Executive Office

 

5.                                       Prior Names, Prior Chief Executive
Office, Location of Tangible Assets

 

6.                                       Patents and Patent Licenses

 

7.                                       Trademarks and Trademark Licenses

 

ANNEX:

 

1.                                       Form of Assumption Agreement

 

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This SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 30,
2010, is made by KODIAK OIL & GAS (USA) INC., a Colorado corporation (the
“Borrower”) and each of the other signatories hereto other than the
Administrative Agent (the Borrower and each of the other signatories hereto
other than the Administrative Agent, together with any other Subsidiary of the
Borrower that becomes a party hereto from time to time after the date hereof,
the “Grantors”), in favor of WELLS FARGO ENERGY CAPITAL, INC., as administrative
agent (in such capacity, together with its successors in such capacity, the
“Administrative Agent”), for the banks and other financial institutions (the
“Lenders”) from time to time parties to that certain Second Lien Credit
Agreement, dated as of even date herewith (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among the Borrower, the
Lenders, the Administrative Agent, and the other Agents party thereto.

 

NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders and the other Secured Parties, as follows:

 

ARTICLE I
Definitions

 

Section 1.01  Definitions.

 

(a)                                  As used in this Agreement, each term
defined above shall have the meaning indicated above.  Unless otherwise defined
herein, terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement, and the following terms as well
as all uncapitalized terms that are defined in the Colorado UCC on the date
hereof are used herein as so defined:  Accounts, Chattel Paper, Commercial Tort
Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment,
Fixtures, General Intangibles, Goods, Instruments, Inventory, Investment
Property, Letter-of-Credit Rights, Payment Intangibles, Proceeds, Supporting
Obligations, and Tangible Chattel Paper.

 

(b)                                 The following terms shall have the following
meanings:

 

“Account Debtor” shall mean a Person (other than any Grantor) obligated on an
Account, Chattel Paper, or General Intangible.

 

“Agreement” shall mean this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.

 

“Collateral” shall have the meaning assigned such term in Section 3.01.

 

“Colorado UCC” shall mean the Uniform Commercial Code, as it may be amended,
from time to time in effect in the State of Colorado.

 

“Discharge of First Lien Obligations” shall have the meaning assigned to such
term in the Intercreditor Agreement.

 

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“First Lien Administrative Agent” has the meaning assigned to such term in the
Intercreditor Agreement.

 

“First Lien Guarantee and Collateral Agreement” means that certain Guarantee and
Collateral Agreement, dated as of May 24, 2010, made by each of the Grantors
party thereto in favor of First Lien Administrative Agent.

 

“First Lien Obligations” has the meaning assigned to such term in the
Intercreditor Agreement.

 

“Guarantors” shall mean, collectively, each Grantor other than the Borrower.

 

“Intercreditor Agreement” shall have the meaning assigned to such term in
Section 10.18.

 

“Issuers” shall mean, collectively, each issuer of a Pledged Security.

 

“Obligations” shall mean, collectively, all Indebtedness, liabilities and
obligations of the Borrower and each Guarantor to the Secured Parties, of
whatsoever nature and howsoever evidenced, due or to become due, now existing or
hereafter arising, whether direct or indirect, absolute or contingent, which may
arise under, out of, or in connection with the Credit Agreement, the other Loan
Documents and all other agreements, guarantees, notes and other documents
entered into by any party in connection therewith, and any amendment,
restatement or modification of any of the foregoing, including, but not limited
to, the full and punctual payment when due of any unpaid principal of the Loans,
interest (including, without limitation, interest accruing at any post-default
rate and interest accruing after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), fees, reimbursement obligations, guaranty obligations, penalties,
indemnities, legal and other fees, charges and expenses, and amounts advanced by
and expenses incurred in order to preserve any collateral or security interest,
whether due after acceleration or otherwise.

 

“Patents” shall mean: (i) all letters patent of the United States and all
reissues and extensions thereof, including, without limitation, any thereof
referred to in Schedule 6 hereto, and (ii) all applications for letters patent
of the United States and all divisions, continuations and continuations-in-part
thereof or any other country, including, without limitation, any thereof
referred to in Schedule 6 hereto.

 

“Patent License” shall mean all agreements, whether written or oral, providing
for the grant by any Grantor of any right to manufacture, use or sell any
invention covered by a Patent, including, without limitation, any thereof
referred to in Schedule 6 hereto.

 

“Pledged Securities” shall mean: (i) the equity interests described or referred
to in Schedule 2; and (ii) (a) the certificates or instruments, if any,
representing such equity interests, (b) all dividends (cash, stock or
otherwise), cash, instruments, rights to subscribe, purchase or sell and all
other rights and property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such equity
interests, (c) all replacements, additions to and substitutions for any of the
property referred to in this definition, including, without limitation, claims
against third parties, (d) the proceeds, interest, profits and

 

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other income of or on any of the property referred to in this definition and
(e) all books and records relating to any of the property referred to in this
definition.

 

“Secured Parties” shall mean, collectively, the Administrative Agent and the
Lenders.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Trademarks” shall mean:  (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule 7 hereto, and (ii) all renewals
thereof.

 

“Trademark License” shall mean any agreement, written or oral, providing for the
grant by any Grantor of any right to use any Trademark, including, without
limitation, any thereof referred to in Schedule 7 hereto.

 

Section 1.02  Other Definitional Provisions; References.  The meanings given to
terms defined herein shall be equally applicable to both the singular and plural
forms of such terms.  The gender of all words shall include the masculine,
feminine, and neuter, as appropriate.  The words “herein,” “hereof,” “hereunder”
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection. 
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein.  Any reference herein
to an exhibit, schedule or annex shall be deemed to refer to the applicable
exhibit, schedule or annex attached hereto unless otherwise stated herein. 
Where the context requires, terms relating to the Collateral or any part
thereof, when used in relation to a Grantor, shall refer to such Grantor’s
Collateral or the relevant part thereof.

 

ARTICLE II
Guarantee

 

Section 2.01  Guarantee.

 

(a)                                  Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Secured Parties and each of their
respective successors, endorsees, transferees and assigns, the prompt and
complete payment and performance by the Borrower and the Guarantors when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations.  This is a guarantee of payment and not collection and the
liability of each Guarantor is primary and not secondary.

 

(b)                                 Anything herein or in any other Loan
Document to the contrary notwithstanding, the maximum liability of each
Guarantor hereunder and under the other Loan Documents shall in no event exceed
the amount which can be guaranteed by such Guarantor under applicable federal
and state laws relating to the insolvency of debtors.

 

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(c)                                  Each Guarantor agrees that the Obligations
may at any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Article II
or affecting the rights and remedies of the Administrative Agent or any Secured
Party hereunder.

 

(d)                                 Each Guarantor agrees that if the maturity
of any of the Obligations is accelerated by bankruptcy or otherwise, such
maturity shall also be deemed accelerated for the purpose of this guarantee
without demand or notice to such Guarantor.  The guarantee contained in this
Article II shall remain in full force and effect until all the Obligations shall
have been satisfied by payment in full, and the Credit Agreement and the total
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement, no Obligations may be outstanding.

 

(e)                                  No payment made by the Borrower, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any other Secured Party from the Borrower, any of
the Guarantors, any other guarantor or any other Person by virtue of any action
or proceeding or any set-off or appropriation or application at any time or from
time to time in reduction of or in payment of the Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of the Obligations or any payment received or
collected from such Guarantor in respect of the Obligations), remain liable for
the Obligations up to the maximum liability of such Guarantor hereunder until
the Obligations are paid in full, and the Credit Agreement and the total
Commitments are terminated.

 

Section 2.02  Payments.  Each Guarantor hereby agrees and guarantees that
payments hereunder will be paid to the Administrative Agent without set-off or
counterclaim in United States dollars at the Administrative Agent’s principal
office in Denver, Colorado.

 

ARTICLE III
Grant of Security Interest

 

Section 3.01  Grant of Security Interest.  Each Grantor hereby pledges, assigns
and transfers to the Administrative Agent, and grants to the Administrative
Agent, for the ratable benefit of the Secured Parties, a security interest in
all of the following property now owned or at any time hereafter acquired by
such Grantor or in which such Grantor now has or at any time in the future may
acquire any right, title or interest and whether now existing or hereafter
coming into existence (collectively, the “Collateral”), as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations:

 

(1)                                  all Accounts;

 

(2)                                  all Chattel Paper (whether Tangible Chattel
Paper or Electronic Chattel Paper);

 

(3)                                  all Commercial Tort Claims;

 

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(4)                                  all Deposit Accounts other than payroll,
withholding tax and other fiduciary Deposit Accounts;

 

(5)                                  all Documents;

 

(6)                                  all General Intangibles (including, without
limitation, rights in and under any Swap Agreements);

 

(7)                                  all Goods (including, without limitation,
all Inventory and all Equipment, but excluding all Fixtures);

 

(8)                                  all Instruments;

 

(9)                                  all Investment Property;

 

(10)                            all Letter-of-Credit Rights (whether or not the
letter of credit is evidenced by a writing);

 

(11)                            all Patents;

 

(12)                            all Patent Licenses;

 

(13)                            all Pledged Securities;

 

(14)                            all Supporting Obligations;

 

(15)                            all Trademarks;

 

(16)                            all books and records pertaining to the
Collateral; and

 

(17)                            to the extent not otherwise included, all
Proceeds and products of any and all of the foregoing and all collateral
security, guarantees and other Supporting Obligations given with respect to any
of the foregoing.

 

Notwithstanding anything herein to the contrary, in no event shall the security
interest granted pursuant to this Article II attach to, or the term “Collateral”
be deemed to include, (a) any of the outstanding equity interests in a
Subsidiary of any Grantor organized under the laws of a jurisdiction not located
in the United States of America ( a “Foreign Subsidiary”) (i) in excess of 65%
of the voting power of all classes of equity interests of such Foreign
Subsidiary entitled to vote in the election of directors or other similar body
of such Foreign Subsidiary or (ii) to the extent that the pledge thereof is
prohibited by the laws of the jurisdiction of such Foreign Subsidiary’s
organization; (b) any equity interest in any Foreign Subsidiary that is not a
first-tier Subsidiary of any Grantor; (c) any lease, license, contract, property
rights or agreement to which a Grantor is a party or any of such Grantor’s
rights or interests thereunder, if, and for so long as and to the extent that,
the grant of the security interest hereunder would constitute or result in
(i) the abandonment, invalidation or unenforceability of any material right,
title or interest of such Grantor therein or (ii) a breach or termination
pursuant to the terms of, or a default under, any such lease, license, contract,
property rights or agreement (other than to the extent that any such

 

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breach, termination or default would be rendered ineffective pursuant to
Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any
successor provision or provisions) of any relevant jurisdiction, any other
applicable law or principles of equity), provided, however, that the security
interest granted hereunder (x) shall attach immediately when the condition
causing such abandonment, invalidation or unenforceability is remedied,
(y) shall attach immediately to any severable term of such lease, license,
contract, property rights or agreement to the extent that such attachment does
not result in any of the consequences specified in (i) or (ii) above and
(z) shall attach immediately to any such lease, license, contract, property
rights or agreement to which the account debtor or such Grantor’s counterparty
has consented to such attachment; and (d) any application to register any
Trademark prior to the filing under applicable law of a verified statement of
use (or the equivalent) for such Trademark to the extent the creation of a
security interest therein or the grant of a mortgage thereon would void or
invalidate such Trademark (collectively, the “Excluded Property”); provided,
however, that any Collateral (or any portion thereof) that ceases to satisfy the
criteria for Excluded Property (whether as a result of a Grantor obtaining any
necessary consent, any change in any rule of law, statute or regulation or
otherwise) shall no longer be Excluded Property and the security interest
granted hereunder shall attach immediately to such Collateral (or portion
thereof) at such time.

