Exhibit 10.1

 

Execution Version

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of October 28, 2011

 

among

 

KODIAK OIL & GAS (USA) INC.,

as Borrower,

 

WELLS FARGO BANK, N.A.,

as Administrative Agent,

 

and

 

The Lenders Party Hereto

 

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WELLS FARGO SECURITIES, LLC,

 

as Sole Lead Arranger and Sole Bookrunner

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING MATTERS

 

 

 

Section 1.01

Terms Defined Above

1

Section 1.02

Certain Defined Terms

1

Section 1.03

Types of Loans and Borrowings

24

Section 1.04

Terms Generally; Rules of Construction

24

Section 1.05

Accounting Terms and Determinations; GAAP

24

 

 

 

ARTICLE II

 

THE CREDITS

 

 

 

Section 2.01

Commitments

24

Section 2.02

Loans and Borrowings.

25

Section 2.03

Requests for Borrowings

26

Section 2.04

Interest Elections.

27

Section 2.05

Funding of Borrowings.

28

Section 2.06

Termination and Reduction of Aggregate Maximum Credit Amounts.

28

Section 2.07

Borrowing Base.

29

Section 2.08

Letters of Credit.

32

Section 2.09

Swingline Loans.

37

Section 2.10

Defaulting Lender Fees.

38

 

 

 

ARTICLE III

 

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

 

 

 

Section 3.01

Repayment of Loans

39

Section 3.02

Interest.

39

Section 3.03

Alternate Rate of Interest

40

Section 3.04

Prepayments.

41

Section 3.05

Fees.

42

 

 

 

ARTICLE IV

 

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

 

 

 

Section 4.01

Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

44

Section 4.02

Presumption of Payment by the Borrower

45

Section 4.03

Certain Deductions by the Administrative Agent

45

Section 4.04

Disposition of Proceeds

45

 

 

 

ARTICLE V

 

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY

 

 

 

Section 5.01

Increased Costs.

46

Section 5.02

Break Funding Payments

47

Section 5.03

Taxes.

47

Section 5.04

Mitigation Obligations; Replacement of Lenders.

51

 

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Section 5.05

Illegality

51

 

 

 

ARTICLE VI

 

CONDITIONS PRECEDENT

 

 

 

Section 6.01

Effective Date

52

Section 6.02

Each Credit Event

56

 

 

 

ARTICLE VII

 

REPRESENTATIONS AND WARRANTIES

 

 

 

Section 7.01

Organization; Powers

57

Section 7.02

Authority; Enforceability

57

Section 7.03

Approvals; No Conflicts

57

Section 7.04

Financial Condition; No Material Adverse Change.

58

Section 7.05

Litigation.

58

Section 7.06

Environmental Matters

58

Section 7.07

Compliance with the Laws and Agreements; No Defaults.

59

Section 7.08

Investment Company Act

60

Section 7.09

Taxes

60

Section 7.10

ERISA.

60

Section 7.11

Disclosure; No Material Misstatements

61

Section 7.12

Insurance

61

Section 7.13

Restriction on Liens

61

Section 7.14

Subsidiaries

62

Section 7.15

Location of Business and Offices

62

Section 7.16

Properties; Titles, Etc.

62

Section 7.17

Maintenance of Properties

63

Section 7.18

Gas Imbalances, Prepayments

64

Section 7.19

Marketing of Production

64

Section 7.20

Swap Agreements

64

Section 7.21

Use of Loans and Letters of Credit

64

Section 7.22

Solvency

64

Section 7.23

Foreign Corrupt Practices

65

Section 7.24

Money Laundering

65

Section 7.25

OFAC

65

 

 

 

ARTICLE VIII

 

AFFIRMATIVE COVENANTS

 

 

 

Section 8.01

Financial Statements; Ratings Change; Other Information

65

Section 8.02

Notices of Material Events

68

Section 8.03

Existence; Conduct of Business

69

Section 8.04

Payment of Obligations

69

Section 8.05

Performance of Obligations under Loan Documents

69

Section 8.06

Operation and Maintenance of Properties

69

Section 8.07

Insurance

70

Section 8.08

Books and Records; Inspection Rights

70

Section 8.09

Compliance with Laws

71

Section 8.10

Environmental Matters.

71

 

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Section 8.11

Further Assurances.

72

Section 8.12

Reserve Reports.

72

Section 8.13

Title Information.

73

Section 8.14

Additional Collateral; Additional Guarantors.

74

Section 8.15

ERISA Compliance

75

Section 8.16

Marketing Activities.

75

 

 

 

ARTICLE IX

NEGATIVE COVENANTS

 

Section 9.01

Financial Covenants.

76

Section 9.02

Debt

76

Section 9.03

Liens

77

Section 9.04

Dividends, Distributions, Redemptions and Restricted Payments.

78

Section 9.05

Investments, Loans and Advances

78

Section 9.06

Nature of Business; International Operations

80

Section 9.07

Limitation on Leases

80

Section 9.08

Proceeds of Notes

80

Section 9.09

ERISA Compliance

80

Section 9.10

Sale or Discount of Receivables

81

Section 9.11

Mergers, Etc

81

Section 9.12

Sale of Properties

81

Section 9.13

Environmental Matters

82

Section 9.14

Transactions with Affiliates

82

Section 9.15

Subsidiaries

82

Section 9.16

Negative Pledge Agreements; Dividend Restrictions

82

Section 9.17

Gas Imbalances, Take-or-Pay or Other Prepayments

82

Section 9.18

Swap Agreements.

83

 

 

 

ARTICLE X

 

EVENTS OF DEFAULT; REMEDIES

 

 

 

Section 10.01

Events of Default

84

Section 10.02

Remedies.

86

 

 

 

ARTICLE XI

 

THE AGENTS

 

 

 

Section 11.01

Appointment; Powers

87

Section 11.02

Duties and Obligations of Administrative Agent

87

Section 11.03

Action by Administrative Agent

88

Section 11.04

Reliance by Administrative Agent

89

Section 11.05

Subagents

89

Section 11.06

Resignation or Removal of Administrative Agent

89

Section 11.07

Agents as Lenders

90

Section 11.08

No Reliance

90

Section 11.09

Administrative Agent May File Proofs of Claim

90

Section 11.10

Authority of Administrative Agent to Release Collateral and Liens

91

Section 11.11

The Syndication Agent and the Documentation Agent

91

Section 11.12

Intercreditor Agreement

91

 

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ARTICLE XII

 

MISCELLANEOUS

 

 

 

Section 12.01

Notices.

92

Section 12.02

Waivers; Amendments.

92

Section 12.03

Expenses, Indemnity; Damage Waiver.

94

Section 12.04

Successors and Assigns.

96

Section 12.05

Survival; Revival; Reinstatement.

99

Section 12.06

Counterparts; Integration; Effectiveness.

100

Section 12.07

Severability

100

Section 12.08

Right of Setoff

100

Section 12.09

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

101

Section 12.10

Headings

102

Section 12.11

Confidentiality

102

Section 12.12

Interest Rate Limitation

103

Section 12.13

EXCULPATION PROVISIONS

103

Section 12.14

Collateral Matters; Swap Agreements

104

Section 12.15

No Third Party Beneficiaries

104

Section 12.16

USA Patriot Act Notice

104

Section 12.17

Existing Credit Agreement

104

Section 12.18

No Fiduciary Duty

105

 

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ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I

 

List of Maximum Credit Amounts

 

 

 

Exhibit A

 

Form of Note

Exhibit B

 

Form of Borrowing Request

Exhibit C

 

Form of Interest Election Request

Exhibit D

 

Form of Compliance Certificate

Exhibit E

 

Form of Assignment and Assumption

Exhibit F-1

 

Form of U.S. Tax Compliance Certificate

Exhibit F-2

 

Form of U.S. Tax Compliance Certificate

Exhibit F-3

 

Form of U.S. Tax Compliance Certificate

Exhibit F-4

 

Form of U.S. Tax Compliance Certificate

 

 

 

Schedule 7.05

 

Litigation

Schedule 7.14

 

Subsidiaries and Partnerships

Schedule 7.18

 

Gas Imbalances

Schedule 7.19

 

Marketing Contracts

Schedule 7.20

 

Swap Agreements

Schedule 9.05

 

Investments

 

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THIS AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 28, 2011, is
among: Kodiak Oil & Gas (USA) Inc., a corporation duly formed and existing under
the laws of the State of Colorado (the “Borrower”); each of the Lenders from
time to time party hereto; and Wells Fargo Bank, N.A. (“Wells Fargo”), as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”).

 

R E C I T A L S

 

A.            The Borrower, the Administrative Agent and the Lenders are parties
to that certain Credit Agreement dated as of May 24, 2010, as amended by that
certain First Amendment dated as of November 30, 2010 and that Second Amendment
dated as of April 13, 2011 (as amended, the “Existing Credit Agreement”),
pursuant to which the Lenders have made certain credit available to and on
behalf of the Borrower.

 

B.            The Borrower has requested that the Lenders amend and restate the
Existing Credit Agreement and provide certain loans to and extensions of credit
on behalf of the Borrower.

 

C.            The Lenders have agreed to amend and restate the Existing Credit
Agreement and make such loans and extensions of credit subject to the terms and
conditions of this Agreement.

 

D.            In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:

 

ARTICLE I

Definitions and Accounting Matters

 

Section 1.01           Terms Defined Above.  As used in this Agreement, each
term defined above has the meaning indicated above.

 

Section 1.02           Certain Defined Terms.  As used in this Agreement, the
following terms have the meanings specified below:

 

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

 

“Acquisition” means the acquisition by the the Borrower of certain assets of BTA
Oil Producers, LLC pursuant to that certain Purchase and Sale Agreement dated
September 27, 2011.

 

“Acquisition Documents” means that certain Purchase and Sale Agreement dated
September 27, 2011, between the Borrower and BTA Oil Producers, LLC, and all
documents, certificates or instruments related thereto.

 

“Acquisition Properties” means those certain Properties acquired by the Borrower
pursuant to the Acquisition Documents.

 

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“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the LIBO Rate for such Interest Period multiplied
by the Statutory Reserve Rate.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

 

“Affected Loans” has the meaning assigned such term in Section 5.05.

 

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

 

“Agents” means, collectively, the Administrative Agent, the Syndication Agent,
if any, and Documentation Agent, if any; and “Agent” shall mean either the
Administrative Agent, the Syndication Agent, if any, or the Documentation Agent,
if any, as the context requires.

 

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.

 

“Agreement” means this Credit Agreement, as the same may from time to time be
amended, modified, supplemented or restated.

