Exhibit 10.1

 

KODIAK OIL & GAS CORP.

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”), effective January 1, 2011
(“Effective Date”), is entered into by and between Lynn A. Peterson
(“Executive”) and Kodiak Oil & Gas (USA) Inc., a Colorado corporation
(“Employer”), and Kodiak Oil & Gas Corp., a Yukon Territory corporation
(“Company”).

 

RECITALS

 

WHEREAS, the Board of Directors of Employer and Company desire to provide for
the continued employment of Executive, and Executive is willing to commit
himself to continue to serve Employer and Company, on the terms and conditions
herein provided, although this Agreement may be amended at any time by written
agreement among the parties; and

 

WHEREAS, in order to effect the foregoing, Employer, Company and Executive wish
to enter into this Agreement on the terms and conditions set forth below.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
other good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties agree as follows:

 

1.                                      Employment.  Employer hereby employs
Executive, and Executive agrees to be employed as the President and Chief
Executive Officer of Employer. Executive will report to the Board of Directors. 
Subject to the provisions of this Agreement relating to termination for “Good
Reason”, changes may be made from time to time by Employer and Company, in their
sole discretion, to the duties, reporting relationships and title of Executive.
 Executive will devote his full time and attention to achieving the purposes and
discharging the responsibilities of his position.  Executive will comply with
all rules, policies and procedures of Employer and Company as modified from time
to time, including without limitation, rules and procedures set forth in
Employer’s and Company’s employee manuals and handbooks, supervisor’s manuals
and operating manuals.  Executive will perform all of Executive’s
responsibilities in compliance with all applicable laws and will ensure that the
operations that Executive conducts or manages are in compliance with all
applicable laws. If Executive dedicates a material amount of his time to any
business activity outside of his employment by and service to Company, then
Executive shall affirmatively disclose the activity to the Board of Directors of
Employer and Company.  During Executive’s employment, Executive shall not engage
in any other business activity that, in the reasonable judgment of the Board of
Directors of Employer or Company, conflicts with the duties of Executive under
this Agreement, whether or not such activity is pursued for gain, profit or
other pecuniary advantage.

 

2.                                      Term of Employment.  The term of
employment (“Term”) shall be for seventeen (17) months from the Effective Date,
or May 31, 2012, unless terminated earlier in

 

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accordance with the terms and conditions of this Agreement.  The Term will
automatically renew for successive one-year terms on each June 1 thereafter
unless and until Employer or Employee provides notice not less than forty five
(45) days in advance of the expiration of the current Term, i.e., on or before
April 16, that Employer or Employee will not accept a renewal of the Term for
another year.

 

3.                                   Compensation. For the duration of
Executive’s employment hereunder, Executive will be entitled to compensation
that will be computed and paid pursuant to the following subparagraphs.

 

3.1.                         Base Salary. Employer will pay to Executive a base
salary (“Base Salary”) at an annual rate of Three Hundred and Fifty Thousand
Dollars ($350,000), subject to withholdings and paid ratably in accordance with
Employer’s payroll policies, so long as Executive remains employed by Employer. 
Executive’s Base Salary will be reviewed annually during the term of Executive’s
employment and may be adjusted based on such review.  Any adjustment of the Base
Salary shall be in the sole discretion of Employer and Company, provided,
however, that the Base Salary may not be reduced by Employer or Company below
the then current base salary established by this Section 3.1, as subsequently
modified, without Executive’s consent, except that Executive’s Base Salary may
be reduced by up to fifteen percent (15%) without Executive’s consent if and to
the extent that all other senior executive officers are taking a corresponding
percentage reduction because of the financial or operational needs of Employer
or Company.

 

3.2                            Discretionary Cash Bonus.  Executive shall be
eligible for a discretionary cash bonus (“Cash Bonus”) equal to an amount as
determined by the Compensation and Nominating Committee of the Board of
Directors of Company (the “Committee”), in its discretion.  The Cash Bonus shall
be based on the Committee’s evaluation of the condition of Company’s business,
the results of operations, Executive’s individual performance for the relevant
period, the satisfaction by Executive or Company of goals that may be
established by the Committee, or any combination thereof, as the Committee may
decide in its sole discretion.  Each Cash Bonus shall be paid on such date as
determined by the Committee, but no later than seventy five (75) days after the
end of the calendar year in which the Cash Bonus is approved by the Committee.

 

3.3                            Equity-based Compensation.  Executive shall be
entitled to participate in equity-based compensation programs offered by Company
in accordance with the terms of any equity-based plans that may be adopted by
Company.  Executive understands that as of the date of this Agreement, Company’s
only equity-based plan is the 2007 Stock Incentive Plan (the “Plan”).

 

3.4                            Performance Standards.  Executive, Company and
Employer agree that a portion of Executive’s Cash Bonus and equity-based
compensation may be based on the Committee’s evaluation of Executive’s and
Company’s achievement of performance goals that may be established by the
Committee after discussion with Executive and other executive officers of
Company.  If and to the extent that the Committee does not establish such

 

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performance goals, Executive’s Cash Bonus and equity based compensation will be
wholly within the discretion of the Committee.