 

Section 3.02  Transfer of Pledged Securities.  All certificates and instruments
representing or evidencing the Pledged Securities shall be delivered to and held
pursuant hereto by the First Lien Administrative Agent or a Person designated by
the First Lien Administrative Agent, in either case, which shall act as the
Administrative Agent’s bailee and agent in accordance with the terms of the
Intercreditor Agreement, and, in the case of an instrument or certificate in
registered form, shall be duly indorsed to the First Lien Administrative Agent
or in blank by an effective indorsement (whether on the certificate or
instrument or on a separate writing), and accompanied by any required transfer
tax stamps to effect the pledge of the Pledged Securities to the First Lien
Administrative Agent.  As required by and in compliance with the Intercreditor
Agreement, upon the Discharge of First Lien Obligations, (i) the First Lien
Administrative Agent shall transfer the possession and control of all
certificates and instruments representing or evidencing the Pledged Securities,
together with any necessary endorsements but without recourse or warranty, and
(ii) all Pledged Securities must be delivered or transferred in such manner, and
each Grantor shall take all such further action as may be requested by the
Administrative Agent, as to permit the Administrative Agent to be a “protected
purchaser” to the extent of its security interest as provided in Section 8-303
of the Colorado UCC (if the Administrative Agent otherwise qualifies as a
protected purchaser).

 

Section 3.03  Grantors Remains Liable under Accounts, Chattel Paper and Payment
Intangibles.  Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Accounts, Chattel Paper and Payment
Intangibles to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account, Chattel Paper or Payment
Intangible.  Neither the Administrative Agent nor any other Secured Party shall
have any obligation or liability under any Account, Chattel Paper or Payment
Intangible (or any agreement giving rise thereto) by reason of or arising out of
this Agreement or the receipt by the Administrative Agent or any such other
Secured Party of any payment relating to such Account, Chattel Paper or Payment
Intangible, pursuant hereto, nor shall the Administrative Agent or any other
Secured Party be obligated in any manner to perform any of the obligations of
any Grantor

 

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under or pursuant to any Account, Chattel Paper or Payment Intangible (or any
agreement giving rise thereto), to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Account, Chattel Paper or
Payment Intangible (or any agreement giving rise thereto), to present or file
any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.

 

ARTICLE IV
Acknowledgments, Waivers and Consents

 

Section 4.01  Acknowledgments, Waivers and Consents.

 

(a)                                  Each Guarantor acknowledges and agrees that
the obligations undertaken by it under this Agreement involve the guarantee and
each Grantor acknowledges and agrees that the obligations undertaken by it
involve the provision of collateral security for the obligations of Persons
other than such Grantor (other than the Borrower) and that such Guarantor’s
guarantee and such Grantor’s provision of collateral security for the
Obligations are absolute, irrevocable and unconditional under any and all
circumstances.  In full recognition and furtherance of the foregoing, each
Grantor understands and agrees, to the fullest extent permitted under applicable
law and except as may otherwise be expressly and specifically provided in the
Loan Documents, that each Grantor shall remain obligated hereunder (including,
without limitation, with respect to the guarantee made by such Guarantor hereby
and the collateral security provided by such Grantor herein) and the
enforceability and effectiveness of this Agreement and the liability of such
Grantor, and the rights, remedies, powers and privileges of the Administrative
Agent and the other Secured Parties under this Agreement and the other Loan
Documents shall not be affected, limited, reduced, discharged or terminated in
any way:

 

(i)                                     notwithstanding that, without any
reservation of rights against any Grantor and without notice to or further
assent by any Grantor, (A) any demand for payment of any of the Obligations made
by the Administrative Agent or any other Secured Party may be rescinded by the
Administrative Agent or such other Secured Party and any of the Obligations
continued; (B) the Obligations, the liability of any other Person upon or for
any part thereof or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by, or any indulgence or forbearance in respect thereof
granted by, the Administrative Agent or any other Secured Party; (C) the Credit
Agreement, the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Majority
Lenders or all Lenders, as the case may be) may deem advisable from time to
time; (D) the Borrower, any Grantor or any other Person may from time to time
accept or enter into new or additional agreements, security documents,
guarantees or other instruments in addition to, in exchange for or relative to,
any Loan Document, all or any part of the Obligations or any Collateral now or
in the future serving as security for the Obligations; (E) any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any other Secured Party for the payment of the Obligations may be sold,
exchanged, waived, surrendered or released; and (F) any other event shall occur
which constitutes a defense or release of sureties generally; and

 

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(ii)                                  without regard to, and each Grantor hereby
expressly waives to the fullest extent permitted by law any defense now or in
the future arising by reason of, (A) the illegality, invalidity or
unenforceability of the Credit Agreement, any other Loan Document, any of the
Obligations or any other collateral security therefor or guarantee or right of
offset with respect thereto at any time or from time to time held by the
Administrative Agent or any other Secured Party, (B) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by any Grantor or any other Person against
the Administrative Agent or any other Secured Party, (C) the insolvency,
bankruptcy arrangement, reorganization, adjustment, composition, liquidation,
disability, dissolution or lack of power of any Grantor or any other Person at
any time liable for the payment of all or part of the Obligations or the failure
of the Administrative Agent or any other Secured Party to file or enforce a
claim in bankruptcy or other proceeding with respect to any Person; or any sale,
lease or transfer of any or all of the assets of the any Grantor, or any changes
in the shareholders of any Grantor; (D) the fact that any Collateral or Lien
contemplated or intended to be given, created or granted as security for the
repayment of the Obligations shall not be properly perfected or created, or
shall prove to be unenforceable or subordinate to any other Lien, it being
recognized and agreed by each of the Grantors that it is not entering into this
Agreement in reliance on, or in contemplation of the benefits of, the validity,
enforceability, collectability or value of any of the Collateral for the
Obligations; (E) any failure of the Administrative Agent or any other Secured
Party to marshal assets in favor of any Grantor or any other Person, to exhaust
any collateral for all or any part of the Obligations, to pursue or exhaust any
right, remedy, power or privilege it may have against any Grantor or any other
Person or to take any action whatsoever to mitigate or reduce any Grantor’s
liability under this Agreement or any other Loan Document; (F) any law which
provides that the obligation of a surety or guarantor must neither be larger in
amount nor in other respects more burdensome than that of the principal or which
reduces a surety’s or guarantor’s obligation in proportion to the principal
obligation; (G) the possibility that the Obligations may at any time and from
time to time exceed the aggregate liability of such Grantor under this
Agreement; or (H) any other circumstance or act whatsoever (with or without
notice to or knowledge of any Grantor), which constitutes, or might be construed
to constitute, an equitable or legal discharge or defense of the Borrower for
the Obligations, or of such Grantor under the guarantee contained in Article II
or with respect to the collateral security provided by such Grantor herein, or
which might be available to a surety or guarantor, in bankruptcy or in any other
instance.

 

(b)                                 Each Grantor hereby waives to the extent
permitted by law:  (i) except as expressly provided otherwise in any Loan
Document, all notices to such Grantor, or to any other Person, including but not
limited to, notices of the acceptance of this Agreement, the guarantee contained
in Article II or the provision of collateral security provided herein, or the
creation, renewal, extension, modification, accrual of any Obligations, or
notice of or proof of reliance by the Administrative Agent or any other Secured
Party upon the guarantee contained in Article II or upon the collateral security
provided herein, or of default in the payment or performance of any of the
Obligations owed to the Administrative Agent or any other Secured Party and
enforcement of any right or remedy with respect thereto; or notice of any other
matters relating thereto; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in Article II and
the collateral security provided herein and no notice of creation of the
Obligations or any extension of credit already or hereafter contracted by or
extended to the

 

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Borrower need be given to any Grantor; and all dealings between the Borrower and
any of the Grantors, on the one hand, and the Administrative Agent and the other
Secured Parties, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in
Article II and on the collateral security provided herein; (ii) diligence and
demand of payment, presentment, protest, dishonor and notice of dishonor;
(iii) any statute of limitations affecting any Grantor’s liability hereunder or
the enforcement thereof; (iv) all rights of revocation with respect to the
Obligations, the guarantee contained in Article II and the provision of
collateral security herein; and (v) all principles or provisions of law which
conflict with the terms of this Agreement and which can, as a matter of law, be
waived.

 

(c)                                  When making any demand hereunder or
otherwise pursuing its rights and remedies hereunder against any Grantor, the
Administrative Agent or any other Secured Party may, but shall be under no
obligation to, join or make a similar demand on or otherwise pursue or exhaust
such rights and remedies as it may have against the Borrower, any other Grantor
or any other Person or against any collateral security or guarantee for the
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any other Secured Party to make any such demand, to
pursue such other rights or remedies or to collect any payments from the
Borrower, any other Grantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Borrower, any Grantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Grantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any other Secured Party against any Grantor.  For the
purposes hereof “demand” shall include the commencement and continuance of any
legal proceedings.  Neither the Administrative Agent nor any other Secured Party
shall have any obligation to protect, secure, perfect or insure any Lien at any
time held by it as security for the Obligations or for the guarantee contained
in Article II or any property subject thereto.

 

Section 4.02  No Subrogation, Contribution or Reimbursement.  Notwithstanding
any payment made by any Grantor hereunder or any set-off or application of funds
of any Grantor by the Administrative Agent or any other Secured Party, no
Grantor shall be entitled to be subrogated to any of the rights of the
Administrative Agent or any other Secured Party against the Borrower or any
other Grantor or any collateral security or guarantee or right of offset held by
the Administrative Agent or any other Secured Party for the payment of the
Obligations, nor shall any Grantor seek or be entitled to seek any indemnity,
exoneration, participation, contribution or reimbursement from the Borrower or
any other Grantor in respect of payments made by such Grantor hereunder, and
each Grantor hereby expressly waives, releases, and agrees not to exercise any
all such rights of subrogation, reimbursement, indemnity and contribution.  Each
Grantor further agrees that to the extent that such waiver and release set forth
herein is found by a court of competent jurisdiction to be void or voidable for
any reason, any rights of subrogation, reimbursement, indemnity and contribution
such Grantor may have against the Borrower, any other Grantor or against any
collateral or security or guarantee or right of offset held by the
Administrative Agent or any other Secured Party shall be junior and subordinate
to any rights the Administrative Agent and the other Secured Parties may have
against the Borrower and such Grantor and to all right, title and interest the
Administrative Agent and the other Secured Parties may have in any collateral or
security or guarantee or right of offset.  The Administrative Agent, for the
benefit of the Secured Parties, may use, sell or dispose of any item

 

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of Collateral or security as it sees fit without regard to any subrogation
rights any Grantor may have, and upon any disposition or sale, any rights of
subrogation any Grantor may have shall terminate.