 

“Allotted Mortgage” means that certain Amended and Restated Mortgage dated as of
the date hereof, by and between Kodiak Oil & Gas (USA) Inc. and the
Administrative Agent, amending and restating that certain Mortgage, dated
August 10, 2010, by and between Kodiak Oil & Gas (USA) Inc. covering the
allotted leases.

 

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus 0.5% and (c) the Adjusted LIBO Rate for a one
month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1%.  Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the
Adjusted LIBO Rate shall be effective from and including the effective date of
such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted
LIBO Rate, respectively.

 

“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be,
the rate per annum set forth in the Borrowing Base Utilization Grid below based
upon the Borrowing Base Utilization Percentage then in effect:

 

Borrowing Base Utilization Grid

 

Borrowing Base Utilization Percentage

 

<25.0%

 

>25.0% <50.0%

 

³50.0% <75.0%

 

³75.0% <90.0%

 

³90.0%

Eurodollar Loans

 

1.75%

 

2.00%

 

2.25%

 

2.50%

 

2.75%

ABR Loans

 

0.75%

 

1.00%

 

1.25%

 

1.50%

 

1.75%

Commitment Fee Rate

 

0.375%

 

0.375%

 

0.50%

 

0.50%

 

0.50%

 

2

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Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change, provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
then the “Applicable Margin” means the rate per annum set forth on the grid when
the Borrowing Base Utilization Percentage is at its highest level.”

 

“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I, as adjusted from time to time
pursuant to Section 12.04(b)(iv).

 

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender and
(b) any other Person reasonably acceptable to the Administrative Agent.

 

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

 

“Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc.,
(b) Ryder Scott Company Petroleum Consultants, L.P. and (c) any other
independent petroleum engineers reasonably acceptable to the Administrative
Agent.

 

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(a)), and accepted by the Administrative Agent, in the form of
Exhibit E or any other form approved by the Administrative Agent.

 

“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.

 

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.

 

“Borrowing” means Loans of the same Type, made, converted or continued on the
same date and, in the case of Eurodollar Loans, as to which a single Interest
Period is in effect or a Swingline Borrowing.

 

3

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“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time
pursuant to Section 2.07(e), Section 2.07(f), Section 8.13(c) or
Section 9.12(d).

 

“Borrowing Base Deficiency” occurs if at any time the total Revolving Credit
Exposures exceeds the Borrowing Base then in effect.

 

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.

 

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Denver, Colorado are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
banks are open for dealings in dollar deposits in the London interbank market.

 

“Capital Expenditures” means, in respect of any Person, for any period, the
aggregate (determined without duplication) of all exploration and development
expenditures and costs that are capital in nature and any other expenditures
that are capitalized on the balance sheet of such Person in accordance with
GAAP.

 

“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.

 

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries.

 

“Change in Control” means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof) other than the Parent, of Equity
Interests representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of the Borrower,
(b) occupation of a majority of the seats (other than vacant seats) on the board
of directors of the Borrower by Persons who were neither (i) nominated by the
board of directors of the Borrower nor (ii) appointed by directors so nominated
or (c) the acquisition of direct or indirect Control of the Borrower by any
Person or group other than the Parent.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c)

 

4

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compliance by any Lender or the Issuing Bank (or, for purposes of
Section 5.01(b)), by any lending office of such Lender or by such Lender’s or
the Issuing Bank’s holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement; provided that notwithstanding
anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, guidelines or directives
thereunder or issued in connection therewith and (ii) all requests, rules,
guidelines or directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar
authority) or the United States regulatory authorities, in each case pursuant to
Basel III, shall in each case be deemed to be a “Change in Law”, regardless of
the date enacted, adopted or issued.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time,
and any successor statute.

 

“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be
(a) modified from time to time pursuant to Section 2.06 and (b) modified from
time to time pursuant to assignments by or to such Lender pursuant to
Section 12.04(a).  The amount representing each Lender’s Commitment shall at any
time be the lesser of such Lender’s Maximum Credit Amount and such Lender’s
Applicable Percentage of the then effective Borrowing Base.

 

“Commitment Fee Rate” has the meaning set forth in the definition of “Applicable
Margin”.

 

“Connection Income Taxes” means with respect to a recipient, Taxes that are
imposed on or measured by net income (however denominated) of a recipient as a
result of a present or former connection between such recipient and the
jurisdiction imposing such Tax (other than connections arising from such
recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document) or
that are franchise Taxes or branch profits Taxes.

 

“Consolidated Net Income” means with respect to the Parent, the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and the Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other Person to
the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net
income (but not loss) during such period of any Consolidated Subsidiary to the
extent

 

5

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that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (d) any extraordinary non-cash gains or losses during such period
and (e) any gains or losses attributable to writeups or writedowns of assets,
including ceiling test writedowns; and provided further that if the Borrower or
any Consolidated Subsidiary shall acquire or dispose of any Property during such
period, then Consolidated Net Income shall be calculated after giving pro forma
effect to such acquisition or disposition, as if such acquisition or disposition
had occurred on the first day of such period.

 

“Consolidated Subsidiaries” means (a) with respect to the Parent, each
Subsidiary of the Parent and (b) with respect to the Borrower, each Subsidiary
of the Borrower (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of the Parent or the Borrower, as applicable, in
accordance with GAAP.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.  For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person.  “Controlling” and
“Controlled” have meanings correlative thereto.

 

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (i) obligations to deliver commodities,
goods or services, including, without limitation, Hydrocarbons, in consideration
of one or more advance payments, other than gas balancing arrangements in the
ordinary course of business; (j) obligations to pay for goods or services even
if such goods or services are not actually received or utilized by such Person;
(k) any Debt (as defined in the other clauses of this definition) of a
partnership for which such Person is liable either by agreement, by operation of
law or by a Governmental Requirement but only to the

 

6

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extent of such liability; (l) obligations of such Person with respect to
Disqualified Capital Stock; and (m) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment.  The Debt of any Person shall include all
obligations of such Person of the character described above to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is not included as a liability of such Person under GAAP.

 

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

 

“Defaulting Lender” means a Lender (a) that fails to fund a requested Loan
required to be funded by such Lender and such default continues for one
(1) Business Day, (b) that fails to reimburse the Administrative Agent for an LC
Disbursement required to be reimbursed by such Lender and such default continues
for one (1) Business Day or (c) who (or whose bank holding company) is placed
into receivership, conservatorship or bankruptcy.

 

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans, LC
Exposure or other obligations hereunder outstanding and all of the Commitments
are terminated.

 

“dollars” or “$” refers to lawful money of the United States of America.

 

“EBITDAX” means, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, transaction fees
and expenses incurred in connection with this Agreement, the Second Lien Term
Loan Agreement and the Acquisition and other permitted acquisitions (in an
amount, with respect to other permitted acquisitions, to be agreed upon by the
Administrative Agent and the Borrower at the time of each such acquisition),
depreciation, depletion, amortization, exploration expenses and other similar
noncash charges including non-cash compensation payments made pursuant to and in
accordance with stock option plans or other benefit plans for management of the
Borrower and unrealized losses incurred in connection with Swap Agreements, and
such other add-backs as the Administrative Agent and the Borrower may agree,
minus all noncash income, including unrealized gains incurred in connection with
Swap Agreements.

 

“Effective Date” means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).

 

“Engineering Reports” has the meaning assigned such term in Section 2.07(c)(i).

 

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“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety, the environment, the preservation or reclamation of
natural resources, or the management, Release or threatened Release of any
Hazardous Materials, in effect in any and all jurisdictions in which the
Borrower or any Subsidiary is conducting, or at any time has conducted,
business, or where any Property of the Borrower or any Subsidiary is located,
including, the Oil Pollution Act of 1990 (“OPA”), as amended, the Clean Air Act,
as amended, the Comprehensive Environmental, Response, Compensation, and
Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 (“RCRA”), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Law, as amended, and other
environmental conservation or protection Governmental Requirements.

 

“Environmental Permit” means any permit, registration, license, notice,
approval, consent, exemption, variance, or other authorization required under or
issued pursuant to applicable Environmental Laws.

 

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.

 

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or a Subsidiary would be deemed to be a “single
employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b),
(c), (m) or (o) of section 414 of the Code.

 

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.

 

“Event of Default” has the meaning assigned such term in Section 10.01.

 

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties

 

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each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business under operating agreements, joint
venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, that do not secure
any monetary obligations and which in the aggregate do not materially impair the
use of such Property for the purposes of which such Property is held by the
Borrower or any Subsidiary or materially impair the value of such Property
subject thereto; (g) Liens on cash or securities pledged to secure performance
of tenders, surety and appeal bonds, government contracts, performance and
return of money bonds, bids, trade contracts, leases, statutory obligations,
regulatory obligations and other obligations of a like nature incurred in the
ordinary course of business and (h) judgment and attachment Liens not giving
rise to an Event of Default, provided that any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceeding may be
initiated shall not have expired and no action to enforce such Lien has been
commenced; provided, further that Liens described in clauses (a) through
(e) shall remain “Excepted Liens” only for so long as no action to enforce such
Lien has been commenced and no intention to subordinate the first priority Lien
granted in favor of the Administrative Agent and the Lenders is to be hereby
implied or expressed by the permitted existence of such Excepted Liens.

 

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or
any other recipient of any payment to be made by or on account of any obligation
of the Borrower or any Guarantor hereunder or under any other Loan Document,
(a) income or franchise taxes imposed on (or measured by) its net income by the
United States of America or such other jurisdiction under the laws of which such
recipient is organized or in which its principal office is

 

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located or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower or any
Guarantor is located and (c) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 5.04(a)), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender’s failure to comply
with Section 5.03(f), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts with respect to such
withholding tax pursuant to Section 5.03(a) or Section 5.03(b) and (d) any U.S.
federal withholding Taxes imposed under FATCA; provided that, notwithstanding
anything to the contrary herein or in any other Loan Document, any withholding
tax imposed on amounts paid under any Guaranty Agreement by Canada (or by any
territory, province or other political subdivision thereof) shall not be
considered an “Excluded Tax.” “FATCA” means Sections 1471 through 1474 of the
Code and any regulations promulgated thereunder or official interpretations
thereof.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof.

 

“FCPA” means the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq.

 

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

 

“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person.  Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.

 

“Financial Statements” means the financial statement or statements of the
Parent, the Borrower and its Consolidated Subsidiaries referred to in
Section 7.04(a).

 

“First Anniversary” means the date which is one year after the Effective Date.

 

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located.  For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

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“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

 

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

 

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, rules of common law, authorization or other
directive or requirement, whether now or hereinafter in effect, of any
Governmental Authority.

 

“Guarantors” means

 

(a)           the Parent; and

 

(b)           each other Subsidiary that guarantees the Indebtedness pursuant to
Section 8.14(b).