 

4.                                   Other Benefits.

 

4.1                            Certain Benefits.  Executive will be eligible to
participate in all employee benefit programs or plans established by Employer
and Company that are applicable to management personnel on a basis commensurate
with Executive’s position and in accordance with Employer’s policies from time
to time, but nothing herein shall require the adoption or maintenance of any
such program or plan.  Employer shall also provide to Executive one parking
space near Company’s corporate office during the term of this Agreement, and
Employer will pay all related parking fees.

 

4.2                            Vacations, Holidays and Expenses.  For the
duration of Executive’s employment hereunder, Executive will be provided such
holidays, sick leave and vacation as Employer makes available to its management
level employees generally. Employer will reimburse Executive in accordance with
Company policies and procedures for reasonable expenses necessarily incurred in
the performance of duties hereunder within thirty (30) days of Employer’s
receipt of all appropriate receipts, vouchers, or other documentation, and
indicating the specific business purpose for each such expenditure.

 

4.3                            Right of Set-off.  By accepting this Agreement,
Executive consents to a deduction from any amounts Employer or Company owes
Executive from time to time (including but not limited to amounts owed to
Executive as Base Salary or other compensation, fringe benefits, or vacation
pay), to the extent of the amounts Executive owes to Employer or Company as a
set-off, provided, however, that no such set-off will be made with respect to
any amount that is subject to Section 409A of the Internal Revenue Code of 1986,
as amended (the “Code’) if it would result in an impermissible acceleration or
deferral of the payment date of such amounts for purposes of applicable
rules under Section 409A of the Code (“Section 409A”).  Whether or not Employer
elects to make any set-off in whole or in part, if Employer does not recover by
means of set-off the full amount Executive owes it or Company, calculated as set
forth above, Executive agrees to pay the unpaid balance to Employer immediately
upon demand or as soon as permitted by Section 409A.

 

4.4                            Section 409A Matters.

 

(a)                                  This Agreement, and the benefits and
compensation provided pursuant to this Agreement, are intended to comply with or
qualify for an exemption from Section 409A and this Agreement and all incentive
compensation awards referred to herein shall be construed and administered
accordingly. It is the intention of the parties that payments or benefits
payable under this Agreement not be subject to the additional tax or interest
imposed pursuant to Section 409A.  To the extent such potential payments or
benefits are subject to Section 409A and are or could become subject to
additional tax or interest imposed pursuant to Section 409A, the parties shall
cooperate to amend this Agreement with the goal of giving Executive the economic
benefits described herein in a manner that does not result in such tax or

 

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interest being imposed.  Executive shall, at the request of Employer, take any
reasonable action (or refrain from taking any action) required to comply with
any correction procedure promulgated pursuant to Section 409A.

 

(b)                                 If a payment that could be made under this
Agreement would be subject to additional taxes and interest under Section 409A,
Employer in its sole discretion may accelerate some or all of a payment
otherwise payable under the Agreement to the time at which such amount is
includible in the income of Executive, provided that such acceleration shall
only be permitted to the extent permitted under Treasury Regulation §
1.409A-3(j)(4)(vii) and the amount of such acceleration does not exceed the
amount permitted under Treasury Regulation §1.409A-3(j)(vii).

 

(c)                                  No payment under this Agreement shall be
made at a time earlier than that provided for in this Agreement unless such
payment is (i) an acceleration of payment permitted to be made under Treasury
Regulation §1.409A-3(j)(4) or (ii) a payment that would otherwise not be subject
to additional taxes and interest under Section 409A.

 

(d)                                 The right to each payment described in this
Agreement shall be treated as a right to a series of separate payments and a
separately identifiable payment for purposes of Section 409A.

 

(e)                                  The definition of Good Reason in
Section 6.1 herein is intended to constitute “good reason” as such term is used
in Treas. Reg. §1.409A-1(n)(2) and shall be interpreted and construed
accordingly, and to the maximum extent permitted by Section 409A and guidance
thereunder, a termination for Good Reason shall be an “involuntary separation
from service” as such term is used in Treas. Reg. §1.409A-1(n).  For purposes of
any payments under this Agreement that are to be made with reference to the date
of termination of Executive’s employment, “termination” (or any similar term)
shall mean “separation from service” with Employer within the meaning of
Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance
issued thereunder, and Executive shall be considered to have terminated
employment with Employer when, and only when, Executive incurs a “separation
from service” with Employer within the meaning of Section 409A(a)(2)(A)(i) of
the Code and applicable administrative guidance issued thereunder.