 

ARTICLE V
Representations and Warranties

 

To induce the Administrative Agent and the other Secured Parties to enter into
the Credit Agreement and to induce the Lenders to make their respective
extensions of credit to the Borrower thereunder, each Grantor hereby represents
and warrants to the Administrative Agent and each other Secured Party that:

 

Section 5.01  Representations in Credit Agreement.  In the case of each
Guarantor, the representations and warranties set forth in Article VII of the
Credit Agreement as they relate to such Guarantor (in its capacity as a
Subsidiary of the Borrower) or to the Loan Documents to which such Guarantor is
a party are true and correct in all material respects, provided that each
reference in each such representation and warranty to the Borrower’s knowledge
shall, for the purposes of this Section 5.01, be deemed to be a reference to
such Guarantor’s knowledge.

 

Section 5.02  Benefit to the Guarantor.  The Borrower is a member of an
affiliated group of companies that includes each Guarantor, and the Borrower and
the Guarantors are engaged in related businesses.  Each Guarantor is a
Subsidiary of the Borrower and its guaranty and surety obligations pursuant to
this Agreement reasonably may be expected to benefit, directly or indirectly,
it; and it has determined that this Agreement is necessary and convenient to the
conduct, promotion and attainment of the business of such Guarantor and the
Borrower.

 

Section 5.03  Solvency.  Such Guarantor (i) is not insolvent as of the date
hereof and will not be rendered insolvent as a result of this Agreement (after
giving effect to Section 2.01(a)), (ii) is not engaged in a business or a
transaction, or about to engage in a business or a transaction, for which any
Property or assets remaining with it constitute unreasonably small capital, and
(iii) does not intend to incur, or believe it will incur, debts that will be
beyond its ability to pay as such debts mature.

 

Section 5.04  Title; No Other Liens.  Except for the security interest granted
to the Administrative Agent for the ratable benefit of the Secured Parties
pursuant to this Agreement and Excepted Liens, such Grantor is the legal and
beneficial owner of its respective items of the Collateral free and clear of any
and all Liens.  No financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as have been filed in favor of the Administrative Agent, for the
ratable benefit of the Secured Parties, pursuant to this Agreement, the Security
Instruments or as are filed to secure Liens permitted by Section 9.03 of the
Credit Agreement.

 

Section 5.05  Perfected Second Priority Liens.  The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form), will constitute valid perfected security
interests in all of the Collateral (other than trucks, trailers and other

 

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motor vehicles covered by a certificate of title law of any state, Commercial
Tort Claims subject to Section 6.15, Letter-of-Credit Rights less than $500,000
and Deposit Accounts not maintained with the Administrative Agent or its
Affiliates) in favor of the Administrative Agent, for the ratable benefit of the
Secured Parties, as collateral security for such Grantor’s obligations,
enforceable in accordance with the terms hereof against all creditors of such
Grantor (except for the First Lien Administrative Agent and the First Lenders
prior to the Discharge of First Lien Obligations) and any Persons purporting to
purchase any Collateral from such Grantor and (b) are prior to all other Liens
on the Collateral in existence on the date hereof except for Liens granted in
connection with the Senior Revolving Credit Documents and Excepted Liens which
have priority over the Liens on the Collateral by operation of law.  No
effective financing statement or other registration or instrument similar in
effect covering any Collateral is on file in any recording office except any
that has been filed in favor of the Senior Administrative Agent or the Senior
Lenders in connection with the Senior Revolving Credit Documents, those in favor
of the Secured Parties relating to this Agreement and any that has been filed to
perfect or protect any Excepted Lien.

 

Section 5.06  Legal Name, Organizational Status, Chief Executive Office.  On the
date hereof, the correct legal name of such Grantor, such Grantor’s jurisdiction
of organization, organizational number, taxpayor identification number and the
location of such Grantor’s chief executive office or sole place of business are
specified on Schedule 4.

 

Section 5.07  Prior Names, Addresses, Locations of Tangible Assets.  Schedule 5
correctly sets forth (a) all names and trade names that such Grantor has used in
the last five years and (b) the chief executive office of such Grantor over the
last five years (if different from that which is set forth in Section 5.06
above).

 

Section 5.08  Pledged Securities.  The shares (or such other interests) of
Pledged Securities pledged by such Grantor hereunder constitute all the issued
and outstanding shares (or such other interests) of all classes of the capital
stock or other equity interests of each Issuer owned by such Grantor.  All the
shares (or such other interests) of the Pledged Securities have been duly
authorized and validly issued and are fully paid and nonassessable; and such
Grantor is the record and beneficial owner of, and has good title to, the
Pledged Securities pledged by it hereunder, free of any and all Liens except
Excepted Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement or any other Security
Instrument, Liens on Property securing the Debt under the Senior Revolving
Credit Documents, and Excepted Liens.

 

Section 5.09  Goods.  No portion of the Collateral constituting Goods is in the
possession of a bailee that has issued a negotiable or non-negotiable document
covering such Collateral.

 

Section 5.10  Instruments and Chattel Paper.  Such Grantor has delivered to the
First Lien Administrative Agent, as bailee and agent for the Administrative
Agent in accordance with the Intercreditor Agreement, all Collateral
constituting Instruments and Chattel Paper.  No Collateral constituting Chattel
Paper or Instruments contains any statement therein to the effect that such
Collateral has been assigned to an identified party other than the First Lien
Administrative Agent (in its own capacity for the benefit of the Senior Lenders
or in its capacity as bailee for the Administrative Agent for the benefit of the
Lenders, or in both capacities), and the grant of a

 

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security interest in such Collateral in favor of the First Lien Administrative
Agent hereunder does not violate the rights of any other Person as a secured
party.

 

Section 5.11  Truth of Information; Accounts.  All information with respect to
the Collateral set forth in any schedule, certificate or other writing at any
time heretofore or hereafter furnished by such Grantor to the Administrative
Agent or any other Secured Party, and all other written information heretofore
or hereafter furnished by such Grantor to the Administrative Agent or any other
Secured Party is and will be true and correct in all material respects as of the
date furnished.  The amount represented by such Grantor to the Administrative
Agent and the Lenders from time to time as owing by each Account Debtor or by
all Account Debtors in respect of the Accounts, Chattel Paper and Payment
Intangibles will at such time be the correct amount actually owing by such
Account Debtor or Account Debtors thereunder.  The place where each Grantor
keeps its records concerning the Accounts, Chattel Paper and Payment Intangibles
is as set forth on Schedule 4.

 

Section 5.12  Governmental Obligors.  None of the Account Debtors on such
Grantor’s Accounts, Chattel Paper or Payment Intangibles is a Governmental
Authority.

 

Section 5.13  Patents and Trademarks.  Schedule 6 hereto includes all Patents
and Patent Licenses owned by such Grantor in its own name as of the date
hereof.  Schedule 7 hereto includes all Trademarks and Trademark Licenses owned
by such Grantor in its own name as of the date hereof.  To the best of each such
Grantor’s knowledge, each Patent and Trademark is valid, subsisting, unexpired,
enforceable and has not been abandoned.  Except as set forth in either such
Schedule, none of such Patents and Trademarks is the subject of any licensing or
franchise agreement.  No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of any
Patent or Trademark.  No action or proceeding is pending (i) seeking to limit,
cancel or question the validity of any Patent or Trademark, or (ii) which, if
adversely determined, would Material Adverse Effect on the value of any Patent
or Trademark.

 

ARTICLE VI
Covenants

 

Each Grantor covenants and agrees with the Administrative Agent and the other
Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full and the total Commitments shall have
terminated:

 

Section 6.01  Covenants in Credit Agreement.  In the case of each Guarantor,
such Guarantor shall take, or shall refrain from taking, as the case may be,
each action that is necessary to be taken or not taken, as the case may be, so
that no Default or Event of Default is caused by the failure to take such action
or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.

 

Section 6.02  Maintenance of Perfected Security Interest; Further Documentation.

 

(a)                                  Such Grantor shall maintain the security
interest created by this Agreement as a perfected security interest having at
least the priority described in Section 5.05

 

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and shall, in accordance with the terms of the Intercreditor Agreement, defend
such security interest against the claims and demands of all Persons whomsoever
except for Excepted Liens.

 

(b)                                 At any time and from time to time, upon the
request of the Administrative Agent or any other Secured Party, and at the sole
expense of such Grantor, such Grantor will promptly and duly give, execute,
deliver, indorse, file or record any and all financing statements, continuation
statements, amendments, notices (including, without limitation, notifications to
financial institutions and any other Person), contracts, agreements,
assignments, certificates, stock powers or other instruments, obtain any and all
governmental approvals and consents and take or cause to be taken any and all
steps or acts that may be necessary or advisable or as the Administrative Agent
may reasonably request to create, perfect, establish the priority of, or to
preserve the validity, perfection or priority of, the Liens granted by this
Agreement or to enable the Administrative Agent or any other Secured Party to
enforce its rights, remedies, powers and privileges under this Agreement with
respect to such Liens or to otherwise obtain or preserve the full benefits of
this Agreement and the rights, powers and privileges herein granted .

 

(c)                                  Without limiting the obligations of the
Grantors under Section 6.02(b):  (i) upon the request of the Administrative
Agent or any other Secured Party, such Grantor shall take or cause to be taken
all actions (other than any actions required to be taken by the Administrative
Agent or any Lender) requested by the Administrative Agent to cause the
Administrative Agent to (A) have “control” (within the meaning of Sections
9-104, 9-105, 9-106, and 9-107 of the Colorado UCC) over any Collateral
constituting Deposit Accounts, Electronic Chattel Paper, Investment Property
(including the Pledged Securities), except to the extent that any such
Collateral is subject to the “control” of the First Lien Administrative Agent,
or Letter-of-Credit Rights, including, without limitation, executing and
delivering any agreements, in form and substance satisfactory to the
Administrative Agent, with securities intermediaries, issuers or other Persons
in order to establish “control”, and each Grantor shall promptly notify the
Administrative Agent and the other Secured Parties of such Grantor’s acquisition
of any such Collateral, and (B) be a “protected purchaser” (as defined in
Section 8-303 of the Colorado UCC); (ii) with respect to Collateral other than
certificated securities and goods covered by a document in the possession of a
Person other than such Grantor, the Administrative Agent or the First Lien
Administrative Agent (as bailee for the Administrative Agent), such Grantor
shall obtain written acknowledgment that such Person holds possession for the
Administrative Agent’s benefit; and (iii) with respect to any Collateral
constituting Goods that are in the possession of a bailee, such Grantor shall
provide prompt notice to the Administrative Agent and the other Secured Parties
of any such Collateral then in the possession of such bailee, and such Grantor
shall take or cause to be taken all actions (other than any actions required to
be taken by the Administrative Agent or any other Secured Party) necessary or
requested by the Administrative Agent to cause the Administrative Agent to have
a perfected security interest in such Collateral under applicable law.