 

“Guaranty Agreement” means an agreement executed by the Guarantors
unconditionally guarantying on a joint and several basis, payment of the
Indebtedness, as the same may be amended, restated, modified or supplemented
from time to time.

 

“Hazardous Material” means any substance regulated or as to which liability
might arise under any applicable Environmental Law including:  (a) any chemical,
compound, material, product, byproduct, substance or waste defined as or
included in the definition or meaning of “hazardous substance,” “hazardous
material,” “hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous
substance,” “toxic substance,” “contaminant,” “pollutant,” or words of similar
meaning or import found in any applicable Environmental Law; (b) Hydrocarbons,
petroleum products, petroleum substances, natural gas, oil, oil and gas waste,
crude oil, and any components, fractions, or derivatives thereof; and
(c) radioactive materials, explosives, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon, infectious or medical wastes.

 

“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.

 

“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.

 

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“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.

 

“Indebtedness” means any and all amounts owing or to be owing by the Borrower,
any Subsidiary or any Guarantor (whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising): (a) to the Administrative Agent, the Issuing
Bank or any Lender under any Loan Document; (b) to any Lender or any Affiliate
of a Lender under any Swap Agreement between the Borrower or any Subsidiary and
such Lender or Affiliate of a Lender while such Person (or in the case of its
Affiliate, the Person affiliated therewith) is a Lender hereunder and (c) all
renewals, extensions and/or rearrangements of any of the above.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of the
Borrower or a Guarantor under any Loan Document and (b) to the extent not
otherwise described in (a), Other Taxes.

 

“Initial Reserve Report” means those certain Reserve Reports covering the Oil
and Gas Properties dated September 20, 2011 and October 5, 2011, respectively.

 

“Intercreditor Agreement” means that certain Amended and Restated Intercreditor
Agreement dated as of the date hereof,among the Borrower, the Administrative
Agent and the Second Lien Agent as the same may from time to time be amended,
modified, supplemented or restated as permitted therein.

 

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.

 

“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of the Borrower and the
Consolidated Subsidiaries for such period, including to the extent included in
interest expense under GAAP:  (a) amortization of debt discount, (b) capitalized
interest and (c) the portion of any payments or accruals under Capital Leases
allocable to interest expense, plus the portion of any payments or accruals
under Synthetic Leases allocable to interest expense whether or not the same
constitutes interest expense under GAAP.

 

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of
each month, (b) with respect to any Eurodollar Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and, in
the case of a Eurodollar Borrowing with an Interest Period of more than three
months’ duration, each day prior to the last day of such Interest Period that
occurs at intervals of three months’ duration after the first day of such
Interest Period and (c) with respect to a Swingline Loan, the day that such Loan
is required to be repaid pursuant to Section 2.09(a); provided that with respect
to ABR Loans, if such day is not a Business Day, the Interest Payment Date shall
be on the next succeeding Business Day.

 

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect;

 

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provided, that (a) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (b) any Interest Period pertaining to a Eurodollar
Borrowing that commences on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in the last calendar
month of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period.  For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.

 

“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).

 

“Interim Redetermination Date” means the date on which a Borrowing Base that has
been redetermined pursuant to an Interim Redetermination becomes effective as
provided in Section 2.07(d).

 

“Investment” means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or capital contribution to,
assumption of Debt of, purchase or other acquisition of any other Debt or equity
participation or interest in, or other extension of credit to, any other Person
(including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding ninety (90) days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
(c) the purchase or acquisition (in one or a series of transactions) of Property
of another Person that constitutes a business unit or (d) the entering into of
any guarantee of, or other contingent obligation (including the deposit of any
Equity Interests to be sold) with respect to, Debt or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person.

 

“Issuing Bank” means Wells Fargo Bank, National Association, in its capacity as
the issuer of Letters of Credit hereunder, and its successors in such capacity
as provided in Section 2.08(i).  The Issuing Bank may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of the
Issuing Bank, in which case the term “Issuing Bank” shall include any such
Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“LC Commitment” at any time means twenty-five million dollars ($25,000,000).

 

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.

 

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the
Borrower at such time.  The LC

 

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Exposure of any Lender at any time shall be its Applicable Percentage of the
total LC Exposure at such time.

 

“Lenders” means the Persons listed on Annex I and any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.  Unless the context otherwise requires, the term “Lenders” includes
the Swingline Lender.

 

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

 

“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with the Issuing
Bank relating to any Letter of Credit.

 

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor
or substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable to
dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period.  In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate (rounded upwards, if necessary, to the
next 1/100 of 1%) at which dollar deposits comparable to such Eurodollar
Borrowing and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.

 

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties.  The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to
be the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

 

“Loan Documents” means this Agreement, the Notes, the Letter of Credit
Agreements, the Letters of Credit, the Intercreditor Agreement and the Security
Instruments.

 

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“Loans” means the loans and Swingline Loans made by the Lenders to the Borrower
pursuant to this Agreement.

 

“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having more than fifty percent (50%) of the Aggregate
Maximum Credit Amounts; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding more than fifty percent (50%) of the outstanding
aggregate principal amount of the Loans (other than Swingline Loans) and
participation interests in Letters of Credit and Swingline Loans (without regard
to any sale by a Lender of a participation in any Loan under Section 12.04(c));
provided that the Maximum Credit Amounts and the principal amount of the Loans
and participation interests in Letters of Credit of the Defaulting Lenders (if
any) shall be excluded from the determination of Majority Lenders and that the
Administrative Agent must as a Lender vote in favor of any action requiring the
consent or approval of the Majority Lenders.

 

“Material Adverse Effect” means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, or condition
(financial or otherwise) of the Borrower and the Subsidiaries taken as a whole,
(b) the ability of the Borrower, any Subsidiary or any Guarantor to perform any
of its material obligations under any Loan Document, (c) the validity or
enforceability of any Loan Document or (d) the rights and remedies of or
benefits available to the Administrative Agent, any other Agent, the Issuing
Bank or any Lender under any Loan Document.

 

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Subsidiaries in an aggregate principal amount exceeding
$1,000,000.  For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any Subsidiary in respect of any
Swap Agreement at any time shall be the Swap Termination Value.

 

“Maturity Date” means October 28, 2016.

 

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b) or (b) modified from time to time pursuant to any assignment
permitted by Section 12.04(a).

 

“Money Laundering Laws” means any Governmental Requirement related to terrorism
financing or money laundering including the USA PATRIOT Act, The Currency and
Foreign Transactions Reporting Act (also known as the “Bank Secrecy Act”, 31
U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959), the
Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) and Executive
Order 13224 (effective September 24, 2001).

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.

 

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.

 

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“New Borrowing Base Notice” has the meaning assigned such term in
Section 2.07(d).

 

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.

 

“Notes” means the promissory notes of the Borrower described in
Section 2.02(d) and being substantially in the form of Exhibit A, together with
all amendments, modifications, replacements, extensions and rearrangements
thereof.

 

“OFAC” means the U.S. Treasury Department’s Office of Foreign Assets Control.

 

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

 

“Other Taxes” means any and all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes or any other excise or Property
Taxes, charges or similar levies arising from any payment made hereunder or from
the execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a security interest under, or otherwise with respect
to, this Agreement and any other Loan Document.

 

“Parent” means Kodiak Oil & Gas Corp., a corporation continued under the laws of
Yukon Territories, Canada.

 

“Participant” has the meaning set forth in Section 12.04(c)(i).

 

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“Participant Register” has the meaning specified in Section 12.04(c)(i).

 

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

 

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time
during the six calendar years preceding the date hereof, sponsored, maintained
or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.

 

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by the Administrative Agent as its prime rate in effect; each change in
the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.  Such rate is set by the Administrative
Agent as a general reference rate of interest, taking into account such factors
as the Administrative Agent may deem appropriate; it being understood that many
of the Administrative Agent’s commercial or other loans are priced in relation
to such rate, that it is not necessarily the lowest or best rate actually
charged to any customer and that the Administrative Agent may make various
commercial or other loans at rates of interest having no relationship to such
rate.

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.

 

“Proposed Borrowing Base” has the meaning assigned to such term in
Section 2.07(c)(i).

 

“Proposed Borrowing Base Notice” has the meaning assigned to such term in
Section 2.07(c)(i).

 

“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt.  “Redeem” has the correlative meaning thereto.

 

“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Borrowing Base
related thereto becomes effective pursuant to Section 2.07(d).

 

“Register” has the meaning assigned such term in Section 12.04(b)(iv).

 

“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.

 

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors (including attorneys, accountants and experts) of such Person and such
Person’s Affiliates.

 

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“Release” means any depositing, spilling, leaking, pumping, pouring, placing,
emitting, discarding, abandoning, emptying, discharging, migrating, injecting,
escaping, leaching, dumping, or disposing.

 

“Remedial Work” has the meaning assigned such term in Section 8.10(a).

 

“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%)
of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the Loans
(other than Swingline Loans) and participation interests in Letters of Credit
and Swingline Loans (without regard to any sale by a Lender of a participation
in any Loan under Section 12.04(c)); provided that the Maximum Credit Amounts
and the principal amount of the Loans and participation interests in Letters of
Credit of the Defaulting Lenders (if any) shall be excluded from the
determination of Required Lenders and that the Administrative Agent must as a
Lender vote in favor of any action requiring the consent or approval of the
Required Lenders.

 

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each December 31st or July 1st
(or such other date in the event of an Interim Redetermination) the oil and gas
reserves attributable to the Oil and Gas Properties of the Borrower and the
Subsidiaries, together with a projection of the rate of production and future
net income, taxes, operating expenses and Capital Expenditures with respect
thereto as of such date, based upon pricing assumptions consistent with SEC
reporting requirements at the time.

 

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or any Vice President of such Person.  Unless
otherwise specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of the Borrower.

 

“Restricted Payment” means (i) any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash, securities
or other Property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any of its Subsidiaries or any
option, warrant or other right to acquire any such Equity Interests in the
Borrower or any of its Subsidiaries and (ii) any payment, prepayment or
redemption of the Debt outstanding (including interest and fees) under the
Second Lien Term Loan Agreement.

 

“Restructuring” has the meaning assigned such term in Section 9.18(b).

 

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Loans, LC Exposure and
Swingline Exposure outstanding at such time.

 

“Scheduled Redetermination” has the meaning assigned such term in
Section 2.07(b).

 

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“Scheduled Redetermination Date” means the date on which a Borrowing Base that
has been redetermined pursuant to a Scheduled Redetermination becomes effective
as provided in Section 2.07(d).

 

“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.

 

“Second Lien Agent” means Wells Fargo Energy Capital, Inc. as Administrative
Agent under the Second Lien Term Loan Agreement.