 

(f)                                    To the extent any payments of Severance
Pay pursuant to Section 5.2 or 6.2: (i) are paid during the period from the date
of Executive’s separation from service through March 15th of the year following
such separation from service, such payments are intended to constitute separate
payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations and
thus payable pursuant to the “short term deferral rule” set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations; (ii) are paid following said
March 15, such payments are intended to constitute separate payments (for
purposes of Section 1.409A-2(b)(2) of the Treasury Regulations) made upon an
involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of
the Treasury Regulations, to the maximum extent permitted by said provision; and
(iii) are in excess of the amounts specified in clauses (i) and (ii) of this
paragraph, shall (unless otherwise exempt under Treasury Regulations) be
considered separate

 

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payments subject to the distribution requirements of Section 409A, including the
requirement of Section 409A(2)B)(i) of the Code that certain payments upon
separation from service be delayed until 6 months following separation from
service.  If, on the date of Executive’s separation from service, Executive is a
“specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code
and applicable administrative guidance issued thereunder, and as a result of
such separation from service Executive would receive any payment that would be
subject to delay of payment under such guidance, then any such payment shall be
made on the date that is the earliest of: six(6) months after Executive’s
separation from service, (ii) Executive’s date of death, or (iii) such other
earliest date for which such payment will not be subject to additional tax or
interest imposed by Section 409A.

 

(g)                                 Notwithstanding anything in this Agreement
to the contrary, no Change of Control shall be deemed to have occurred under
this Agreement unless such Change of Control constitutes a “change in control
event” as such term is used in Treas. Reg. §1.409A-3(i)(5)(i).

 

(h)                                 The preceding provisions shall not be
construed as a guarantee by Employer or Company of any particular tax effect
with respect to amounts paid to Executive pursuant to this Agreement.  Neither
Employer nor Company, nor any of their officers, directors, agents or
affiliates, shall be obligated, directly or indirectly, to Executive or any
other person for any taxes, penalties, interest or like amounts that may be
imposed on Executive or any other person on account of any amounts payable under
this Agreement or upon failure to comply with the Code.

 

5.                                   Termination Or Discharge By Employer.

 

5.1                           For Cause.  Employer and Company will have the
right to immediately terminate Executive’s employment and this Agreement for
“Cause.”  “Cause” shall be determined in the sole discretion of the Committee,
and shall mean Executive: (i) has materially failed or refused to satisfactorily
perform his assigned duties and job responsibilities, (ii) has willfully engaged
in conduct that he knew or should have known would be materially injurious to
Employer or Company, (iii) has committed an act of fraud, embezzlement or a
willful and material breach of a fiduciary duty to Employer or Company, (iv) has
breached Section 7, 8 or 9 of this Agreement, (v) has been convicted of (or
pleaded no contest to) any crime that (A) is a felony, (B) involves fraud or
dishonesty or (C) impugns the character or reputation of Executive, Company or
Employer, (vi) has violated or caused the Company to violate any law that is
harmful to the business reputation of Employer or Company.  A failure to
terminate Executive’s employment and this Agreement immediately upon the
occurrence of any “Cause” shall not be deemed a waiver of Employer’s or
Company’s right to do so at a later time for such “Cause.”

 

The foregoing is an exclusive list of the acts or omissions that shall be
considered “Cause” for purposes of the termination of Executive’s services by
Employer.  If and to the extent that such act or omission may be “cured” by
Executive, then Company and Employer shall provide Executive with one (1) month
advance written notice detailing the basis for the

 

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proposed termination of services for Cause, and during the one-month period
after Executive has received such notice, Executive shall have an opportunity to
cure such Cause event(s) before the termination for Cause is finalized, during
which notice period Executive shall continue to receive the compensation and
benefits provided by this Agreement.  It is acknowledged and agreed by the
parties that many of such acts or omissions, including but not limited to those
listed in clauses (iii), (iv), (v) and (vi) above, may not be curable.  The
parties further agree that it shall be within the sole discretion of the
Committee to determine whether any such acts or omissions may be cured and, if
so, what actions would constitute an adequate cure of such Cause for purposes of
canceling the termination for Cause of Executive’s employment and this
Agreement.

 

Upon termination of Executive’s employment hereunder for Cause, Executive will
have no rights to any unvested benefits or any other unearned compensation or
payments after the termination date.

 

5.2                            Without Cause, Death, or Disability.  Employer
may terminate Executive’s employment under this Agreement without Cause and
without advance notice; provided, however, that if the termination by Employer
without Cause (including for this purpose a termination of employment resulting
from Employer’s timely notice of non-renewal of the Term for any year so long as
Executive was both willing to renew the Term and able to continue providing
services) that does not occur within twelve (12) months after a Change of
Control (as defined in Section 6.2 below), Employer will pay severance
compensation (“Severance Pay”) to Executive equal to Executive’s Base Salary at
the rate in effect on the termination date for a period of eighteen (18)
months.  If Executive’s employment is terminated by Employer as a result of
Executive’s disability, or if termination occurs as a result of Executive’s
death, irrespective of whether there has been a Change of Control (as defined
below) prior to such termination, then Executive’s Severance Pay shall also be
equal to Executive’s Base Salary then in effect for a period of eighteen (18)
months.  No Severance Pay will be paid, however, until Executive has executed,
with all applicable revocation periods having expired, a separation and release
agreement in favor of Employer, Company and their respective affiliates that is
reasonably satisfactory to Employer and Company (“Release”).  The parties agree
that a Release shall be executed not more than forty-five (45) days after the
termination of Executive’s employment.