 

(d)                                 This Section 6.02 and the obligations
imposed on each Grantor by this Section 6.02 shall be interpreted as broadly as
possible in favor of the Administrative Agent and the other Secured Parties in
order to effectuate the purpose and intent of this Agreement.

 

Section 6.03  Maintenance of Records.  Such Grantor will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral,
including, without

 

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limitation, a record of all payments received and all credits granted with
respect to the Accounts.  For the Administrative Agent’s and the other Secured
Parties’ further security, the Administrative Agent, for the ratable benefit of
the Secured Parties, shall have a security interest in all of such Grantor’s
books and records pertaining to the Collateral, and such Grantor shall turn over
any such books and records to the Administrative Agent or to its representatives
during normal business hours at the request of the Administrative Agent and
shall provide such clerical and other assistance as may be reasonably requested
with regard thereto.

 

Section 6.04  Right of Inspection.  The Administrative Agent and its respective
representatives shall at all times have full and free access during normal
business hours to all the books, correspondence and records of such Grantor, and
the Administrative Agent and its respective representatives may examine the
same, take extracts therefrom and make photocopies thereof and shall at all
times also have the right to enter into and upon any premises where any of the
Collateral (including, without limitation, Inventory or Equipment) is located
for the purpose of inspecting the same, observing its use or otherwise
protecting its interests therein, and such Grantor agrees to render to the
Administrative Agent and its respective representatives, at such Grantor’s sole
cost and expense, such clerical and other assistance as may be reasonably
requested with regard to any of the foregoing; provided, that so long as no
Event of Default has occurred and is continuing, such Grantor shall only be
responsible to reimburse the fees and expenses of the Administrative Agent for
two visits per calendar year, notwithstanding anything to the contrary in this
Agreement.

 

Section 6.05  Further Identification of Collateral.  Such Grantor will furnish
to the Administrative Agent and the Lenders from time to time, at such Grantor’s
sole cost and expense, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.

 

Section 6.06  Changes in Locations, Name, etc.  Such Grantor recognizes that
financing statements pertaining to the Collateral have been or may be filed
where such Grantor maintains any Collateral or is organized.  Without limitation
of any other covenant herein, such Grantor will not cause or permit (a) any
change to be made in its name, identity or corporate structure or (b) any change
to the identity of any warehouseman, common carrier, other third-party
transporter, bailee or any agent or processor in possession or control of any
Collateral or (c) such Grantor’s jurisdiction of organization or (d) the
location of any Collateral, unless such Grantor shall have first (i) notified
the Administrative Agent and the other Secured Parties of such change at least
thirty (30) days prior to the effective date of such change, and (ii) taken all
action reasonably requested by the Administrative Agent or any other Secured
Party for the purpose of maintaining the perfection and priority of the
Administrative Agent’s security interests under this Agreement.  In any notice
furnished pursuant to this Section 6.06, such Grantor will expressly state in a
conspicuous manner that the notice is required by this Agreement and contains
facts that may require additional filings of financing statements or other
notices for the purposes of continuing perfection of the Administrative Agent’s
security interest in the Collateral.

 

Section 6.07  Compliance with Contractual Obligations.  Such Grantor will
perform and comply in all material respects with all its contractual obligations
relating to the Collateral

 

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(including, without limitation, with respect to the goods or services, the sale
or lease or rendition of which gave rise or will give rise to each Account).

 

Section 6.08  Limitations on Dispositions of Collateral.  The Administrative
Agent and the other Secured Parties do not authorize, and such Grantor agrees
not to sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except to the extent expressly permitted by
the Credit Agreement.

 

Section 6.09  Pledged Securities.

 

(a)                                  If such Grantor shall become entitled to
receive or shall receive any stock certificate or other instrument (including,
without limitation, any certificate or instrument representing a dividend or a
distribution in connection with any reclassification, increase or reduction of
capital or any certificate or instrument issued in connection with any
reorganization), option or rights in respect of the capital stock or other
equity interests of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares (or such other interests) of the
Pledged Securities, or otherwise in respect thereof, such Grantor shall accept
the same as the agent of the Administrative Agent and the other Secured Parties,
hold the same in trust for the Administrative Agent and the other Secured
Parties and deliver the same forthwith to the Administrative Agent in the exact
form received, duly indorsed by such Grantor to the Administrative Agent, if
required, together with an undated stock power or other equivalent instrument of
transfer acceptable to the Administrative Agent covering such certificate or
instrument duly executed in blank by such Grantor and with, if the
Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations; provided, however, that if the foregoing occurs
prior to the Discharge of First Lien Obligations, such Grantor shall accept the
same as the agent of the First Lien Administrative Agent (for itself and as
bailee for the Administrative Agent) and the Senior Secured Parties, hold the
same in trust for the First Lien Administrative Agent (for itself and as bailee
for the Administrative Agent) and the Senior Secured Parties and deliver the
same forthwith to the First Lien Administrative Agent, for itself and as bailee
for the Administrative Agent, in the exact form received, duly indorsed by such
Grantor to the First Lien Administrative Agent, if required, together with an
undated stock power or other equivalent instrument of transfer acceptable to the
Administrative Agent covering such certificate or instrument duly executed in
blank by such Grantor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the First Lien Administrative Agent, for
itself and as bailee for the Administrative Agent, subject to the terms hereof,
as additional collateral security for the Obligations.

 

(b)                                 Subject to the terms of the Intercreditor
Agreement, without the prior written consent of the Administrative Agent, such
Grantor will not (i) unless otherwise permitted hereby, vote to enable, or take
any other action to permit, any Issuer to issue any stock or other equity
interests of any nature or to issue any other securities or interests
convertible into or granting the right to purchase or exchange for any stock or
other equity interests of any nature of any Issuer, (ii) sell, assign, transfer,
exchange or otherwise dispose of, or grant any option with respect to, the
Pledged Securities or Proceeds thereof (except pursuant to a transaction
expressly permitted by the Credit Agreement), (iii) create, incur or permit to
exist any Lien except for Excepted Liens or option in favor of, or any claim of
any Person with respect to, any of the

 

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Pledged Securities or Proceeds thereof, or any interest therein, except for the
security interests created by this Agreement or any other Security Instrument,
Liens on Property securing the Debt under the Senior Revolving Credit Documents
or (iv) enter into any agreement or undertaking restricting the right or ability
of such Grantor or the Administrative Agent to sell, assign or transfer any of
the Pledged Securities or Proceeds thereof.

 

(c)                                  In the case of each Grantor which is an
Issuer, such Issuer agrees that (i) it will be bound by the terms of this
Agreement relating to the Pledged Securities issued by it and will comply with
such terms insofar as such terms are applicable to it, (ii) it will notify the
Administrative Agent promptly in writing of the occurrence of any of the events
described in Section 6.09(a) with respect to the Pledged Securities issued by it
and (iii) the terms of Section 7.01(c) and Section 7.05 shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 7.01(c) or Section 7.05 with respect to the Pledged
Securities issued by it.

 

(d)                                 Such Grantor shall furnish to the
Administrative Agent or the First Lien Administrative Agent, as the case may be,
such stock powers and other equivalent instruments of transfer as may be
required by the Administrative Agent to assure the transferability of and the
perfection of the security interest in the Pledged Securities when and as often
as may be reasonably requested by the Administrative Agent.

 

(e)                                  The Pledged Securities will at all times
constitute not less than 100% of the capital stock or other equity interests of
the Issuer thereof owned by any Grantor.  Each Grantor will not permit any
Issuer of any of the Pledged Securities to issue any new shares (or other
interests) of any class of capital stock or other equity interests of such
Issuer without the prior written consent of the Administrative Agent.

 

Section 6.10  Limitations on Modifications, Waivers, Extensions of Agreements
Giving Rise to Accounts.  Such Grantor will not (i) amend, modify, terminate or
waive any provision of any Chattel Paper, Instrument or any agreement giving
rise to an Account or Payment Intangible in any manner which could reasonably be
expected to have a Material Adverse Effect on the value of such Chattel Paper,
Instrument, Payment Intangible or Account as Collateral, or (ii) fail to
exercise promptly and diligently each and every material right which it may have
under any Chattel Paper, Instrument and each agreement giving rise to an Account
or Payment Intangible (other than any right of termination).  Such Grantor shall
deliver to the Administrative Agent a copy of each material demand, notice or
document received by it relating in any way to any Chattel Paper, Instrument or
any agreement giving rise to an Account or Payment Intangible.

 

Section 6.11  Analysis of Accounts, Etc.  The Administrative Agent shall have
the right from time to time to make test verifications of the Accounts, Chattel
Paper and Payment Intangibles in any manner and through any medium that it
reasonably considers advisable, and each Grantor, at such Grantor’s sole cost
and expense, shall furnish all such assistance and information as the
Administrative Agent may require in connection therewith.  At any time and from
time to time, upon the Administrative Agent’s request and at the expense of each
Grantor, such Grantor shall furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts, Chattel Paper and Payment Intangibles, and all original and other
documents evidencing, and relating to, the agreements and

 

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transactions which gave rise to the Accounts, Chattel Paper and Payment
Intangibles, including, without limitation, all original orders, invoices and
shipping receipts.

 

Section 6.12  Instruments and Tangible Chattel Paper.  If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Tangible Chattel Paper, such Instrument or Tangible Chattel
Paper shall be immediately delivered to the First Lien Administrative Agent, as
bailee for the Administrative Agent, duly endorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Agreement.

 

Section 6.13  Maintenance of Equipment.  Such Grantor will maintain each item of
Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose.

 

Section 6.14  Patents and Trademarks.

 

(a)                                  Such Grantor (either itself or through
licensees) will, except with respect to any Trademark that such Grantor shall
reasonably determine is of negligible economic value to it, (i) continue to use
each Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price lists in
order to maintain such Trademark in full force free from any claim of
abandonment for non-use, (ii) maintain as in the past the quality of products
and services offered under such Trademark, (iii) employ such Trademark with the
appropriate notice of registration, (iv) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Secured Parties, shall
obtain a perfected security interest in such mark pursuant to this Agreement,
and (v) not (and not permit any licensee or sublicensee thereof to) do any act
or knowingly omit to do any act whereby any Trademark may become invalidated.

 

(b)                                 Such Grantor will not, except with respect
to any Patent that such Grantor shall reasonably determine is of negligible
economic value to it, do any act, or omit to do any act, whereby any Patent may
become abandoned or dedicated.

 

(c)                                  Such Grantor will notify the Administrative
Agent and the other Secured Parties immediately if it knows, or has reason to
know, that any application or registration relating to any Patent or Trademark
that is material to the business or operations of such Grantor or the Grantors
taken as a whole may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the institution of,
or any such determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country) regarding
such Grantor’s ownership of any such Patent or Trademark or its right to
register the same or to keep and maintain the same.