 

“Second Lien Notes” means the Notes from time to time issued pursuant to the
Second Lien Term Loan Agreement, together with all amendments, modifications and
supplements thereto permitted by Section 9.04(b).

 

“Second Lien Term Loan Agreement” means that certain Second Lien Credit
Agreement dated as of November 30, 2010 among the Borrower, the Second Lien
Agent and the lenders party thereto from time to time and together with all
amendments, modifications and supplements thereto permitted by Section 9.04(b).

 

“Second Lien Term Loan Documents” means the Second Lien Term Loan Agreement, the
Second Lien Notes and any other “Loan Documents” (as defined therein), in each
case, together with all amendments, modifications and supplements thereto
permitted by Section 9.04(b).

 

“Secured Swap Agreement” means any Swap Agreement of any Loan Party with a
Secured Swap Party; provided, however, that any confirmation or other
transaction entered into in respect of any such Swap Agreement after (a) the
applicable Secured Swap Party ceases to be a Lender or an Affiliate of a Lender
or (b) assignment by such applicable Secured Swap Party to a third party that is
not an Approved Counterparty, shall be deemed not to be a “Secured Swap
Agreement” for purposes of this Agreement and the other Loan Documents.

 

“Secured Swap Party” means (a) any Person that is a party to a Swap Agreement
with any Loan Party that enters into such Swap Agreement while such Person is or
before such Person becomes a Lender or an Affiliate of a Lender, whether or not
such Person at any time ceases to be a Lender or an Affiliate of a Lender, as
the case may be, or (b) any assignee of any Person described in clause (a) above
so long as such assignee is an Approved Counterparty.

 

“Security Instruments” means the Guaranty Agreement, mortgages, deeds of trust,
pledges, and any and all other agreements, instruments, consents or certificates
now or hereafter executed and delivered by the Borrower or any other Person
(other than Swap Agreements with the Lenders or any Affiliate of a Lender or
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Indebtedness, the Notes, this Agreement, or reimbursement obligations under the
Letters of Credit, as such agreements may be amended, modified, supplemented or
restated from time to time.

 

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“Senior Notes” means Debt in respect of senior unsecured notes (issued under an
indenture) issued by the Borrower from time to time (including guarantees
thereof by the Guarantors), that complies with all of the following
requirements:

 

(a)           such Debt is and shall remain unsecured at all times;

 

(b)           no scheduled payment of principal, scheduled mandatory redemption
or scheduled sinking fund payment of such Debt is due on or before the date that
is 180 days after the Maturity Date in effect on the date on which such Debt is
issued (in this definition defined as a “Date of Issuance”);

 

(c)           the financial covenants governing such Debt are no more
restrictive with respect to the Borrower and its Subsidiaries than the financial
covenants under this Agreement and all of the covenants and events of default
governing such Debt are not, taken as a whole, materially more restrictive with
respect to the Borrower and its Subsidiaries than the covenants and Events of
Default under this Agreement;

 

(d)           on each date on which such Debt is issued and immediately after
giving effect to such Debt, the Borrower is in compliance on a pro forma basis
with Section 9.01 of this Agreement, for which the financial statements
described in Sections 8.01(a) and (b) are available to Lenders;

 

(e)           no Default or Event of Default exists on the Date of Issuance or
will occur as a result of the issuance of the notes evidencing such Debt;

 

(f)            such Debt is not guaranteed by any Person which is not a
Guarantor of the Indebtedness;

 

(g)           if such Debt is convertible, in whole or in part, into Equity
Interests in the Borrower, such Debt must (i) be convertible only into common
Equity Interests in the Borrower, and (ii) not contain any put or mandatory
redemption provisions that may be exercised prior to the date that is 180 days
after the Maturity Date;

 

(h)           the principal amount of the first issuance of any Senior Notes
shall be in an amount sufficient to pay in full the obligations outstanding
under the Second Lien Term Loan Agreement; and

 

(i)            on the date of issuance of such Debt, the Borrower shall have
delivered to the Administrative Agent a certificate in reasonable detail signed
by a Responsible Officer of the Borrower reflecting compliance with the
foregoing requirements; and

 

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(j)            if a Borrowing Base Deficiency exists at the time of issuance of
such Debt, the proceeds of such Senior Notes shall be first applied to eliminate
such Borrowing Base Deficiency pursuant to Section 3.04(c)(iii).

 

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

 

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such
reserve percentages shall include those imposed pursuant to such Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation.  The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.

 

‘Subordinated Parent Debt’ means intercompany Debt between the Borrower and the
Parent that by its terms does not allow the Parent to ask for, sue for, take,
demand or accept from the Borrower by set-off or in any other manner any payment
of principal or interest until the termination of the Commitments, no Letter of
Credit is outstanding and all Swap Agreements secured by the Loan Documents
shall be terminated and which is subject to a subordination agreement among the
Parent, the Borrower, the Administrative Agent and the Second Lien Agent.”

 

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
other Person the accounts of which would be consolidated with those of the
parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other Person (a) of which Equity Interests representing more than 50% of the
equity or more than 50% of the ordinary voting power (irrespective of whether or
not at the time Equity Interests of any other class or classes of such Person
shall have or might have voting power by reason of the happening of any
contingency) or, in the case of a partnership, any general partnership interests
are, as of such date, owned, controlled or held, or (b) that is, as of such
date, otherwise Controlled, by the parent or one or more subsidiaries of the
parent or by the parent and one or more subsidiaries of the parent.

 

“Subsidiary” means any subsidiary of the Borrower.

 

“Swap Agreement” means (i) any agreement with respect to any option, swap,
floor, cap, collar, forward sale or forward purchase or derivative transaction
or option or similar agreement, whether exchange traded, “over-the-counter” or
otherwise, involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or

 

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economic, financial or pricing indices or measures of economic, financial or
pricing risk or value or any similar transaction or any combination of these
transactions; provided that no phantom stock or similar plan providing for
payments only on account of services provided by current or former directors,
officers, employees or consultants of the Borrower or the Subsidiaries shall be
a Swap Agreement; provided that a “Swap Agreement” shall not include a contract
for the future sale and/or delivery of physical quantities of Hydrocarbons,
(ii) put or call options or cap or floor transactions with respect to
Hydrocarbons that are entered into solely for hedging, and not speculative,
purposes and do not subject the Borrower or any Subsidiary to any obligation
thereunder other than the payment of the applicable premium for any such put or
call option or cap or floor transaction.

 

“Swap Termination Value” means, in respect of any one or more Swap Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements, (a) for any date on or after the
date such Swap Agreements have been closed out and termination
value(s) determined in accordance therewith, such termination value(s) and
(b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market value(s) for such Swap Agreements, as
determined by the counterparties to such Swap Agreements.

 

“Swingline Borrowing” means a borrowing of a Swingline Loan pursuant to
Section 2.09.

 

“Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time.  The Swingline Exposure of any Lender
at any time shall be its Applicable Percentage of the total Swingline Exposure
at such time.

 

“Swingline Lender” means Wells Fargo, in its capacity as a lender of Swingline
Loans hereunder.

 

“Swingline Loan” has the meaning assigned to such term in Section 2.09.

 

“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.

 

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings (including backup withholding), assessments,
fees or other charges imposed by any Governmental Authority, including any
interest, additions to tax or penalties applicable thereto.

 

“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments.

 

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“Term Lender” means each “Lender” as defined in the Second Lien Term Loan
Agreement (or such corresponding term in the event the Second Lien Term Loan
Agreement is refinanced as permitted by the Intercreditor Agreement).”

 

“Three Affiliated Tribes Mortgage” means that certain Amended and Restated
Mortgage, dated as of the date hereof, by and between Kodiak Oil & Gas (USA)
Inc. and the Administrative Agent, amending and restating that certain Mortgage,
dated August 10, 2010, by and between Kodiak Oil & Gas (USA) Inc. covering the
Tribal Leases.

 

“Total Debt” means, at any date, all Debt of the Borrower and the Consolidated
Subsidiaries on a consolidated basis, excluding (i) non-cash obligations under
FAS 133 and (ii) accounts payable and other accrued liabilities (for the
deferred purchase price of Property or services) from time to time incurred in
the ordinary course of business which are not greater than ninety (90) days past
the date of invoice or delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP.

 

“Three Affiliated Tribes” means the Three Affiliated Tribes of the Fort Berthold
Indian Reservation.

 

“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, and each other Loan Document
to which it is a party, the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder, and the grant of Liens by the
Borrower on Mortgaged Properties and other Properties pursuant to the Security
Instruments and (b) each Guarantor, the execution, delivery and performance by
such Guarantor of each Loan Document to which it is a party, the guaranteeing of
the Indebtedness and the other obligations under the Guaranty Agreement by such
Guarantor and such Guarantor’s grant of the security interests and provision of
collateral under the Security Instruments, and the grant of Liens by such
Guarantor on Mortgaged Properties and other Properties pursuant to the Security
Instruments.

 

“Tribal Leases” means those certain oil and gas leases issued by the Three
Affiliated Tribes.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Alternate Base Rate or the Adjusted LIBO Rate.

 

“U.S. Person” means any Person that is a “United States Person” as defined in
Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
Section 5.03(f).

 

“Wells Fargo” has the meaning assigned to it in the preamble.

 

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Section 1.03           Types of Loans and Borrowings.  For purposes of this
Agreement, Loans and Borrowings, respectively, may be classified and referred to
by Type (e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

 

Section 1.04           Terms Generally; Rules of Construction.  The definitions
of terms herein shall apply equally to the singular and plural forms of the
terms defined.  Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”,
“includes” and “including” as used in this Credit Agreement shall be deemed to
be followed by the phrase “without limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth in the Loan Documents),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained in the Loan Documents), (d) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (e) with
respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference
herein to Articles, Sections, Annexes, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Annexes, Exhibits and Schedules to,
this Agreement.  No provision of this Agreement or any other Loan Document shall
be interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

 

Section 1.05           Accounting Terms and Determinations; GAAP.  Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Administrative Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the Financial Statements except for changes in which the Parent
and the Borrower’s independent certified public accountants concur and which are
disclosed to Administrative Agent on the next date on which financial statements
are required to be delivered to the Lenders pursuant to Section 8.01(a);
provided that, unless the Borrower and the Majority Lenders shall otherwise
agree in writing, no such change shall modify or affect the manner in which
compliance with the covenants contained herein is computed such that all such
computations shall be conducted utilizing financial information presented
consistently with prior periods.