 

(a)                                Upon termination of Executive’s employment on
account of death, Severance Pay will be payable in a lump sum sixty (60) days
after the termination of Executive’s employment, subject to all appropriate
deductions and withholdings and, notwithstanding any other requirements of this
Agreement, a Release signed by Executive is not required prior to such lump sum
payment.

 

(b)                               Upon any other termination of Executive’s
employment by Employer without Cause not following a Change of Control (as
defined below) or a termination by Employer for disability not following a
Change of Control, Severance Pay will be payable, subject to Section 4.4(f) of
this Agreement, in equal installments on Employer’s regular payroll dates over
the twelve (12) month period following Executive’s execution of a Release,
subject to all appropriate deductions and withholdings.  However, the first
payment shall be made on the

 

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date sixty (60) days after termination of employment (or the earliest date under
Section 4.4(f) of this Agreement) and shall include all amounts that would
otherwise be payable before such date.

 

(c)                                Upon termination of Executive’s employment
without Cause not following a Change of Control (as defined below), and not on
account of death or disability, all unvested incentive compensation previously
granted to Executive (whether equity awards, cash payments or employee benefits,
including but not limited to any prospective or implied Cash Bonus for a partial
year) will immediately terminate and be of no further force or effect, subject
only to the provisions of any Award Agreement (as defined in the Plan) relating
to post-termination exercise of stock options awarded under the Plan; provided,
however, that, notwithstanding the foregoing, any such compensation that
constitutes an incentive stock option intended to be qualified under Section 422
of the Code shall, upon termination of Executive’s employment without Cause not
following a Change of Control, and not on account of death or disability, be
treated exclusively in accordance with the provisions of the applicable award
agreement.

 

(d)                               Upon any termination of Executive’s employment
on account of death or disability, all unvested stock options and restricted
stock, if any, that were previously granted to Executive under the Plan will
immediately become fully vested and no longer subject to any restrictions on
ownership or exercise.  With respect to other forms of incentive compensation
awarded under the Plan, including, but not limited to, restricted stock units
and performance awards, the terms of the applicable award agreement will govern
vesting and payment dates upon termination of Executive’s employment on account
of death or as a result of disability.  With respect to unvested incentive
compensation not granted under the Plan, whether cash payments, employee
benefits or a Cash Bonus for a partial year, the Committee shall determine, in
its sole discretion, whether to vest or provide any payment or compensation on
account thereof, provided however, that if any such incentive compensation is
subject to Section 409A, no acceleration of vesting or payment will occur if it
would result in additional taxes and interest under Section 409A.

 

(e)                                For purposes of this Agreement, “disability”
means the incapacity or inability of Executive, whether due to accident,
sickness or otherwise, as determined by a medical doctor acceptable to the Board
of Directors of Employer and Company and confirmed in writing by such doctor, to
perform the essential functions of Executive’s position under this Agreement,
with or without reasonable accommodation (provided that no accommodation that
imposes undue hardship on Employer or Company will be required) for an aggregate
of ninety (90) days during any period of one hundred eighty (180) consecutive
days, or such longer period as may be required under applicable law.

 

(f)                                  Notwithstanding the foregoing, in the event
of a termination of Executive’s employment by Employer without Cause during the
twelve (12) month period following a “Change of Control,” as defined in
Section 6.2 below, then the Severance Pay to Executive provided by Section 6.2
shall govern.

 

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6.                                   Termination By Executive.

 

6.1.                         Termination by Executive for Good Reason. 
Executive shall have the right to terminate his employment for “Good Reason.” 
“Good Reason” shall mean any one of the conditions set forth below, so long as:
Executive has provided written notice to Employer of the existence of such
condition within ninety (90) days of its inception, or Executive’s actual
knowledge of its inception; Employer has not remedied the condition caused by
the occurrence within thirty (30) days of such notice; and Executive terminates
his employment within sixty (60) days after the end of such thirty (30) day
period. The following conditions will constitute “Good Reason”:

 

(i) Employer’s or Company’s material breach of this Agreement or any other
material written agreement between Executive and Employer or Executive and
Company;

 

(ii) the assignment to Executive (without Executive’s consent) of any duties
that are substantially inconsistent with or materially diminish Executive’s
position, as such position was defined on either the Effective Date of this
Agreement or immediately prior to a Change of Control (as defined below); or

 

(iii) a requirement that Executive (without Executive’s consent) be based at any
office or location more than 50 miles from Executive’s primary work location
immediately prior to a Change of Control (as defined below), not including
reasonable travel by Executive consistent with the travel obligations of similar
executives holding similar positions with similar responsibilities; or

 

(iv) Employer’s refusal to renew this Agreement at the time it would otherwise
expire, provided that at such time Executive was willing to renew the Agreement
and was able to continue providing services.