 

(d)                                 Whenever a Grantor, either by itself or
through any agent, employee, licensee or designee, shall file an application for
the registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent and the other Secured Parties in connection with the
delivery by the

 

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Borrower of the compliance certificates required pursuant to Section 8.01(c) of
the Credit Agreement.  Upon request of the Administrative Agent, such Grantor
shall execute and deliver any and all agreements, instruments, documents, and
papers as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s and the other Secured Parties’ security interest in any
Patent or Trademark and the goodwill and General Intangibles of such Grantor
relating thereto or represented thereby, and such Grantor hereby constitutes the
Administrative Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full and the Commitments are terminated.

 

(e)                                  Such Grantor will take all reasonable and
necessary steps, including, without limitation, in any proceeding before the
United States Patent and Trademark Office, or any similar office or agency in
any other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain each
registration of the Patents and Trademarks that are material to the business or
operations of such Grantor or the Grantors taken as a whole, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.

 

(f)                                    In the event that any Patent or Trademark
included in the Collateral is infringed, misappropriated or diluted by a third
party, such Grantor shall promptly notify the Administrative Agent and the other
Secured Parties after it learns thereof and shall, unless such Grantor shall
reasonably determine that such Patent or Trademark is of negligible economic
value to such Grantor which determination such Grantor shall promptly report to
the Administrative Agent and the other Secured Parties, promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as such Grantor shall
reasonably deem appropriate under the circumstances to protect such Patent or
Trademark.

 

Section 6.15  Commercial Tort Claims.  If such Grantor shall at any time hold or
acquire a Commercial Tort Claim that satisfies the requirements of the following
sentence, such Grantor shall, within thirty (30) days after such Commercial Tort
Claim satisfies such requirements, notify the Administrative Agent and the other
Secured Parties in a writing signed by such Grantor containing a brief
description thereof, and granting to the Administrative Agent in such writing
(for the benefit of the Secured Parties) a security interest therein and in the
Proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to the Administrative Agent and the other
Secured Parties.  The provisions of the preceding sentence shall apply only to a
Commercial Tort Claim that satisfies the following requirements:  (i) the
monetary value claimed by or payable to the relevant Grantor in connection with
such Commercial Tort Claim shall exceed $500,000, and either (ii) (A) such
Grantor shall have filed a law suit or counterclaim or otherwise commenced legal
proceedings (including, without limitation, arbitration proceedings) against the
Person against whom such Commercial Tort Claim is made, or (B) such Grantor and
the Person against whom such Commercial Tort Claim is asserted shall have
entered into a settlement agreement with respect to such Commercial Tort Claim. 
In addition, to the extent that the existence of any Commercial Tort Claim held
or acquired by any Grantor is disclosed by such Grantor in any public filing
with the Securities

 

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Exchange Commission or any successor thereto or analogous Governmental
Authority, or to the extent that the existence of any such Commercial Tort Claim
is disclosed in any press release issued by any Grantor, then, upon the request
of the Administrative Agent, the relevant Grantor shall, within thirty (30) days
after such request is made, transmit to the Administrative Agent and the other
Secured Parties a writing signed by such Grantor containing a brief description
of such Commercial Tort Claim and granting to the Administrative Agent in such
writing (for the benefit of the Secured Parties) a security interest therein and
in the Proceeds thereof, all upon the terms of this Agreement, with such writing
to be in form and substance satisfactory to the Administrative Agent and the
other Secured Parties.

 

Section 6.16  Letter-of-Credit Rights.  If any Grantor shall at any time be
entitled to Letter-of-Credit Rights in excess of $500,000, such Grantor shall
notify the Administrative Agent of such rights in connection with the delivery
by the Borrower of the compliance certificates required pursuant to Section
8.01(c) of the Credit Agreement.

 

ARTICLE VII
Remedial Provisions

 

Section 7.01  Pledged Securities.

 

(a)                                  Unless an Event of Default shall have
occurred and be continuing and the Administrative Agent shall have given notice
to the relevant Grantor of the Administrative Agent’s intent to exercise its
corresponding rights pursuant to Section 7.01(b), each Grantor shall be
permitted to receive all cash dividends paid in respect of the Pledged
Securities paid in the normal course of business of the relevant Issuer, to the
extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities.

 

(b)                                 If an Event of Default shall occur and be
continuing (and subject to the Intercreditor Agreement), then at any time in the
Administrative Agent’s discretion without notice, (i) the Administrative Agent
shall have the right to receive any and all cash dividends, payments or other
Proceeds paid in respect of the Pledged Securities and make application thereof
to the Obligations in accordance with Section 10.02 of the Credit Agreement, and
(ii) any or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders (or other equivalent
body) of the relevant Issuer or Issuers or otherwise and (y) any and all rights
of conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Securities as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the
organizational structure of any Issuer, or upon the exercise by any Grantor or
the Administrative Agent of any right, privilege or option pertaining to such
Pledged Securities, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Securities with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Administrative Agent may determine), all without liability
except to account for property actually received by it, but the Administrative
Agent shall have no duty to any Grantor to

 

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exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.

 

(c)                                  Each Grantor hereby authorizes and
instructs each Issuer of any Pledged Securities pledged by such Grantor
hereunder (and each Issuer party hereto hereby agrees) to, upon the Discharge of
First Lien Obligations, (i) comply with any instruction received by it from the
Administrative Agent in writing that (x) states that an Event of Default has
occurred and is continuing and (y) is otherwise in accordance with the terms of
this Agreement, without any other or further instructions from such Grantor, and
each Grantor agrees that each Issuer shall be fully protected in so complying,
and (ii) unless otherwise expressly permitted hereby, pay any dividends or other
payments with respect to the Pledged Securities directly to the Administrative
Agent.

 

(d)                                 After the occurrence and during the
continuation of an Event of Default, if the Issuer of any Pledged Securities is
the subject of bankruptcy, insolvency, receivership, custodianship or other
proceedings under the supervision of any Governmental Authority, then all rights
of the Grantor in respect thereof to exercise the voting and other consensual
rights which such Grantor would otherwise be entitled to exercise with respect
to the Pledged Securities issued by such Issuer shall cease, and all such rights
shall thereupon become vested in the Administrative Agent (subject to the
Intercreditor Agreement) who shall thereupon have the sole right to exercise
such voting and other consensual rights, but the Administrative Agent shall have
no duty to exercise any such voting or other consensual rights and shall not be
responsible for any failure to do so or delay in so doing.

 

Section 7.02  Collections on Accounts, Etc.  The Administrative Agent hereby
authorizes each Grantor to collect upon the Accounts, Instruments, Chattel Paper
and Payment Intangibles, provided that the Administrative Agent may curtail or
terminate said authority at any time after the occurrence and during the
continuance of an Event of Default.  Upon the request of the Administrative
Agent at any time after the occurrence and during the continuance of an Event of
Default, each Grantor shall notify the Account Debtors that the applicable
Accounts, Chattel Paper and Payment Intangibles have been assigned to the First
Lien Administrative Agent, as bailee for the Administrative Agent, and for the
ratable benefit of the Senior Lenders and the Secured Parties and that payments
in respect thereof shall be made directly to (a) the First Lien Administrative
Agent prior to the Discharge of First Lien Obligations and (b) the
Administrative Agent after the Discharge of First Lien Obligations.  After the
occurrence and during the continuation of an Event of Default, the
Administrative Agent may in its own name or in the name of others communicate
with the Account Debtors to verify with them to its satisfaction the existence,
amount and terms of any Accounts, Chattel Paper or Payment Intangibles.

 

Section 7.03  Proceeds.  If required by the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, any
payments of Accounts, Instruments, Chattel Paper and Payment Intangibles, when
collected or received by each Grantor, and any other cash or non-cash Proceeds
received by each Grantor upon the sale or other disposition of any Collateral,
shall be forthwith (and, in any event, within two Business Days) deposited by
such Grantor in the exact form received, duly indorsed by such Grantor to the
First Lien Administrative Agent, as agent or bailee of the Administrative Agent,
if required, in a special collateral account maintained by the First Lien
Administrative Agent, subject to

 

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withdrawal by the First Lien Administrative Agent (for itself and as bailee for
the Administrative Agent) for the ratable benefit of the Senior Lenders prior to
the Discharge of First Lien Obligations and thereafter to withdrawal by the
Administrative Agent for the ratable benefit of the Secured Parties only, as
hereinafter provided, and, until so turned over, shall be held by such Grantor
in trust for the First Lien Administrative Agent for the ratable benefit of the
Senior Lenders or the Administrative Agent for the ratable benefit of the
Secured Parties (as applicable) segregated from other funds of any such
Grantor.  Each deposit of any such Proceeds shall be accompanied by a report
identifying in reasonable detail the nature and source of the payments included
in the deposit.  All Proceeds (including, without limitation, Proceeds
constituting collections of Accounts, Chattel Paper, Instruments) while held by
the First Lien Administrative Agent or the Administrative Agent (or by any
Grantor in trust for the First Lien Administrative Agent for the ratable benefit
of the Senior Lenders or the Administrative Agent for the ratable benefit of the
Secured Parties (as applicable)) shall continue to be collateral security for
all of the Obligations and shall not constitute payment thereof until applied as
hereinafter provided.  At such intervals as may be agreed upon by each Grantor
and the Administrative Agent (subject to the Intercreditor Agreement), or, if an
Event of Default shall have occurred and be continuing, at any time at the
Administrative Agent’s election (subject to the Intercreditor Agreement), the
Administrative Agent shall apply all or any part of the funds on deposit in said
special collateral account on account of the Obligations in such order as the
Administrative Agent may elect, and any part of such funds which the
Administrative Agent elects not so to apply and deems not required as collateral
security for the Obligations shall be paid over from time to time by the
Administrative Agent to each Grantor or to whomsoever may be lawfully entitled
to receive the same.

 

Section 7.04  Colorado UCC and Other Remedies.

 

(a)                                  If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Secured Parties, may
exercise in its discretion, in addition to all other rights, remedies, powers
and privileges granted to them in this Agreement, the other Loan Documents and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights, remedies, powers and privileges of a secured party
under the Colorado UCC (whether the Colorado UCC is in effect in the
jurisdiction where such rights, remedies, powers or privileges are asserted) or
any other applicable law or otherwise available at law or equity.  Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon any Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker’s board or office of
the Administrative Agent or any other Secured Party or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk.  The Administrative Agent or any other Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any

 

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Grantor, which right or equity is hereby waived and released.  If an Event of
Default shall occur and be continuing, each Grantor further agrees, at the
Administrative Agent’s request (subject to the Intercreditor Agreement), to
assemble the Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select, whether at such
Grantor’s premises or elsewhere.  Any such sale or transfer by the
Administrative Agent either to itself or to any other Person shall be absolutely
free from any claim of right by Grantor, including any equity or right of
redemption, stay or appraisal which Grantor has or may have under any rule of
law, regulation or statute now existing or hereafter adopted.  Upon any such
sale or transfer, the Administrative Agent shall have the right to deliver,
assign and transfer to the purchaser or transferee thereof the Collateral so
sold or transferred.  The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 7.04, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
other Secured Parties hereunder, including, without limitation, reasonable
attorneys’ fees and disbursements, to the payment in whole or in part of the
Obligations, in accordance with Section 10.02 of the Credit Agreement, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-615 of the Colorado UCC, need the Administrative Agent account for the
surplus, if any, to any Grantor.  To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any other Secured Party arising out of the exercise by
them of any rights hereunder.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.