 

ARTICLE II

The Credits

 

Section 2.01           Commitments.  Subject to the terms and conditions set
forth herein, each Lender agrees to make Loans to the Borrower during the
Availability Period in an aggregate principal amount that will not result in
(a) such Lender’s Revolving Credit Exposure exceeding such Lender’s Commitment
or (b) the total Revolving Credit Exposures exceeding the total

 

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Commitments.  Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, repay and reborrow the
Loans.

 

Section 2.02           Loans and Borrowings.

 

(a)           Borrowings; Several Obligations.  Each Loan shall be made as part
of a Borrowing consisting of Loans made by the Lenders ratably in accordance
with their respective Commitments.  The failure of any Lender to make any Loan
required to be made by it shall not relieve any other Lender of its obligations
hereunder; provided that the Commitments are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.

 

(b)           Types of Loans.  Subject to Section 3.03, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith.  Each Lender at its option may make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement.

 

(c)           Minimum Amounts; Limitation on Number of Borrowings.  At the
commencement of each Interest Period for any Eurodollar Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of
$1,000,000 and not less than $1,000,000.  At the time that each ABR Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $500,000; provided that an ABR Borrowing
may be in an aggregate amount that is equal to the entire unused balance of the
total Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.08(e).  Borrowings of more than one
Type may be outstanding at the same time, provided that there shall not at any
time be more than a total of five (5) Eurodollar Borrowings outstanding. 
Notwithstanding any other provision of this Agreement, the Borrower shall not be
entitled to request, or to elect to convert or continue, any Borrowing if the
Interest Period requested with respect thereto would end after the Maturity
Date.

 

(d)           Notes.  The Loans made by each Lender shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit A,
dated, in the case of (i) any Lender party hereto as of the date of this
Agreement, as of the date of this Agreement or (ii) any Lender that becomes a
party hereto pursuant to an Assignment and Assumption, as of the effective date
of the Assignment and Assumption, payable to such Lender in a principal amount
equal to its Maximum Credit Amount as in effect on such date, and otherwise duly
completed.  In the event that any Lender’s Maximum Credit Amount increases or
decreases for any reason (whether pursuant to Section 2.06, Section 12.04(a) or
otherwise), the Borrower shall deliver or cause to be delivered on the effective
date of such increase or decrease, a new Note payable to such Lender in a
principal amount equal to its Maximum Credit Amount after giving effect to such
increase or decrease, and otherwise duly completed and each such Lender shall
deliver the prior effective Note to the Borrower promptly upon receipt of such
new Note.  The date, amount, Type, interest rate and, if applicable, Interest
Period of each Loan made by each Lender, and all payments made on account of the
principal thereof, shall be recorded by such Lender on its books for its Note
and on a schedule attached to such Note or any continuation thereof or on any
separate record maintained by such Lender.  Failure to make any such notation or
to attach a

 

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schedule shall not affect any Lender’s or the Borrower’s rights or obligations
in respect of such Loans.

 

Section 2.03           Requests for Borrowings.  To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone, in
writing or by e-mail (a) in the case of a Eurodollar Borrowing, not later than
12:00 noon, Denver, Colorado time, three Business Days before the date of the
proposed Borrowing, (b) in the case of an ABR Borrowing, not later than 12:00
noon, Denver, Colorado time, one Business Day before the date of the proposed
Borrowing or (c) in the case of an Swingline Borrowing, not later than 12:00
noon, Denver, Colorado time, on the date of the proposed Borrowing; provided
that no such notice shall be required for any deemed request of an ABR Borrowing
to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e).  Each such telephonic Borrowing Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in substantially the form of
Exhibit B and signed by the Borrower.  Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:

 

(i)            the aggregate amount of the requested Borrowing;

 

(ii)           the date of such Borrowing, which shall be a Business Day;

 

(iii)          whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

 

(iv)          in the case of a Eurodollar Borrowing, the initial Interest Period
to be applicable thereto, which shall be a period contemplated by the definition
of the term “Interest Period”;

 

(v)           the amount of the then effective Borrowing Base, the current total
Revolving Credit Exposures (without regard to the requested Borrowing) and the
pro forma total Revolving Credit Exposures (giving effect to the requested
Borrowing); and

 

(vi)          the location and number of the Borrower’s account to which funds
are to be disbursed, which shall comply with the requirements of Section 2.05.

 

If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration.  Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Revolving Credit Exposures to exceed the
total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and
the then effective Borrowing Base).

 

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

 

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Section 2.04           Interest Elections.

 

(a)           Conversion and Continuance.  Each Borrowing initially shall be of
the Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request.  Thereafter, the Borrower may elect to convert such Borrowing
to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section 2.04.  The Borrower may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing.  This Section 2.04 shall not apply to Swingline Borrowings,
which may not be converted or continued.

 

(b)           Interest Election Requests.  To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by telephone by the time that a Borrowing Request would be required
under Section 2.03 if the Borrower were requesting a Borrowing of the Type
resulting from such election to be made on the effective date of such election. 
Each such telephonic Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request in substantially the form of Exhibit C and
signed by the Borrower.

 

(c)           Information in Interest Election Requests.  Each telephonic and
written Interest Election Request shall specify the following information in
compliance with Section 2.02:

 

(i)            the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing (in
which case the information to be specified pursuant to Section 2.04(c)(ii) and
(iii) shall be specified for each resulting Borrowing);

 

(ii)           the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;

 

(iii)          whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and

 

(iv)          if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election, which
shall be a period contemplated by the definition of the term “Interest Period”.

 

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

 

(d)           Notice to Lenders by the Administrative Agent.  Promptly following
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender’s portion of each
resulting Borrowing.

 

(e)           Effect of Failure to Deliver Timely Interest Election Request and
Events of Default and Borrowing Base Deficiencies on Interest Election.  If the
Borrower fails to deliver

 

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a timely Interest Election Request with respect to a Eurodollar Borrowing prior
to the end of the Interest Period applicable thereto, then, unless such
Borrowing is repaid as provided herein, at the end of such Interest Period such
Borrowing shall be converted to an ABR Borrowing.  Notwithstanding any contrary
provision hereof, if an Event of Default or a Borrowing Base Deficiency has
occurred and is continuing:  (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing (and any Interest Election Request that
requests the conversion of any Borrowing to, or continuation of any Borrowing
as, a Eurodollar Borrowing shall be ineffective) and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the
Interest Period applicable thereto.

 

Section 2.05           Funding of Borrowings.

 

(a)           Funding by Lenders.  Each Lender shall make each Loan to be made
by it hereunder on the proposed date thereof by wire transfer of immediately
available funds by 1:00 p.m., Denver, Colorado time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders.  The Administrative Agent will make such Loans available to the
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the Borrower maintained with the Administrative Agent in Denver,
Colorado and designated by the Borrower in the applicable Borrowing Request;
provided that ABR Loans made to finance the reimbursement of an LC Disbursement
as provided in Section 2.08(e) shall be remitted by the Administrative Agent to
the Issuing Bank; provided further that Swingline Loans shall be made by the
Swingline Lender at the time specified in Section 2.09(b).  Nothing herein shall
be deemed to obligate any Lender to obtain the funds for its Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for its Loan in any particular place or
manner.

 

(b)           Presumption of Funding by the Lenders.  Except with respect to
Swingline Loans made pursuant to Section 2.09, unless the Administrative Agent
shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount.  In such event, if a Lender has not in fact
made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to ABR Loans.  If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

 

Section 2.06           Termination and Reduction of Aggregate Maximum Credit
Amounts.

 

(a)           Scheduled Termination of Commitments.  Unless previously
terminated, the Commitments shall terminate on the Maturity Date.  If at any
time the Aggregate Maximum

 

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Credit Amounts or the Borrowing Base is terminated or reduced to zero, then the
Commitments shall terminate on the effective date of such termination or
reduction.

 

(b)           Optional Termination and Reduction of Aggregate Credit Amounts.

 

(i)            The Borrower may at any time terminate, or from time to time
reduce, the Aggregate Maximum Credit Amounts; provided that (A) each reduction
of the Aggregate Maximum Credit Amounts shall be in an amount that is an
integral multiple of $100,000 and not less than $100,000 and (B) the Borrower
shall not terminate or reduce the Aggregate Maximum Credit Amounts if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 3.04(b), the total Revolving Credit Exposures would exceed the total
Commitments.

 

(ii)           The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Aggregate Maximum Credit Amounts under
Section 2.06(b)(i) at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof.  Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable.  Any
termination or reduction of the Aggregate Maximum Credit Amounts shall be
permanent and may not be reinstated.  Each reduction of the Aggregate Maximum
Credit Amounts shall be made ratably among the Lenders in accordance with each
Lender’s Applicable Percentage.

 

Section 2.07           Borrowing Base.

 

(a)           Initial Borrowing Base.  For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be two-hundred twenty-five million dollars
$225,000,000.  Notwithstanding the foregoing, the Borrowing Base may be subject
to further adjustments from time to time pursuant to Section 2.07(e), (f),
Section 8.13(c) or Section 9.12.

 

(b)           Scheduled and Interim Redeterminations.  The Borrowing Base shall
be redetermined semi-annually in accordance with this Section 2.07 (a “Scheduled
Redetermination”), and, subject to Section 2.07(d), such redetermined Borrowing
Base shall become effective and applicable to the Borrower, the Agents, the
Issuing Bank and the Lenders on April 1st and October 1st of each year,
commencing April 1, 2012.  In addition, (i) the Borrower may, by notifying the
Administrative Agent thereof, and the Administrative Agent may, at the direction
of the Required Lenders, by notifying the Borrower thereof, one time between
each two consecutive Scheduled Redeterminations, each elect to cause the
Borrowing Base to be redetermined between Scheduled Redeterminations and (ii) at
any time any of the Borrower’s Oil and Gas Properties included in the most
recent Reserve Report which have been given value in the then current Borrowing
Base are subject to leases or other agreements with federally recognized Indian
Tribes and the Administrative Agent has not received (A) an opinion of counsel
acceptable to the Administrative Agent regarding such Oil and gas Properties and
(B) any applicable consents to waivers required by the Administrative Agent, the
Administrative Agent may cause the Borrowing Base to be redetermined (each of
(i) and (ii) an “Interim Redetermination”), each of (i) and (ii) in accordance
with this Section 2.07.

 

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(c)           Scheduled and Interim Redetermination Procedure.