 

If Executive terminates his employment for Good Reason, then compensation shall
be provided to Executive in such amounts and on such terms as set forth in
Section 5.2 of this Agreement for a termination without Cause that does not
occur within twelve (12) months after a Change of Control (as defined below),
subject to Executive’s obligation to provide a Release, provided, however, that
if Executive terminates his employment for Good Reason during the twelve (12)
month period following a Change of Control, then the Severance Pay to Executive
provided under Section 6.2 shall govern.

 

6.2                            Termination Following a Change of Control. For
purposes of this Agreement, a “Change of Control” shall mean any of the
following:

 

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Company representing more than 50% of the total
voting power represented by Company’s then outstanding voting securities;

 

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(ii) A merger or consolidation of Company whether or not approved by the Board
of Directors of Company, other than a merger or consolidation that would result
in the voting securities of Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
or into voting securities of the surviving entity) at least 50% of the total
voting power represented by the voting securities of Company or such surviving
entity (or the parent of any such surviving entity) outstanding immediately
after such merger or consolidation, or a change in the ownership of all or
substantially all of Company’s assets to a person not related (within the
meaning of income tax Regulations Section 1.409A-3(i)(5)(vii)(b)) to the
Company; or

 

(iii) The replacement during any 12-month period of a majority of the members of
the Board of Directors of Company with directors whose appointment or election
was not endorsed by a majority of the members before the date of the appointment
or election.

 

If Executive’s employment is terminated by Employer or Company without Cause or
if Executive terminates his employment for Good Reason during the 12-month
period following a Change of Control, Employer shall pay Executive, on the date
that is sixty (60) days following the date of such termination, but subject to
Section 4.4(f) of this Agreement, a lump sum payment equal to Executive’s Base
Salary at the rate in effect on the termination date for a period of twenty four
(24) months plus (b) an amount equal to the most recent annual Cash Bonus paid
to Executive pursuant to Section 3.2 of this Agreement or the average Cash Bonus
paid to Executive under this Agreement and prior employment agreements,
whichever is greater, subject only to withholdings and deductions required by
law and Executive’s execution of a Release not more than 45 days following the
termination of Executive’s employment.  If Executive’s employment is terminated
by Company as a result of Executive’s disability during the 12 month period
following a Change of Control, Employer shall pay Executive in a lump sum
payment on the date that is sixty (60) days following the date of such
termination, the amount of Severance Pay calculated under Section 5.2 hereof,
subject only to withholdings and deductions required by law and Executive’s
execution of a Release not more than 45 days following the termination of
Executive’s employment.

 

Immediately upon the occurrence of a Change of Control, all of Executive’s
equity-based incentive compensation shall immediately vest irrespective of
whether Executive’s employment continues or is terminated thereafter, except to
the extent that such compensation is subject to Section 409A and such
acceleration would violate Section 409A or subject Executive to additional taxes
or interest under Section 409A.

 

7.                                   Covenant Not To Compete.  A restricted
period (“Restricted Period”) shall exist during Executive’s continued employment
hereunder and during the twelve (12) month period following termination of
Executive’s employment for any reason other than a termination without Cause,
termination by Executive for Good Reason, or termination for Disability, in
which case the Restricted Period is six (6) months.  During the Restricted
Period, Executive shall not, without the prior written consent of Company,
directly or indirectly engage in or become associated with a Competitive
Activity.  For purposes of this Agreement, a “Competitive Activity” means, as of
the Termination Date, any business or other endeavor of a

 

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kind being conducted by Company or any of its subsidiaries or affiliates (or
demonstrably anticipated by Company or its subsidiaries or affiliates) in a
geographic area that is within ten (10) miles of (a) any property that is owned,
leased or controlled by Employer or Company at any time during the six
(6) months preceding the Competitive Activity or, if Executive’s employment has
been terminated, during the last six (6) months of the Term, or (b) any oil or
gas prospect that Employer or Company is evaluating or in which either is
seeking to acquire an interest at any time during the six (6) months preceding
the Competitive Activity or, if Executive’s employment has been terminated,
during the last six (6) months of the Term.  Executive shall be considered to
have become “associated with a Competitive Activity” if Executive becomes
directly or indirectly involved as an owner, principal, employee, officer,
director, independent contractor, representative, stockholder, financial backer,
agent, partner, advisor, lender, or in any other individual or representative
capacity with any individual, partnership, corporation or other organization
that is engaged in a Competitive Activity. Notwithstanding the foregoing,
Executive may make and retain investments during the Restricted Period, for
investment purposes only, in less than 5% of the outstanding capital stock of
any publicly-traded corporation engaged in a Competitive Activity if Executive
is not otherwise affiliated with such corporation.  Executive’s ownership of
interests in oil and gas producing properties (whether a working interest,
royalty interest, or other interest) that (a) were acquired prior to the date
hereof or (b) are subsequently acquired with the knowledge and approval of
Company or Employer will not be considered a Competing Activity.