 

(b)                                 In the event that the Administrative Agent
elects not to sell the Collateral, the Administrative Agent retains its rights
to dispose of or utilize the Collateral or any part or parts thereof in any
manner authorized or permitted by law or in equity, and to apply the proceeds of
the same towards payment of the Obligations.  Each and every method of
disposition of the Collateral described in this Agreement shall constitute
disposition in a commercially reasonable manner.  The Administrative Agent may
appoint any Person as agent to perform any act or acts necessary or incident to
any sale or transfer of the Collateral.

 

Section 7.05  Private Sales of Pledged Securities.  Each Grantor recognizes that
the Administrative Agent may be unable to effect a public sale of any or all the
Pledged Securities, by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof.  Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner.  The Administrative Agent shall be under no obligation to
delay a sale of any of the Pledged Securities for the period of time necessary
to permit the Issuer thereof to register such securities for public sale under
the Securities Act, or under applicable state securities laws, even if such
Issuer would agree to do so.  Each Grantor agrees to use its commercially
reasonable efforts to do or cause to be done all such other acts as may
reasonably

 

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be necessary to make such sale or sales of all or any portion of the Pledged
Securities pursuant to this Section 7.05 valid and binding and in compliance
with any and all other applicable Governmental Requirements.  Each Grantor
further agrees that a breach of any of the covenants contained in this Section
7.05 will cause irreparable injury to the Administrative Agent and the other
Secured Parties, that the Administrative Agent and the other Secured Parties
have no adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this Section 7.05 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants.

 

Section 7.06  Waiver; Deficiency.  To the extent permitted by applicable law,
each Grantor waives and agrees not to assert any rights or privileges which it
may acquire under the Colorado UCC or any other applicable law.  Each Grantor
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay its Obligations and the
fees and disbursements of any attorneys employed by the Administrative Agent or
any other Secured Party to collect such deficiency.

 

Section 7.07  Non-Judicial Enforcement.  The Administrative Agent may enforce
its rights hereunder without prior judicial process or judicial hearing, and to
the extent permitted by law, each Grantor expressly waives any and all legal
rights which might otherwise require the Administrative Agent to enforce its
rights by judicial process.

 

ARTICLE VIII
The Administrative Agent

 

Section 8.01  Administrative Agent’s Appointment as Attorney-in-Fact, Etc.

 

(a)                                  Each Grantor hereby irrevocably constitutes
and appoints the Administrative Agent and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Grantor and in
the name of such Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take any and all reasonably appropriate action and
to execute any and all documents and instruments which may be reasonably
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Administrative Agent the power and right, on behalf of such Grantor, without
notice to or assent by such Grantor, to do any or all of the following:

 

(i)                                     pay or discharge taxes and Liens levied
or placed on or threatened against the Collateral, effect any repairs or any
insurance called for by the terms of this Agreement and pay all or any part of
the premiums therefor and the costs thereof;

 

(ii)                                  execute, in connection with any sale
provided for in Section 7.04 or Section 7.05, any endorsements, assignments or
other instruments of conveyance or transfer with respect to the Collateral; and

 

(iii)                               (A) direct any party liable for any payment
under any of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) take possession of and

 

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indorse and collect any checks, drafts, notes, acceptances or other instruments
for the payment of moneys due under any Account, Instrument, General Intangible,
Chattle Paper or Payment Intangible or with respect to any other Collateral, and
to file any claim or to take any other action or proceeding in any court of law
or equity or otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any all such moneys due under any Account, Instrument or
General Intangible or with respect to any other Collateral whenever payable; (C)
ask or demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect of
or arising out of any Collateral; (D) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (E) receive, change the address for delivery, open
and dispose of mail addressed to any Grantor, and to execute, assign and indorse
negotiable and other instruments for the payment of money, documents of title or
other evidences of payment, shipment or storage for any form of Collateral on
behalf of and in the name of any Grantor; (F) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce any
other right in respect of any Collateral; (G) defend any suit, action or
proceeding brought against such Grantor with respect to any Collateral; (H)
settle, compromise or adjust any such suit, action or proceeding and, in
connection therewith, give such discharges or releases as the Administrative
Agent may deem appropriate; (I) assign any Patent or Trademark (along with the
goodwill of the business to which any such Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its sole discretion determine; and (J) generally,
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent’s option and such Grantor’s expense, at any time, or from
time to time, all acts and things which the Administrative Agent deems necessary
to protect, preserve or realize upon the Collateral and the Administrative
Agent’s and the other Secured Parties’ security interests therein and to effect
the intent of this Agreement, all as fully and effectively as such Grantor might
do.

 

Anything in this Section 8.01(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 8.01(a) unless an Event of Default
shall have occurred and be continuing and in accordance with the Intercreditor
Agreement.

 

(b)                                 If any Grantor fails to perform or comply
with any of its agreements contained herein within the applicable grace periods,
the Administrative Agent, at its option, but without any obligation so to do,
may perform or comply, or otherwise cause performance or compliance, with such
agreement.

 

(c)                                  The expenses of the Administrative Agent
incurred in connection with actions undertaken as provided in this Section 8.01,
together with interest thereon at the post-default rate specified in Section
3.02(c) of the Credit Agreement from the date of payment by the Administrative
Agent to the date reimbursed by the relevant Grantor, shall be payable by such
Grantor to the Administrative Agent on demand.

 

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(d)                                 Each Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue and in compliance
hereof.  All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.

 

Section 8.02  Duty of Administrative Agent.  The Administrative Agent’s sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Colorado UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account and shall be deemed to
have exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal to
that which comparable secured parties accord comparable collateral.  Neither the
Administrative Agent, any other Secured Party nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The powers
conferred on the Administrative Agent and the other Secured Parties hereunder
are solely to protect the Administrative Agent’s and the other Secured Parties’
interests in the Collateral and shall not impose any duty upon the
Administrative Agent or any other Secured Party to exercise any such powers. 
The Administrative Agent and the other Secured Parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.  To the
fullest extent permitted by applicable law, the Administrative Agent shall be
under no duty whatsoever to make or give any presentment, notice of dishonor,
protest, demand for performance, notice of non-performance, notice of intent to
accelerate, notice of acceleration, or other notice or demand in connection with
any Collateral or the Obligations, or to take any steps necessary to preserve
any rights against any Grantor or other Person or ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not it has or is deemed to have
knowledge of such matters.  Each Grantor, to the extent permitted by applicable
law, waives any right of marshaling in respect of any and all Collateral, and
waives any right to require the Administrative Agent or any other Secured Party
to proceed against any Grantor or other Person, exhaust any Collateral or
enforce any other remedy which the Administrative Agent or any other Secured
Party now has or may hereafter have against each Grantor, any Grantor or other
Person.

 

Section 8.03  Execution of Financing Statements.  Pursuant to the Colorado UCC
and any other applicable law, each Grantor authorizes the Administrative Agent,
its counsel or its representative, at any time and from time to time, to file or
record financing statements, continuation statements, amendments thereto and
other filing or recording documents or instruments with respect to the
Collateral without the signature of such Grantor in such form and in such
offices as the Administrative Agent reasonably determines appropriate to perfect
the security interests of the Administrative Agent under this Agreement. 
Additionally, each Grantor authorizes the Administrative Agent, its counsel or
its representative, at any time and from time to time, to file or record such
financing statements that describe the collateral covered thereby as “all assets
of the Grantor”, “all personal property of the Grantor” or words of similar
effect.  A

 

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photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.

 

Section 8.04  Authority of Administrative Agent.  Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the other
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Grantors, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Secured Parties
with full and valid authority so to act or refrain from acting, and no Grantor
shall be under any obligation, or entitlement, to make any inquiry respecting
such authority.

 

ARTICLE IX
Subordination of Indebtedness

 

Section 9.01  Subordination of All Guarantor Claims.  As used herein, the term
“Guarantor Claims” shall mean all debts and obligations of the Borrower or any
other Grantor to any Grantor, whether such debts and obligations now exist or
are hereafter incurred or arise, or whether the obligation of the debtor thereon
be direct, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such debts or obligations be evidenced by
note, contract, open account, or otherwise, and irrespective of the Person or
Persons in whose favor such debts or obligations may, at their inception, have
been, or may hereafter be created, or the manner in which they have been or may
hereafter be acquired by. After and during the continuation of an Event of
Default, no Grantor shall receive or collect, directly or indirectly, from any
obligor in respect thereof any amount upon the Guarantor Claims.

 

Section 9.02  Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief or other insolvency proceedings
involving any Grantor, the Administrative Agent on behalf of the Secured Parties
shall have the right to prove their claim in any proceeding, so as to establish
their rights hereunder and receive directly from the receiver, trustee or other
court custodian, dividends and payments which would otherwise be payable upon
Guarantor Claims.  Each Grantor hereby assigns such dividends and payments to
the Administrative Agent for the benefit of the Secured Parties for application
against the Obligations as provided under Section 10.02 of the Credit
Agreement.  Should any Agent or Secured Party receive, for application upon the
Obligations, any such dividend or payment which is otherwise payable to any
Grantor, and which, as between such Grantor, shall constitute a credit upon the
Guarantor Claims, then upon payment in full of the Obligations, the intended
recipient shall become subrogated to the rights of the Administrative Agent and
the other Secured Parties to the extent that such payments to the Administrative
Agent and the other Secured Parties on the Guarantor Claims have contributed
toward the liquidation of the Obligations, and such subrogation shall be with
respect to that proportion of the Obligations which would have been unpaid if
the Administrative Agent and the other Secured Parties had not received
dividends or payments upon the Guarantor Claims.

 

26

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Section 9.03  Payments Held in Trust.  In the event that notwithstanding Section
9.01 and Section 9.02, any Grantor should receive any funds, payments, claims or
distributions which is prohibited by such Sections, then it agrees: (a) to hold
in trust prior to the Discharge of First Lien Obligations for the First Lien
Administrative Agent and the Senior Lenders and after the Discharge of First
Lien Obligations for the Administrative Agent and the other Secured Parties an
amount equal to the amount of all funds, payments, claims or distributions so
received, and (b) that it shall have absolutely no dominion over the amount of
such funds, payments, claims or distributions except to pay them promptly to the
First Lien Administrative Agent for the benefit of the Senior Lenders or to the
Administrative Agent, for the benefit of the Secured Parties (as applicable);
and each Grantor covenants promptly to pay the same to the First Lien
Administrative Agent or the Administrative Agent (as applicable).