 

(i)            Each Scheduled Redetermination and each Interim Redetermination
shall be effectuated as follows:  Upon receipt by the Administrative Agent of
(A) the Reserve Report and the certificate required to be delivered by the
Borrower to the Administrative Agent, in the case of a Scheduled
Redetermination, pursuant to Section 8.12(a) and (c), and, in the case of an
Interim Redetermination, pursuant to Section 8.12(b) and (c), and (B) such other
reports, data and supplemental information, including, without limitation, the
information provided pursuant to Section 8.12(c), as may, from time to time, be
reasonably requested by the Majority Lenders (the Reserve Report, such
certificate and such other reports, data and supplemental information being the
“Engineering Reports”), the Administrative Agent shall evaluate the information
contained in the Engineering Reports and shall, in good faith, propose a new
Borrowing Base (the “Proposed Borrowing Base”) based upon such information and
such other information (including, without limitation, the status of title
information with respect to the Oil and Gas Properties as described in the
Engineering Reports and the existence of any other Debt) as the Administrative
Agent deems appropriate in its sole discretion and consistent with its normal
oil and gas lending criteria as it exists at the particular time.  In no event
shall the Proposed Borrowing Base exceed the Aggregate Maximum Credit Amounts.

 

(ii)           The Administrative Agent shall notify the Borrower and the
Lenders of the Proposed Borrowing Base (the “Proposed Borrowing Base Notice”):

 

(A)          in the case of a Scheduled Redetermination (1) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and
complete manner, then on or before the March 15th and September 15th of such
year following the date of delivery or (2) if the Administrative Agent shall not
have received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 8.12(a) and (c) in a timely and complete manner, then
promptly after the Administrative Agent has received complete Engineering
Reports from the Borrower and has had a reasonable opportunity to determine the
Proposed Borrowing Base in accordance with Section 2.07(c)(i); and

 

(B)           in the case of an Interim Redetermination, promptly, and in any
event, within fifteen (15) days after the Administrative Agent has received the
Engineering Reports required to be delivered pursuant to Section 8.12(b) and
(c).

 

(iii)          Any Proposed Borrowing Base that would increase the Borrowing
Base then in effect must be approved or deemed to have been approved by all of
the Lenders as provided in this Section 2.07(c)(iii); and any Proposed Borrowing
Base that would decrease or maintain the Borrowing Base then in effect must be
approved or be deemed to have been approved by the Required Lenders as provided
in this Section 2.07(c)(iii).  Upon receipt of the Proposed Borrowing Base
Notice, each Lender shall have fifteen (15) days to agree with the Proposed
Borrowing Base or disagree with the Proposed Borrowing Base by proposing an
alternate Borrowing Base; provided, however, that in the event there is only one
Lender and such Lender is also the Administrative Agent or an Affiliate thereof,
such Lender will be deemed to have approved the Proposed Borrowing Base on the
date of the delivery of the Proposed Borrowing Base Notice to the Borrower.  If
at the end of such fifteen (15) days, any Lender has

 

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not communicated its approval or disapproval in writing to the Administrative
Agent, such silence shall be deemed to be an approval of the Proposed Borrowing
Base.  If, at the end of such 15-day period, all of the Lenders, in the case of
a Proposed Borrowing Base that would increase the Borrowing Base then in effect,
or the Required Lenders, in the case of a Proposed Borrowing Base that would
decrease or maintain the Borrowing Base then in effect, have approved or deemed
to have approved, as aforesaid, then the Proposed Borrowing Base shall become
the new Borrowing Base, effective on the date specified in Section 2.07(d).  If,
however, at the end of such 15-day period, all of the Lenders or the Required
Lenders, as applicable, have not approved or deemed to have approved, as
aforesaid, then the Administrative Agent shall poll the Lenders to ascertain the
highest Borrowing Base then acceptable to the Required Lenders for purposes of
this Section 2.07 and, so long as such amount does not increase the Borrowing
Base then in effect, such amount shall become the new Borrowing Base, effective
on the date specified in Section 2.07(d).

 

(d)           Effectiveness of a Redetermined Borrowing Base.  After a
redetermined Borrowing Base is approved or is deemed to have been approved by
all of the Lenders or the Required Lenders, as applicable, pursuant to
Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and the
Lenders of the amount of the redetermined Borrowing Base (the “New Borrowing
Base Notice”), and such amount shall become the new Borrowing Base, effective
and applicable to the Borrower, the Administrative Agent, the Issuing Bank and
the Lenders:

 

(i)            in the case of a Scheduled Redetermination, (A) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to Section 8.12(a) and (c) in a timely and
complete manner, then on the April 1st or October 1st, as applicable, following
such notice, or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to
Section 8.12(a) and (c) in a timely and complete manner, then on the Business
Day next succeeding delivery of such notice; and

 

(ii)           in the case of an Interim Redetermination, on the Business Day
next succeeding delivery of such notice.

 

Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 2.07(e), (f), Section 8.13(c) or
Section 9.12, whichever occurs first.  Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective
until the New Borrowing Base Notice related thereto is received by the Borrower.

 

(e)           Potential Reduction of Borrowing Base Upon Termination of Swap
Agreements.  If the Borrower or any Subsidiary completes a Restructuring or
Restructurings with an aggregate negative effect on the Borrowing Base as
determined by the Administrative Agent in its sole discretion between any two
successive Scheduled Redetermination Dates greater than five percent (5%) of the
value of the then current Borrowing Base, the Administrative Agent shall have
the right to immediately redetermine the Borrowing Base based upon the most
recent Engineering Reports and such other information (including, without
limitation, the status of title information with respect to the Oil and Gas
Properties as described in the Engineering Reports

 

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and the existence of any other Debt) as the Administrative Agent deems
appropriate in its sole discretion and consistent with its normal oil and gas
lending criteria as it exists at the particular time and such redetermination
shall not be counted as an Interim Redetermination.

 

(f)            Potential Reduction of Borrowing Base Upon Sale of Assets.  If
the Borrower or any Subsidiary sells assets pursuant to Section 9.12 with an
aggregate negative effect on the Borrowing Base as determined by the
Administrative Agent in its sole discretion between any two successive Scheduled
Redetermination Dates greater than five percent (5%) of the value of the then
current Borrowing Base, the Administrative Agent shall have the right to
immediately redetermine the Borrowing Base based upon the most recent
Engineering Reports and such other information (including, without limitation,
the status of title information with respect to the Oil and Gas Properties as
described in the Engineering Reports and the existence of any other Debt) as the
Administrative Agent deems appropriate in its sole discretion and consistent
with its normal oil and gas lending criteria as it exists at the particular time
and such redetermination shall not be counted as an Interim Redetermination.

 

(g)           Adjustment following Issuance of Senior Notes. Notwithstanding
anything to the contrary contained herein, on each date of issuance of Senior
Notes by Borrower or any of its Subsidiaries, the Borrowing Base then in effect
may be reduced, at the sole discretion of the Administrative Agent, by an amount
up to the product of up to 0.25 and the stated principal amount of the Senior
Notes then being issued.  Such Borrowing Base shall become effective immediately
upon such date of issuance and shall remain in effect until the next
Redetermination Date or adjustment pursuant to Section 2.07(e), this
Section 2.07(f), Section 8.13(c) or Section 9.12. For purposes of this
Section 2.07(f), if any such Senior Notes is issued at a discount or otherwise
sold for less than “par”, the reduction shall be calculated based upon the
stated principal amount without reference to such discount.

 

Section 2.08           Letters of Credit.

 

(a)           General.  Subject to the terms and conditions set forth herein,
the Borrower may request the issuance of dollar denominated Letters of Credit
for its own account or for the account of any of its Subsidiaries, in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time during the Availability Period; provided that the
Borrower may not request the issuance, amendment, renewal or extension of
Letters of Credit hereunder if a Borrowing Base Deficiency exists at such time
or would exist as a result thereof.  In the event of any inconsistency between
the terms and conditions of this Agreement and the terms and conditions of any
form of letter of credit application or other agreement submitted by the
Borrower to, or entered into by the Borrower with, the Issuing Bank relating to
any Letter of Credit, the terms and conditions of this Agreement shall control.

 

(b)           Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions.  To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (not less than three (3) Business Days in
advance of the requested date of issuance, amendment, renewal or extension) a
notice:

 

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(i)            requesting the issuance of a Letter of Credit or identifying the
Letter of Credit to be amended, renewed or extended;

 

(ii)           specifying the date of issuance, amendment, renewal or extension
(which shall be a Business Day);

 

(iii)          specifying the date on which such Letter of Credit is to expire
(which shall comply with Section 2.08(c));

 

(iv)          specifying the amount of such Letter of Credit;

 

(v)           specifying the name and address of the beneficiary thereof and
such other information as shall be necessary to prepare, amend, renew or extend
such Letter of Credit; and

 

(vi)          specifying the amount of the then effective Borrowing Base and
whether a Borrowing Base Deficiency exists at such time, the current total
Revolving Credit Exposures (without regard to the requested Letter of Credit or
the requested amendment, renewal or extension of an outstanding Letter of
Credit) and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).

 

Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC Commitment and (ii) the total Revolving Credit
Exposures shall not exceed the total Commitments (i.e. the lesser of the
Aggregate Maximum Credit Amounts and the then effective Borrowing Base).

 

If requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit.

 

(c)           Expiration Date.  Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.

 

(d)           Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit.  In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender’s Applicable Percentage of each
LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on
the date due as provided in Section 2.08(e), or of any reimbursement payment
required to be refunded to the Borrower for any reason.  Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this Section 2.08(d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by

 

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any circumstance whatsoever, including any amendment, renewal or extension of
any Letter of Credit or the occurrence and continuance of a Default, the
existence of a Borrowing Base Deficiency or reduction or termination of the
Commitments, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.

 

(e)           Reimbursement.  If the Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, Denver, Colorado time, on the date that
such LC Disbursement is made, if the Borrower shall have received notice of such
LC Disbursement prior to 10:00 a.m., Denver, Colorado time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, Denver, Colorado time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., Denver, Colorado time, on the day of receipt, or (ii) the Business
Day immediately following the day that the Borrower receives such notice, if
such notice is not received prior to such time on the day of receipt; provided
that if such LC Disbursement is greater than $1,000,000, the Borrower shall,
subject to the conditions to Borrowing set forth herein, be deemed to have
requested, and the Borrower does hereby request under such circumstances, that
such payment be financed with an ABR Borrowing in an equivalent amount and, to
the extent so financed, the Borrower’s obligation to make such payment shall be
discharged and replaced by the resulting ABR Borrowing.  If the Borrower fails
to make such payment when due, the Administrative Agent shall notify each Lender
of the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender’s Applicable Percentage thereof.  Promptly
following receipt of such notice, each Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.05 with respect to Loans made by such
Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to
the Issuing Bank the amounts so received by it from the Lenders.  Promptly
following receipt by the Administrative Agent of any payment from the Borrower
pursuant to this Section 2.08(e), the Administrative Agent shall distribute such
payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such
Lenders and the Issuing Bank as their interests may appear.  Any payment made by
a Lender pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any
LC Disbursement (other than the funding of ABR Loans as contemplated above)
shall not constitute a Loan and shall not relieve the Borrower of its obligation
to reimburse such LC Disbursement.