 

Employer, Company and Executive agree that this provision does not impose an
undue hardship on Executive, is not injurious to the public and is necessary to
protect the business of Employer, Company and their respective affiliates.  The
parties also agree that the nature of Executive’s responsibilities with Employer
and Company under this Agreement require Executive to have access to
Confidential Information (as defined below), which is valuable and confidential
to Company and Employer, that the scope of this Section 7 is reasonable in terms
of length of time and geographic areas covered, and that adequate consideration
supports this Section 7, including the consideration provided for in this
Agreement.

 

If any of the covenants in this Section 7 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of extending for too great
a period of time or over too great a geographical area or by reason of being too
extensive in any other respect, it shall be interpreted to extend over the
maximum period of time for which it may be enforceable and to the maximum extent
in all other respects as to which it may be enforceable, and enforced as so
interpreted, all as determined by such court in such action. Executive
acknowledges the uncertainty of the law in this respect and expressly stipulates
that this Agreement is to be given the construction that renders its provisions
valid and enforceable to the maximum extent (not exceeding its express terms)
possible under applicable law.

 

8.                                   Non-solicitation.  Executive agrees that
(i) during the Restricted Period, Executive shall not, without the prior written
consent of Company, directly or indirectly, hire, recruit or solicit the
employment or services of (whether as an employee, officer, director, agent,
consultant or independent contractor), or encourage to change such person’s
relationship with Company or any of its subsidiaries or affiliates, any
employee, officer, director, agent, consultant

 

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or independent contractor of Company or any of its subsidiaries or affiliates,
provided, however, that a general solicitation of the public for employment
shall not constitute a solicitation hereunder so long as such general
solicitation is not designed to target, or does not have the effect of
targeting, any employee, officer, director, agent, consultant or independent
contractor of Company or any of its subsidiaries or affiliates; (ii) Executive
will not convey any information (whether confidential or otherwise) or trade
secrets about any employees, officers, directors, agents, consultants and
independent contractors of Company or any of its subsidiaries or affiliates to
any other person; and (iii) during the Restricted Period, Executive shall not,
without the prior written consent of Company, directly or indirectly, solicit,
attempt to do business with, or do business with any customers of, suppliers to,
business partners of or business affiliates of Company or any of its
subsidiaries or affiliates (such customers, suppliers, partners and affiliates,
collectively, “Trade Relationships”) on behalf of any entity engaged in a
Competitive Activity, or encourage (regardless of who initiates the contact) any
Trade Relationship to use the services of any competitor of Company or its
subsidiaries or affiliates, or encourage any Trade Relationship to change its
relationship with Company or its subsidiaries or affiliates.

 

9.                                   Confidentiality.  Executive acknowledges
that, during the course of Executive’s employment with Employer, Executive may
have developed Confidential Information (as defined below) for Employer or
Company, and Executive may have learned of Confidential Information developed or
owned by Employer, Company or its affiliates or entrusted to Employer, Company
or its affiliates by others.  Executive agrees that Executive will not, directly
or indirectly, use any Confidential Information or disclose it to any other
person or entity, except as otherwise required by law.  Executive further agrees
not to retain copies of any Confidential Information.

 

“Confidential Information” means any and all information relating to Company or
Employer that is not generally known by the public or others with whom Company
or Employer does (or plans to) compete or do business, as well as comparable
information relating to any of Company’s affiliates. Confidential Information
includes, but is not limited to, information relating to the terms of this
Agreement, as well as Company’s and Employer’s business, technology, practices,
products, marketing, sales, services, finances, strategic opportunities,
internal strategies, legal affairs (including pending litigation), the terms of
business relationships not yet publicly known, intellectual property and the
filing or pendency of patent applications. Confidential Information also
includes, but is not limited to, comparable information that Employer or Company
may receive or has received belonging to customers, suppliers, consultants and
others who do business with Employer or Company, or any of Employer’s or
Company’s affiliates.

 

“Confidential Information” does not include any information that is: (i) shown
to have been developed independently by Executive prior to Executive’s
employment with Employer; or (ii) required by a judicial tribunal or similar
governmental body to be disclosed under law (provided that Executive have first
promptly notified Employer of such disclosure requirement and have cooperated
fully with Employer and Company (at Employer’s expense) in exhausting all
appeals

 

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10.                            Property of Employer.  Upon any termination of
Executive’s employment, Executive agrees to return to Employer and Company any
and all records, files, notes, memoranda, reports, work product and similar
items, and any manuals, drawings, sketches, plans, tape recordings, computer
programs, disks, cassettes and other physical representations of any
information, relating to Employer or Company, or any of their respective
affiliates, whether or not constituting Confidential Information.  Executive
also agrees to return to Employer and Company any other property belonging to
Employer or Company, including but not limited to any laptop computer, no later
than the date of Executive’s termination from employment for any reason.
Executive acknowledges and agrees that retaining any copies of Confidential
Information will be deemed to be the misappropriation of the property of Company
or Employer, as the case may be.