 

Section 9.04  Liens Subordinate.  Each Grantor agrees that, until the
Obligations are paid in full and the total Commitments terminated, any Liens
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any Liens securing payment of the Obligations, regardless of
whether such encumbrances in favor of such Grantor, the Administrative Agent or
any other Secured Party presently exist or are hereafter created or attach. 
Without the prior written consent of the Administrative Agent, no Grantor,
during the period in which any of the Obligations are outstanding or the total
Commitments are in effect, shall (a) exercise or enforce any creditor’s right it
may have against any debtor in respect of the Guarantor Claims, or (b)
foreclose, repossess, sequester or otherwise take steps or institute any action
or proceeding (judicial or otherwise, including without limitation the
commencement of or joinder in any liquidation, bankruptcy, rearrangement,
debtor’s relief or insolvency proceeding) to enforce any Lien held by it.

 

Section 9.05  Notation of Records.  Upon the request of the Administrative
Agent, all promissory notes and all accounts receivable ledgers or other
evidence of the Guarantor Claims accepted by or held by any Grantor shall
contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under the terms of this Agreement and the First Lien
Guarantee and Collateral Agreement.

 

ARTICLE X
Miscellaneous

 

Section 10.01  Waiver.  No failure on the part of the Administrative Agent or
any other Secured Party to exercise and no delay in exercising, and no course of
dealing with respect to, any right, remedy, power or privilege under any of the
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.  The rights, remedies, powers and
privileges provided herein are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.  The exercise by the
Administrative Agent of any one or more of the rights, powers and remedies
herein shall not be construed as a waiver of any other rights, powers and
remedies, including, without limitation, any rights of set-off.

 

Section 10.02  Notices.  All notices and other communications provided for
herein shall be given in the manner and subject to the terms of Section 12.01 of
the Credit Agreement;

 

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provided that any such notice, request or demand to or upon any Guarantor shall
be addressed to such Guarantor at its notice address set forth on Schedule 1.

 

Section 10.03  Payment of Expenses, Indemnities, Etc.

 

(a)                                  Each Grantor agrees to pay or promptly
reimburse the Administrative Agent and each other Secured Party for all
advances, charges, costs and expenses (including, without limitation, all costs
and expenses of holding, preparing for sale and selling, collecting or otherwise
realizing upon the Collateral and all attorneys’ fees, legal expenses and court
costs) incurred by any Secured Party in connection with the exercise of its
respective rights and remedies hereunder, including, without limitation, any
advances, charges, costs and expenses that may be incurred in any effort to
enforce any of the provisions of this Agreement or any obligation of any Grantor
in respect of the Collateral or in connection with (i) the preservation of the
Lien of, or the rights of the Administrative Agent or any other Secured Party
under this Agreement, (ii) any actual or attempted sale, lease, disposition,
exchange, collection, compromise, settlement or other realization in respect of,
or care of, the Collateral, including all such costs and expenses incurred in
any bankruptcy, reorganization, workout or other similar proceeding, or (iii)
collecting against such Grantor under the guarantee contained in Article II or
otherwise enforcing or preserving any rights under this Agreement and the other
Loan Documents to which such Grantor is a party.

 

(b)                                 Each Grantor agrees to pay, and to save the
Administrative Agent and the other Secured Parties harmless from, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
reasonable costs, reasonable expenses or disbursements of any kind or nature
whatsoever (including, without limitation, court costs and reasonable attorneys’
fees, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement) incurred because
of, incident to, or with respect to, the Collateral (including, without
limitation, any exercise of rights or remedies in connection therewith) or the
execution, delivery, enforcement, performance and administration of this
Agreement, to the extent the Borrower would be required to do so pursuant to
Section 12.03 of the Credit Agreement.  All amounts for which any Grantor is
liable pursuant to this Section 10.03 shall be due and payable by such Grantor
to the Secured Parties upon demand.

 

Section 10.04  Amendments in Writing.  None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 12.02 of the Credit Agreement.

 

Section 10.05  Successors and Assigns.  This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the other Secured Parties and their successors and
assigns permitted under the Credit Agreement; provided that except as set forth
in Section 9.11 of the Credit Agreement, no Grantor may assign, transfer or
delegate any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent and the Lenders.

 

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Section 10.06  Invalidity.  In the event that any one or more of the provisions
contained in this Agreement or in any of the Loan Documents to which a Grantor
is a party shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or such other Loan Document and the
remaining provisions hereof shall remain in full force and effect and shall be
liberally construed to carry out the provisions and intent hereof; provided, if
any one or more of the provisions contained in this Agreement shall be
determined or held to be invalid or unenforceable because such provision is
overly broad as to duration, geographic scope, activity, subject or otherwise,
such provision shall be deemed amended (and any court or other tribunal shall be
entitled to reform this Agreement accordingly) by limiting and reducing it to
the extent necessary to make such provision valid and enforceable

 

Section 10.07  Counterparts.  This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.

 

Section 10.08  Survival.  The obligations of the parties under Section 10.03
shall survive the repayment of the Loans and the termination of the Credit
Agreement and total Commitments.  To the extent that any payments on the
Obligations or proceeds of any Collateral are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Administrative Agent’s and the other Secured Parties’
Liens, security interests, rights, powers and remedies under this Agreement and
each Security Instrument shall continue in full force and effect.  In such
event, each Security Instrument shall be automatically reinstated and each
Grantor shall take such action as may be reasonably requested by the
Administrative Agent and the other Secured Parties to effect such reinstatement.

 

Section 10.09  Captions.  Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.

 

Section 10.10  No Oral Agreements.  The Loan Documents (other than the Letters
of Credit) embody the entire agreement and understanding between the parties and
supersede all other agreements and understandings between such parties relating
to the subject matter hereof and thereof.  The Loan Documents represent the
final agreement between the parties and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements of the parties.  There are
no unwritten oral agreements between the parties.

 

Section 10.11  Governing Law; Submission to Jurisdiction.

 

(a)                                  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Colorado.

 

(b)                                 Any legal action or proceeding with respect
to this Agreement or any other Loan Documents to which a Grantor is a party
shall be brought in the courts of the State of

 

29

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Colorado or of the United States of America for the District of Colorado, and
each of the Lenders, the Administrative Agent and the Grantors hereby accepts
for itself and (to the extent permitted by law) in respect of its Property,
generally and unconditionally, the jurisdiction of the aforesaid courts.  Each
of the Lenders, the Administrative Agent and the Grantors hereby irrevocably
waives any objection, including, without limitation, any objection to the laying
of venue or based on the grounds of forum non conveniens, which it may now or
hereafter have to the bringing of any such action or proceeding in such
respective jurisdictions.  This submission to jurisdiction is non-exclusive and
does not preclude the Administrative Agent or any Lender from obtaining
jurisdiction over such Grantor in any court otherwise having jurisdiction.

 

(c)                                  Each of the Lenders, the Administrative
Agent and the Grantors irrevocably consents to the service of process of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such Person
at the address specified on its signature page of this Agreement or the Credit
Agreement, as applicable, such service to become effective thirty (30) days
after such mailing.  Nothing herein shall affect the right of the Administrative
Agent or any Lender or any holder of a Note or Grantor to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against such Grantor in any other jurisdiction.

 

(d)                                 Each Grantor and each Lender hereby (i)
irrevocably and unconditionally waive, to the fullest extent permitted by law,
trial by jury in any legal action or proceeding relating to this Agreement or
any other Loan Document and for any counterclaim therein; (ii) irrevocably
waive, to the maximum extent not prohibited by law, any right it may have to
claim or recover in any such litigation any special, exemplary, punitive or
consequential damages, or damages other than, or in addition to, actual damages;
(iii) certify that no party hereto nor any representative or agent of counsel
for any party hereto has represented, expressly or otherwise, or implied that
such party would not, in the event of litigation, seek to enforce the foregoing
waivers, and (iv) acknowledge that it has been induced to enter into this
Agreement, the Loan Documents and the transactions contemplated hereby and
thereby by, among other things, the mutual waivers and certifications contained
in this Section 10.11.

 

Section 10.12  Acknowledgments.  Each Grantor hereby acknowledges that:

 

(a)                                  it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents to which it is a party;

 

(b)                                 neither the Administrative Agent nor any
other Secured Party has any fiduciary relationship with or duty to any Grantor
arising out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between the Grantors, on the one hand, and the
Administrative Agent and the other Secured Parties, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is created hereby or by
the other Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Secured Parties or among the Grantors and the
Lenders.

 

30

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(d)           each of the parties hereto specifically agrees that it has a duty
to read this Agreement and the Security Instruments and agrees that it is
charged with notice and knowledge of the terms of this Agreement and the
Security Instruments; that it has in fact read this Agreement and is fully
informed and has full notice and knowledge of the terms, conditions and effects
of this Agreement; that it has been represented by independent legal counsel of
its choice throughout the negotiations preceding its execution of this Agreement
and the Security Instruments; and has received the advice of its attorney in
entering into this Agreement and the Security Instruments; and that it
recognizes that certain of the terms of this Agreement and the Security
Instruments result in one party assuming the liability inherent in some aspects
of the transaction and relieving the other party of its responsibility for such
liability.  Each party hereto agrees and covenants that it will not contest the
validity or enforceability of any exculpatory provision of this Agreement and
the Security Instruments on the basis that the party had no notice or knowledge
of such provision or that the provision is not “conspicuous.”

 

(e)           each Grantor warrants and agrees that each of the waivers and
consents set forth in this Agreement are made voluntarily and unconditionally
after consultation with outside legal counsel and with full knowledge of their
significance and consequences, with the understanding that events giving rise to
any defense or right waived may diminish, destroy or otherwise adversely affect
rights which such Grantor otherwise may have against the Borrower, any other
Grantor, the Secured Parties or any other Person or against any collateral.  If,
notwithstanding the intent of the parties that the terms of this Agreement shall
control in any and all circumstances, any such waivers or consents are
determined to be unenforceable under applicable law, such waivers and consents
shall be effective to the maximum extent permitted by law.

 

Section 10.13  Additional Grantors.  Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to Section 8.14 of the
Credit Agreement and is not a signatory hereto shall become a Grantor for all
purposes of this Agreement upon execution and delivery by such Subsidiary of an
Assumption Agreement in the form of Annex I hereto.

 

Section 10.14  Set-Off.  Each Grantor agrees that, in addition to (and without
limitation of) any right of set-off, bankers’ lien or counterclaim a Secured
Party may otherwise have, each Secured Party shall have the right and be
entitled (after consultation with the Administrative Agent), at its option, to
offset balances held by it or by any of its Affiliates for account of any
Grantor or any Subsidiary at any of its offices, in United States dollars or in
any other currency against any principal of or interest on any of such Secured
Party’s Loans, or any other amount due and payable to such Secured Party
hereunder, which is not paid when due (regardless of whether such balances are
then due to such Person), in which case it shall promptly notify the Borrower
and the Administrative Agent thereof, provided that such Secured Party’s failure
to give such notice shall not affect the validity thereof.