 

(f)            Obligations Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit or any Letter of Credit
Agreement, or (iv) any other event or circumstance whatsoever, whether or not
similar to

 

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any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder.  Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any document
required to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank; provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.  The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination.  In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.

 

(g)           Disbursement Procedures.  The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit.  The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.

 

(h)           Interim Interest.  If the Issuing Bank shall make any LC
Disbursement, then, until the Borrower shall have reimbursed the Issuing Bank
for such LC Disbursement (either with its own funds or a Borrowing under
Section 2.08(e)), the unpaid amount thereof shall bear interest, for each day
from and including the date such LC Disbursement is made to but excluding the
date that the Borrower reimburses such LC Disbursement, at the rate per annum
then applicable to ABR Loans.  Interest accrued pursuant to this
Section 2.08(h) shall be for the account of the Issuing Bank, except that
interest accrued on and after the date of payment by any Lender pursuant to
Section 2.08(e) to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.

 

(i)            Replacement of the Issuing Bank.  The Issuing Bank may be
replaced at any time by written agreement among the Borrower, the Administrative
Agent, the replaced Issuing Bank and the successor Issuing Bank.  The
Administrative Agent shall notify the Lenders of any such replacement of the
Issuing Bank.  At the time any such replacement shall become

 

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effective, the Borrower shall pay all unpaid fees accrued for the account of the
replaced Issuing Bank pursuant to Section 3.05(a).  From and after the effective
date of any such replacement, (i) the successor Issuing Bank shall have all the
rights and obligations of the Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the term
“Issuing Bank” shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require.  After the replacement of the Issuing Bank hereunder, the
replaced Issuing Bank shall remain a party hereto and shall continue to have all
the rights and obligations of the Issuing Bank under this Agreement with respect
to Letters of Credit issued by it prior to such replacement, but shall not be
required to issue additional Letters of Credit.

 

(j)            Cash Collateralization.  If (i) any Event of Default shall occur
and be continuing and the Borrower receives notice from the Administrative Agent
or the Majority Lenders demanding the deposit of cash collateral pursuant to
this Section 2.08(j), or (ii) the Borrower is required to pay to the
Administrative Agent the excess attributable to an LC Exposure in connection
with any prepayment pursuant to Section 3.04(b), then the Borrower shall
deposit, in an account with the Administrative Agent, in the name of the
Administrative Agent and for the benefit of the Lenders, an amount in cash equal
to, in the case of an Event of Default, the LC Exposure, and in the case of a
payment required by Section 3.04(b), the amount of such excess as provided in
Section 3.04(b), as of such date plus any accrued and unpaid interest thereon;
provided that the obligation to deposit such cash collateral shall become
effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower or any Subsidiary described in
Section 10.01(g) or Section 10.01(h).  The Borrower hereby grants to the
Administrative Agent, for the benefit of the Issuing Bank and the Lenders, an
exclusive first priority and continuing perfected security interest in and Lien
on such account and all cash, checks, drafts, certificates and instruments, if
any, from time to time deposited or held in such account, all deposits or wire
transfers made thereto, any and all investments purchased with funds deposited
in such account, all interest, dividends, cash, instruments, financial assets
and other Property from time to time received, receivable or otherwise payable
in respect of, or in exchange for, any or all of the foregoing, and all
proceeds, products, accessions, rents, profits, income and benefits therefrom,
and any substitutions and replacements therefor.  The Borrower’s obligation to
deposit amounts pursuant to this Section 2.08(j) shall be absolute and
unconditional, without regard to whether any beneficiary of any such Letter of
Credit has attempted to draw down all or a portion of such amount under the
terms of a Letter of Credit, and, to the fullest extent permitted by applicable
law, shall not be subject to any defense or be affected by a right of set-off,
counterclaim or recoupment which the Borrower or any of its Subsidiaries may now
or hereafter have against any such beneficiary, the Issuing Bank, the
Administrative Agent, the Lenders or any other Person for any reason
whatsoever.  Such deposit shall be held as collateral securing the payment and
performance of the Borrower’s and the Guarantor’s obligations under this
Agreement and the other Loan Documents.  The Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account.  Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Administrative Agent and at the Borrower’s risk and expense, such deposits
shall not bear interest.  Interest or profits, if any, on such investments shall
accumulate in such account.  Moneys in such account shall be applied by the
Administrative Agent to reimburse the Issuing Bank for LC

 

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Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated, be applied to satisfy other obligations of the Borrower
and the Guarantors under this Agreement or the other Loan Documents.  If the
Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, and the Borrower is not
otherwise required to pay to the Administrative Agent the excess attributable to
an LC Exposure in connection with any prepayment pursuant to Section 3.04(b),
then such amount (to the extent not applied as aforesaid) shall be returned to
the Borrower within three Business Days after all Events of Default have been
cured or waived.

 

(k)           So long as any Lender is a Defaulting Lender, the Issuing Bank
shall not be required to issue, amend or increase any Letter of Credit, unless
it is satisfied that the related exposure will be 100% covered by the
Commitments of the Non-Defaulting Lenders and/or cash collateral will be
provided by the Borrower in accordance with Section 2.08(j), and participating
interests in any such newly issued or increased Letter of Credit shall be
allocated among Non-Defaulting Lenders in a manner consistent with Section 2.10
(and Defaulting Lenders shall not participate therein).

 

Section 2.09           Swingline Loans.

 

(a)           Subject to the terms and conditions set forth herein, the
Swingline Lender agrees to make loans to the Borrower (each such loan, a
“Swingline Loan”) from time to time during the period from and including the
Effective Date to, but excluding, the Termination Date, in an aggregate
principal amount at any time outstanding that will not result in (i) the
aggregate principal amount of outstanding Swingline Loans exceeding $15,000,000,
notwithstanding the fact that such Swingline Loans, when aggregated with the
Credit Exposure of the Lender acting as the Swingline Lender, may exceed the
amount of such Lender’s Commitment, or (ii) the Total Revolving Credit Exposure
exceeding the Aggregate Commitments; provided that the Swingline Lender shall
not be required to make a Swingline Loan to refinance an outstanding Swingline
Loan.  The Borrower shall pay to the Administrative Agent, for the account of
the Swingline Lender or each Lender, as applicable, pursuant to Section 2.09(c),
the outstanding aggregate principal and accrued and unpaid interest under each
Swingline Loan upon the earlier to occur of (i) the Termination Date or
(ii) thirty (30) days following such Swingline Borrowing.  Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Swingline Loans.

 

(b)           To request a Swingline Loan, the Borrower shall notify the
Administrative Agent of such request by telephone, facsimile or e-mail not later
than 12:00 p.m., Denver, Colorado time, on the date of the proposed Swingline
Loan (and, in the case of telephonic notice, confirmed by hand delivery,
facsimile or e-mail).  Each such notice shall be irrevocable and shall specify
the requested date (which shall be a Business Day) and amount of the requested
Swingline Loan.  The Administrative Agent will promptly advise the Swingline
Lender of any such notice received from the Borrower.  The Swingline Lender
shall make each Swingline Loan available to the Borrower by means of a credit to
the general deposit account of the Borrower with the Swingline Lender by
3:00 p.m., Denver, Colorado time, on the requested date of such

 

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Swingline Loan.  Each Swingline Borrowing shall be in an amount that is an
integral multiple of $250,000 and not less than $250,000.

 

(c)           The Lenders shall participate in Swingline Loans according to
their respective Applicable Percentages. Upon any Swingline Borrowing, the
Administrative Agent shall give notice thereof to each Lender, specifying in
such notice such Lender’s Applicable Percentage of such Swingline Loan or
Loans.  Each Lender hereby absolutely and unconditionally agrees, upon receipt
of notice as provided above, to pay to the Administrative Agent, for the account
of the Swingline Lender, such Lender’s Applicable Percentage of such Swingline
Loan or Loans.  Each Lender acknowledges and agrees that its obligation to
acquire participations in Swingline Loans pursuant to this paragraph is absolute
and unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or reduction or
termination of the Aggregate Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.  Each
Lender shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.05 with
respect to Loans made by such Lender (and Section 2.05 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Administrative
Agent shall promptly pay to the Swingline Lender the amounts so received by it
from the Lenders and shall distribute the payments received from the Borrower to
the Swingline Lender and the other Lenders as their interests appear with
respect to such Swingline Loans.  The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this
paragraph.  The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrower of any default in the payment thereof.

 

Section 2.10           Defaulting Lender Fees.

 

Notwithstanding any provision of this Agreement to the contrary, if any Lender
becomes a Defaulting Lender, and if any LC Exposure or Swingline Exposure exists
at the time a Lender becomes a Defaulting Lender then:

 

(i)            such Defaulting Lender shall deposit with the Administrative
Agent cash collateral in an amount equal to such Defaulting Lender’s LC Exposure
and Swingline Exposure in accordance with its Applicable Percentage;

 

(ii)           if the Defaulting Lender does not deposit cash collateral as
described in clause (i) above, all or any part of such LC Exposure and Swingline
Exposure shall be reallocated among the Non-Defaulting Lenders in accordance
with their respective Applicable Percentages but only to the extent (A) the sum
of all Non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting
Lender’s LC Exposure and Swingline Exposure does not exceed the total of all
Non-Defaulting Lenders’ Commitments and (B) the conditions set forth in
Section 6.02 are satisfied at such time;

 

(iii)          if the reallocation described in clause (ii) above cannot, or can
only partially, be effected, then the Borrower shall within one (1) Business Day
following notice by the Administrative Agent cash collateralize such Defaulting
Lender’s LC Exposure and Swingline Exposure (after giving effect to any partial
reallocation pursuant to clause (ii) above)

 

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in accordance with the procedures set forth in Section 2.08(e) for so long as
such LC Exposure and Swingline Exposure are outstanding;

 

(iv)          if the Borrower cash collateralizes any portion of such Defaulting
Lender’s LC Exposure pursuant to Section 2.08(k)(iii) then the Borrower shall
not be required to pay any fees to such Defaulting Lender pursuant to
Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure during the
period such Defaulting Lender’s LC Exposure is cash collateralized;

 

(v)           if the LC Exposure of the Non-Defaulting Lenders is reallocated
pursuant to this Section 2.08(k), then the fees payable to the Lenders pursuant
to Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such
Non-Defaulting Lenders’ Applicable Percentages; or

 

(vi)          if any Defaulting Lender’s LC Exposure is neither cash
collateralized nor reallocated pursuant to this Section 2.08(k), then, without
prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder,
all commitment fees that otherwise would have been payable to such Defaulting
Lender (solely with respect to the portion of such Defaulting Lender’s
Commitment that was utilized by such LC Exposure) and letter of credit fees
payable under Section 3.05(b) with respect to such Defaulting Lender’s LC
Exposure shall be payable to the Issuing Bank until such LC Exposure is cash
collateralized and/or reallocated.