 

11.                            Section 280G Safe Harbor Cap.  If it shall be
determined that any payment or distribution or any part thereof of any type to
or for the benefit of Executive whether pursuant to this Agreement or any other
agreement between Executive and Employer or Company, or any person or entity
that acquires ownership or effective control of Employer or Company, or
ownership of a substantial portion of Employer’s assets (within the meaning of
Section 280G of the Code whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or any other agreement, (the “Total
Payments”), is or will be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise Tax”), then the Total Payments shall be reduced to the
maximum amount that could be paid to Executive without giving rise to the Excise
Tax (the “Safe Harbor Cap”), if the net after-tax payment to Executive after
reducing Executive’s Total Payments to the Safe Harbor Cap is greater than the
net after-tax (including the Excise Tax) payment to Executive without such
reduction.

 

The reduction of the amounts payable hereunder, if applicable, shall be made by
reducing payments that trigger the excise tax, and such reductions will be first
the payment made pursuant to the Agreement and then to payments pursuant to any
other agreements that are not subject to Section 409A of the Code, and finally
to payments pursuant to any other agreements that are subject to Section 409A of
the Code, provided that Executive shall have no ability to designate the order
of such reductions.  All mathematical determinations, and all determinations as
to whether any of the Total Payments are “parachute payments” (within the
meaning of Section 280G of the Code), that are required to be made under this
Section 11, including determinations as to whether the Total Payments to
Executive shall be reduced to the Safe Harbor Cap and the assumptions to be
utilized in arriving at such determinations, shall be made by a nationally
recognized accounting firm selected by Employer or Company (the “Accounting
Firm”).

 

If the Accounting Firm determines that the Total Payments to Executive shall be
reduced to the Safe Harbor Cap (the “Cutback Payment”) and it is established
pursuant to a final determination of a court or an Internal Revenue Service (the
“IRS”) proceeding which has been finally and conclusively resolved, that the
Cutback Payment is in excess of the limitations provided in this Section 11
(such excess amount hereinafter referred to as an “Excess Payment”), such Excess
Payment shall be deemed for all purposes to be an overpayment to Executive made
on the date such Executive received the Excess Payment.  Employer or Executive,
as applicable,

 

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shall notify the other within 30 days of its receipt of such final determination
of the amount of the Excess Payment, along with a copy of the final
determination, and Executive shall repay the Excess Payment amount to Employer
within 30 days of such notification; provided, however, if Executive shall be
required to pay an Excise Tax by reason of receiving such Excess Payment
(regardless of the obligation to repay Employer), Executive shall provide
Employer with written evidence of such requirement to pay an Excise Tax amount,
and shall then be required to repay the Excess Payment reduced by such Excise
Tax amount (or if already paid by Executive, Employer shall reimburse Executive
within 10 days of proof of payment).

 

12.                               Repayment Provisions.  If Company is required
to prepare an accounting restatement due to noncompliance with any financial
reporting requirement under United States securities laws, then Company will
have the right to require Executive to reimburse Employer for (a) any bonus or
other incentive-based or equity-based compensation received by Executive from
Employer during the 12-month period following the first public issuance or
filing with the Securities and Exchange Commission (whichever first occurs) of
the financial documents embodying such financial reporting requirement, (b) any
profits realized from the sale of securities of Company during such 12-month
period and (c) such other incentive-based compensation as may be specified by
applicable law, regulation or listing standard.

 

13.                            Remedies.  Notwithstanding other provisions of
this Agreement regarding dispute resolution, Executive agrees that Executive’s
violation of any of Sections 7, 8, 9 or 10 of this Agreement would cause
Employer and Company irreparable harm that would not be adequately compensated
by monetary damages and that an injunction may be granted by any court or courts
having jurisdiction, restraining Executive from violation of the terms of this
Agreement, upon any breach or threatened breach of Executive of the obligations
set forth in any of the Sections 7, 8, 9 or 10.  The preceding sentence shall
not be construed to limit Employer or Company from any other relief or damages
to which it may be entitled as a result of Employee’s breach of any provision of
this Agreement, including Sections 7, 8, 9 or 10. Employee also agrees that a
violation of any of Sections 7, 8, 9 or 10 would entitle Employer and Company,
in addition to all other remedies available at law or equity, to recover from
Executive any and all funds, including, without limitation, wages, salary and
profits, which will be held by Executive in constructive trust for Employer or
Company, received by Executive in connection with such violation.

 

14.                            Arbitration.  If any dispute shall arise between
Executive and Employer or Executive and Company in connection with this
Agreement and such dispute cannot be resolved amicably by the parties, the same
shall be conclusively and finally resolved by binding arbitration.  Any party
hereto may commence an arbitration proceeding by providing written notice to the
other party requesting the arbitration of an unresolved dispute. Each such
dispute, if any, shall be submitted to an arbitrator acceptable to both parties
(for this purpose Employer and Company shall be deemed to one party).  If
Executive on the one hand, or Company and Employer on the other, refuses or
neglects to agree on the appointment of an arbitrator within 30 days after
receipt of written notice from the other party requesting the other party to do
so, then the Judicial Arbiter Group, Inc., Denver, Colorado (www.jaginc.com) may
appoint such arbitrator. The arbitrator shall be experienced in the subject
matter of the dispute.  Except as

 

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otherwise specifically set forth herein, the arbitrators shall conduct the
arbitration in accordance with the rules of the Judicial Arbiter Group, Inc. 
The decision in writing of the arbitrator, when filed with the parties hereto,
shall be final and binding on both parties.  Judgment may be entered upon the
final decision of the arbitrator in any court having jurisdiction.  Such
arbitration shall take place in Denver, Colorado.