 

Section 10.15  Releases.

 

(a)           Release Upon Payment in Full.  The grant of a security interest
hereunder and all of rights, powers and remedies in connection herewith shall
remain in full force and effect until the Administrative Agent has
(i) retransferred and delivered all Collateral in its possession to the
Grantors, and (ii) executed a written release or termination statement and

 

31

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reassigned to the Grantors without recourse or warranty any remaining Collateral
and all rights conveyed hereby.  Upon the sale, transfer or other disposition of
Collateral permitted pursuant to the terms of Section 9.12 of the Credit
Agreement, the Administrative Agent, at the written request and expense of the
Borrower, will promptly release such Collateral to the Grantors.  Additionally,
upon the complete payment of the Obligations, the termination of the Credit
Agreement and the total Commitments and the compliance by the Grantors with all
covenants and agreements hereof, the Administrative Agent, at the written
request and expense of the Borrower, will promptly release, reassign and
transfer the Collateral to the Grantors and declare this Agreement to be of no
further force or effect.

 

(b)           Further Assurances.  If any of the Collateral shall be sold,
transferred or otherwise disposed of by any Grantor in a transaction permitted
by the Credit Agreement, then the Administrative Agent, at the request and sole
expense of such Grantor, shall promptly execute and deliver to such Grantor all
releases or other documents reasonably necessary or desirable for the release of
the Liens created hereby on such Collateral and the capital stock of such
Grantor.  At the request and sole expense of the Borrower, a Grantor shall be
released from its obligations hereunder in the event that all the capital stock
of such Grantor shall be sold, transferred or otherwise disposed of in a
transaction permitted by the Credit Agreement; provided that the Borrower shall
have delivered to the Administrative Agent, at least ten Business Days prior to
the date of the proposed release, a written request for release identifying the
relevant Grantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such transaction is
in compliance with the Credit Agreement and the other Loan Documents.

 

(c)           Retention in Satisfaction.  Except as may be expressly applicable
pursuant to Section 9-620 of the Colorado UCC, no action taken or omission to
act by the Administrative Agent or the other Secured Parties hereunder,
including, without limitation, any exercise of voting or consensual rights or
any other action taken or inaction, shall be deemed to constitute a retention of
the Collateral in satisfaction of the Obligations or otherwise to be in full
satisfaction of the Obligations, and the Obligations shall remain in full force
and effect, until the Administrative Agent and the other Secured Parties shall
have applied payments (including, without limitation, collections from
Collateral) towards the Obligations in the full amount then outstanding or until
such subsequent time as is provided in Section 10.15(a).

 

Section 10.16  Reinstatement.  The obligations of each Grantor under this
Agreement (including, without limitation, with respect to the guarantee
contained in Article II and the provision of collateral herein) shall continue
to be effective, or be reinstated, as the case may be, if at any time payment,
or any part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any other Secured Party upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Grantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Grantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.

 

Section 10.17  Acceptance.  Each Grantor hereby expressly waives notice of
acceptance of this Agreement, acceptance on the part of the Administrative Agent
and the other Secured

 

32

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Parties being conclusively presumed by their request for this Agreement and
delivery of the same to the Administrative Agent.

 

Section 10.18  Intercreditor Agreement.  Reference is made to the Intercreditor
Agreement dated as of November 30, 2010 (as amended, restated, supplemented or
otherwise modified from time to time, the “Intercreditor Agreement”), among the
Company, Wells Fargo Bank, National Association, as First Lien Administrative
Agent (as defined therein), and Wells Fargo Energy Capital, Inc., as Second Lien
Administrative Agent (as defined therein). Notwithstanding anything herein to
the contrary, the lien and security interest granted to the Administrative
Agent, for the benefit of the Secured Parties, pursuant to this Agreement and
the exercise of any right or remedy by the Administrative Agent and the other
Secured Parties hereunder are subject to the provisions of the Intercreditor
Agreement.  In the event of any conflict or inconsistency between the provisions
of the Intercreditor Agreement and this Agreement, the provisions of the
Intercreditor Agreement shall control.

 

[Reminder of Page Intentionally Left Blank.

 

Signature Page of Borrower and Administrative Agent Follows.]

 

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IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.

 

BORROWER:

KODIAK OIL & GAS (USA) INC., a Colorado corporation

 

 

 

 

 

By:

/s/ James P. Henderson

 

 

James P. Henderson

 

 

Chief Financial Officer

 

SIGNATURE PAGE

GUARANTEE AND COLLATERAL AGREEMENT

 

--------------------------------------------------------------------------------

 

Acknowledged and Agreed to as
of the date hereof by:

 

ADMINISTRATIVE AGENT:

WELLS FARGO ENERGY CAPITAL, INC.

 

 

 

 

 

By:

/s/ Bryan McDavid

 

 

Bryan McDavid

 

 

Vice President

 

SIGNATURE PAGE

GUARANTEE AND COLLATERAL AGREEMENT

 

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Schedule 1

 

NOTICE ADDRESSES OF GRANTORS

 

1.

Kodiak Oil & Gas (USA) Inc.

 

 

 

Notice Address:

 

 

 

1625 Broadway, Suite 250

 

Denver, Colorado 80202

 

Attention: James P. Henderson

 

Telephone: 303-592-8030

 

Facsimile: 303-592-8071

 

GUARANTEE AND COLLATERAL AGREEMENT

 

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Schedule 2

 

DESCRIPTION OF PLEDGED SECURITIES

 

None.

 

GUARANTEE AND COLLATERAL AGREEMENT

 

--------------------------------------------------------------------------------

 

Schedule 3

 

FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS

 

Uniform Commercial Code Filings

 

1.             Filing of UCC-1 financing statement with the Secretary of State
of the State of Colorado

 

Actions with respect to Pledged Securities

 

1.             Delivery to the Senior Administrative Agent of all Pledged
Securities consisting of certificated securities, in each case properly endorsed
for transfer in blank.

 

Description of Commercial Tort Claims

 

None

 

Actions with respect to Letter-of-Credit Rights in excess of $500,000

 

None

 

Actions with respect to Equipment Covered by a Certificate of Title

 

Notation of the Administrative Agent’s security interest on the certificate of
title of each item of Equipment

 

GUARANTEE AND COLLATERAL AGREEMENT

 

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Schedule 4

 

CORRECT LEGAL NAME, LOCATION OF JURISDICTION OF
ORGANIZATION, ORGANIZATIONAL IDENTIFICATION
NUMBER, TAXPAYOR IDENTIFICATION NUMBER AND
CHIEF EXECUTIVE OFFICE

 

1.

Kodiak Oil & Gas (USA) Inc., a Colorado corporation

 

Organizational Identification Number: 20031303362

 

Taxpayer Identification Number: 57-1191218

 

Chief Executive Office:

1625 Broadway, Suite 250

 

 

Denver, Colorado 80202

 

GUARANTEE AND COLLATERAL AGREEMENT

 

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Schedule 5

 

PRIOR NAMES AND PRIOR CHIEF EXECUTIVE OFFICE

 

1.

Kodiak Oil & Gas (USA) Inc., a Colorado corporation

 

Prior Names: None

 

Prior Chief Executive Office:

1625 Broadway, Suite 330

 

 

Denver, Colorado 80202

 

GUARANTEE AND COLLATERAL AGREEMENT

 

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Schedule 6

 

PATENTS AND PATENT LICENSES

 

None.

 

GUARANTEE AND COLLATERAL AGREEMENT

 

--------------------------------------------------------------------------------

 

Schedule 7

 

TRADEMARKS AND TRADEMARK LICENSES

 

None.

 

GUARANTEE AND COLLATERAL AGREEMENT

 

--------------------------------------------------------------------------------

 

ACKNOWLEDGMENT AND CONSENT

 

The undersigned hereby acknowledges receipt of a copy of the Guarantee and
Collateral Agreement dated as of November     , 2010 (the “Agreement”), made by
the Grantors parties thereto for the benefit of Wells Fargo Energy Capital,
Inc., as Administrative Agent.  The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:

 

1.             The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.

 

2.             The terms of Sections 6.02(c) and 6.03 of the Agreement shall
apply to it, mutatis mutandis, with respect to all actions that may be required
of it pursuant to Sections 6.02(c) and 6.03 of the Agreement.

 

 

[NAME OF ISSUER]

 

 

 

 

 

By:

 

 

Title:

 

 

 

 

 

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

Fax:

 

 

*This consent is necessary only with respect to any Issuer which is not also a
Grantor.  This consent may be modified or eliminated with respect to any Issuer
that is not controlled by a Grantor.

 

GUARANTEE AND COLLATERAL AGREEMENT

 

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Annex I

 

ASSUMPTION AGREEMENT

 

ASSUMPTION AGREEMENT, dated as of                     , 201    , made by
                              
                                                                      , a
                             corporation (the “Additional Grantor”), in favor of
WELLS FARGO ENERGY CAPITAL, INC., as administrative agent (in such capacity, the
“Administrative Agent”) for the banks and other financial institutions (the
“Lenders”) parties to the Credit Agreement referred to below.  All capitalized
terms not defined herein shall have the meaning ascribed to them in such Credit
Agreement.

 

W I T N E S S E T H:

 

WHEREAS, KODIAK OIL & GAS (USA) INC. (the “Borrower”), the Lenders, the
Administrative Agent and the other Agents, have entered into a Second Lien
Credit Agreement, dated as of November     , 2010 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”);

 

WHEREAS, in connection with the Credit Agreement, the Borrower and certain of
its Subsidiaries have entered into the Guarantee and Collateral Agreement, dated
as of November     , 2010 (as amended, supplemented or otherwise modified from
time to time, the “Guarantee and Collateral Agreement”) in favor of the
Administrative Agent for the benefit of the Lenders and Affiliates of the
Lenders;

 

WHEREAS, the Credit Agreement requires the Additional Grantor to become a party
to the Guarantee and Collateral Agreement; and

 

WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

1.             Guarantee and Collateral Agreement.  By executing and delivering
this Assumption Agreement, the Additional Grantor, as provided in Section 10.13
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder and expressly grants to the Administrative
Agent, for the benefit of the Secured Parties (as defined in the Guarantee and
Collateral Agreement), a security interest in all Collateral owned by such
Additional Grantor to secure all of such Additional Grantor’s obligations and
liabilities thereunder.  The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedules 1 through 5 to the Guarantee and
Collateral Agreement.  The Additional Grantor hereby represents and warrants
that each of the representations and warranties contained in Article V of the
Guarantee and Collateral Agreement is true and correct on and as the date hereof
(after giving effect to this Assumption Agreement) as if made on and as of such
date.

 

GUARANTEE AND COLLATERAL AGREEMENT

 

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2.             Governing Law.  THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
COLORADO.

 

IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be
duly executed and delivered as of the date first above written.

 

 

[ADDITIONAL GRANTOR]

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

GUARANTEE AND COLLATERAL AGREEMENT

 

Annex I - 2

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