 

15.                            Fees.  Unless otherwise agreed, the prevailing
party will be entitled to its costs and attorneys’ fees incurred in any
arbitration or litigation relating to the interpretation or enforcement of this
Agreement.

 

16.                            Disclosure.  Executive agrees to fully and
completely reveal the terms of this Agreement to any future employer or
potential employer of Executive and authorizes Employer and Company, at their
election, to make such disclosure.

 

17.                            Representation of Executive.  Executive
represents and warrants to Employer and Company that Executive is free to enter
into this Agreement and has no contract, commitment, arrangement or
understanding to or with any party that restrains or is in conflict with
Executive’s performance of the covenants, services and duties provided for in
this Agreement.  Executive agrees to indemnify Employer and Company and to hold
them harmless against any and all liabilities or claims arising out of any
unauthorized act or acts by Executive that, the foregoing representation and
warranty to the contrary notwithstanding, are in violation, or constitute a
breach, of any such contract, commitment, arrangement or understanding. 
Executive further represents and warrants to Employer and Company that Executive
has consulted with his legal, tax, accounting, and investment advisors with
respect to the advisability of entering into this agreement to the extent that
Executive has determined such consultation to be necessary or appropriate.

 

18.                            Assignability. During Executive’s employment,
this Agreement may not be assigned by either party without the written consent
of the other; provided, however, that Employer and Company may assign their
rights and obligations under this Agreement without Executive’s consent to a
successor by sale, merger or liquidation, if such successor carries on Company’s
business substantially in the form in which it is being conducted at the time of
the sale, merger or liquidation.  This Agreement is binding upon Executive,
Executive’s heirs, personal representatives and permitted assigns, on Company,
its successors and assigns, and on Employer, its successors and assigns.

 

19.                            Notices. For purposes of this Agreement, notices
and all other communications provided for herein shall be in writing and shall
be deemed to have been duly given when personally delivered or when mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

 

IF TO EMPLOYER TO:

KODIAK OIL & GAS (USA) INC.

1625 Broadway, Suite 250

Denver, Colorado 80202

Attention: Chief Financial Officer

 

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IF TO COMPANY TO:

KODIAK OIL & GAS CORP.

1625 Broadway, Suite 250

Denver, Colorado 80202

Attention: Chairman of the Compensation and Nominating Committee

 

 

IF TO EXECUTIVE TO:

Lynn A. Peterson

1625 Broadway, Suite 250

Denver, Colorado 80202

 

20.                            Severability.  If any provision of this Agreement
or compliance by any of the parties with any provision of this Agreement
constitutes a violation of any law, or is or becomes unenforceable or void, then
such provision, to the extent only that it is in violation of law, unenforceable
or void, shall be deemed modified to the extent necessary so that it is no
longer in violation of law, unenforceable or void, and such provision will be
enforced to the fullest extent permitted by law.  If such modification is not
possible, said provision, to the extent that it is in violation of law,
unenforceable or void, shall be deemed severable from the remaining provisions
of this Agreement, which provisions will remain binding on the parties.

 

21.                            Waivers.  No failure on the part of either party
to exercise, and no delay in exercising, any right or remedy hereunder will
operate as a waiver thereof; nor will any single or partial waiver of a breach
of any provision of this Agreement operate or be construed as a waiver of any
subsequent breach; nor will any single or partial exercise of any right or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right or remedy granted hereby or by law.

 

22.                            Governing Law.  The validity, construction and
performance of this Agreement shall be governed by the laws of the State of
Colorado without regard to the conflicts of law provisions of such laws.

 

23.                            Entire Agreement.  This instrument contains the
entire agreement of the parties with respect to the relationship among
Executive, Company and Employer and supersedes all prior agreements and
understandings, and there are no other representations or agreements other than
as stated in this Agreement related to the terms and conditions of Executive’s
employment. This Agreement may be changed only by an agreement in writing signed
by the party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have duly signed and delivered this Agreement as
of the day and year first above written.

 

 

 

EMPLOYER:

 

 

 

 

 

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

 

 

By:

/s/ James P. Henderson

 

 

James P. Henderson, Chief Financial Officer

 

 

 

 

 

 

 

 

COMPANY:

 

 

 

 

 

KODIAK OIL & GAS CORP.

 

 

 

 

 

 

 

By: :

/s/ James P. Henderson

 

 

James P. Henderson, Chief Financial Officer

 

 

 

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

 

 

/s/ Lynn A. Peterson

 

 

Name: Lynn A. Peterson

 

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