 

ARTICLE III
Payments of Principal and Interest; Prepayments; Fees

 

Section 3.01           Repayment of Loans.  The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan on the Termination Date.

 

Section 3.02           Interest.

 

(a)           ABR Loans.  The Loans comprising each ABR Borrowing shall bear
interest at the Alternate Base Rate plus the Applicable Margin, but in no event
to exceed the Highest Lawful Rate.

 

(b)           Eurodollar Loans.  The Loans comprising each Eurodollar Borrowing
shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect
for such Borrowing plus the Applicable Margin, but in no event to exceed the
Highest Lawful Rate.

 

(c)           Swingline Loans.  Swingline Loans shall bear interest at the
Adjusted LIBO Rate for a one (1) month Interest Period that would be applicable
to a Revolving Loan, as that rate may fluctuate in accordance with changes in
the Adjusted LIBO Rate as determined on a day-to-day basis, plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate.

 

(d)           Post-Default Rate and Borrowing Base Deficiency Rate. 
Notwithstanding the foregoing, (i) if an Event of Default has occurred and is
continuing, or if any principal of or

 

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interest on any Loan or any fee or other amount payable by the Borrower or any
Guarantor hereunder or under any other Loan Document is not paid when due,
whether at stated maturity, upon acceleration or otherwise, and including any
payments in respect of a Borrowing Base Deficiency under Section 3.04(b), then
at the election of the Administrative Agent, all Loans outstanding, in the case
of an Event of Default, and such overdue amount, in the case of a failure to pay
amounts when due, shall bear interest, after as well as before judgment, at a
rate per annum equal to two percent (2%) plus the rate applicable to ABR Loans
as provided in Section 3.02(a), but in no event to exceed the Highest Lawful
Rate, and (ii)  during any Borrowing Base Deficiency, upon the election by the
Administrative Agent, all Loans outstanding at such time shall bear interest,
after as well as before judgment, at the rate then applicable to such Loans,
plus the Applicable Margin, if any, plus an additional two percent (2%), but in
no event to exceed the Highest Lawful Rate.

 

(e)           Interest Payment Dates.  Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan and on the
Termination Date; provided that (i) interest accrued pursuant to
Section 3.02(c) shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Loan (other than an optional prepayment of an ABR Loan
prior to the Termination Date), accrued interest on the principal amount repaid
or prepaid shall be payable on the date of such repayment or prepayment, and
(iii) in the event of any conversion of any Eurodollar Loan prior to the end of
the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.

 

(f)            Interest Rate Computations.  All interest hereunder shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), except that interest
computed by reference to the Alternate Base Rate at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).  The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall
be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.

 

Section 3.03           Alternate Rate of Interest.  If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:

 

(a)           the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest
Period; or

 

(b)           the Administrative Agent is advised by the Majority Lenders that
the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period;

 

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no

 

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longer exist, (i) any Interest Election Request that requests the conversion of
any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing
shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar
Borrowing, such Borrowing shall be made either as an ABR Borrowing or at an
alternate rate of interest determined by the Majority Lenders as their cost of
funds.

 

Section 3.04           Prepayments.

 

(a)           Optional Prepayments.  The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with Section 3.04(b).

 

(b)           Notice and Terms of Optional Prepayment.  The Borrower shall
notify the Administrative Agent by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing,
not later than 11:00 a.m., Denver, Colorado time, three Business Days before the
date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not
later than 11:00 a.m., Denver, Colorado time, one Business Day before the date
of prepayment or (iii) in the case of prepayment of a Swingline Borrowing, no
later than 11:00 a.m., Denver, Colorado time, on the date of such prepayment. 
Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of each Borrowing or portion thereof to be prepaid (which
shall be (x) in the case of a prepayment of any ABR Borrowing in an amount that
is an integral multiple of $100,000 and not less than $500,000 or equal to the
aggregate principal balance outstanding of such ABR Borrowing, (y) in the case
of a prepayment of any Eurodollar Borrowing, in an amount that is an integral
multiple of $1,000,000 and not less than $1,000,000 or equal to the aggregate
principal balance outstanding of such Eurodollar Borrowing) or (z) in the case
of a Swingline Borrowing, the entire amount of the Swingline Borrowing. 
Promptly following receipt of any such notice relating to a Borrowing, the
Administrative Agent shall advise the Lenders of the contents thereof.  Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of an advance of a Borrowing of the same Type as provided
in Section 2.02.  Each prepayment of a Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by
accrued interest to the extent required by Section 3.02(d).

 

(c)           Mandatory Prepayments.

 

(i)            If, after giving effect to any termination or reduction of the
Aggregate Maximum Credit Amounts pursuant to Section 2.06(b), the total
Revolving Credit Exposures exceeds the total Commitments, then the Borrower
shall (A) prepay the Borrowings on the date of such termination or reduction in
an aggregate principal amount equal to such excess, and (B) if any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure, pay
to the Administrative Agent on behalf of the Lenders an amount equal to such
excess to be held as cash collateral as provided in Section 2.08(j).

 

(ii)           Upon any redetermination of or adjustment to the amount of the
Borrowing Base in accordance with Section 2.07 (other than Section 2.07(e),
Section 2.07(f)) or Section 8.13(c), if the total Revolving Credit Exposures
exceeds the redetermined or adjusted Borrowing Base, then the Borrower shall,
within thirty (30) days following its receipt of the New

 

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Borrowing Base Notice in accordance with Section 2.07(d) or the date the
adjustment occurs; either (A) prepay the Borrowings in an aggregate principal
amount equal to such excess, (B) notify the Administrative Agent in writing that
the Borrower will prepay such excess in six (6) equal monthly installments
beginning on the date that is fifteen (15) days following its receipt of the New
Borrowing Base Notice in accordance with Section 2.07(d) or the date the
adjustment occurs or (C) provide additional collateral acceptable to the
Lenders, in their sole discretion, to increase the Borrowing Base to an amount
that at least equals the outstanding aggregate principal balance of the Loans. 
If any excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, the Borrower will pay to the Administrative Agent on behalf of the
Lenders an amount equal to such excess to be held as cash collateral as provided
in Section 2.08(j).  Notwithstanding the foregoing, the Borrower shall be
obligated to make such prepayment and/or deposit of cash collateral required to
be made pursuant to this Section 3.04(c)(i) on or prior to the Termination Date.

 

(iii)          Upon any adjustments to the Borrowing Base pursuant to
Section 2.07(e), Section 2.07(f) or Section 9.12, if the total Revolving Credit
Exposures exceeds the Borrowing Base as adjusted, then the Borrower shall
(A) prepay the Borrowings in an aggregate principal amount equal to such excess,
and (B) if any excess remains after prepaying all of the Borrowings as a result
of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an
amount equal to such excess to be held as cash collateral as provided in
Section 2.08(j).  The Borrower shall be obligated to make such prepayment and/or
deposit of cash collateral on the date it or any Subsidiary receives proceeds as
a result of such disposition; provided that all payments required to be made
pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination
Date.

 

(iv)          Each prepayment of Borrowings pursuant (other than Swingline
Borrowings) to this Section 3.04(b) shall be applied, first, ratably to any ABR
Borrowings then outstanding, and, second, to any Eurodollar Borrowings then
outstanding, and if more than one Eurodollar Borrowing is then outstanding, to
each such Eurodollar Borrowing in order of priority beginning with the
Eurodollar Borrowing with the least number of days remaining in the Interest
Period applicable thereto and ending with the Eurodollar Borrowing with the most
number of days remaining in the Interest Period applicable thereto.

 

(v)           Each prepayment of Borrowings pursuant to this
Section 3.04(b) shall be applied ratably to the Loans included in the prepaid
Borrowings.  Prepayments pursuant to this Section 3.04(b) shall be accompanied
by accrued interest to the extent required by Section 3.02(d).

 

(d)           No Premium or Penalty.  Prepayments permitted or required under
this Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.

 

Section 3.05           Fees.

 

(a)           Commitment Fees.  The Borrower agrees to pay to the Administrative
Agent for the account of each Lender a commitment fee, which shall accrue at the
applicable Commitment Fee Rate on the average daily amount (before deducting any
outstanding Swingline Loans) of the unused amount of the Commitment of such
Lender during the period from and

 

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including the date of this Agreement to but excluding the Termination Date. 
Accrued commitment fees shall be payable in arrears on the last day of March,
June, September and December of each year and on the Termination Date,
commencing on the first such date to occur after the date hereof.  All
commitment fees shall be computed on the basis of a year of 360 days, unless
such computation would exceed the Highest Lawful Rate, in which case interest
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

 

(b)           Letter of Credit Fees.  The Borrower agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee with
respect to its participations in Letters of Credit, which shall accrue at the
same Applicable Margin used to determine the interest rate applicable to
Eurodollar Loans on the average daily amount of such Lender’s LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date of this Agreement to but excluding
the later of the date on which such Lender’s Commitment terminates and the date
on which such Lender ceases to have any LC Exposure, (ii) to the Issuing Bank a
one time fronting fee, which shall be equal to 0.25% of the principal amount of
such Letter of Credit (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the date of
this Agreement to but excluding the later of the date of termination of the
Commitments and the date on which there ceases to be any LC Exposure, provided
that in no event shall such fee be less than $500 during any year, and (iii) to
the Issuing Bank, for its own account, its standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder.  Participation fees and fronting fees accrued through
and including the last day of March, June, September and December of each year
shall be payable on the third Business Day following such last day, commencing
on the first such date to occur after the date of this Agreement; provided that
all such fees shall be payable on the Termination Date and any such fees
accruing after the Termination Date shall be payable on demand.  Any other fees
payable to the Issuing Bank pursuant to this Section 3.05(a) shall be payable
within 10 days after demand.  All participation fees and fronting fees shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).

 

(c)           Administrative Agent Fees.  The Borrower agrees to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrower and the Administrative
Agent.

 

(d)           Defaulting Lender Fees.  The Borrower shall not be obligated to
pay the Administrative Agent any Defaulting Lender’s ratable share of the fees
described in Sections 3.05(a) and (b) as specified in Section 2.10, for the
period commencing on the day such Defaulting Lender becomes a Defaulting Lender
and continuing for so long as such Lender continues to be a Defaulting Lender.

 

(e)           Other Fees.  The Borrower agrees to pay to the Administrative
Agent fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.

 

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ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs

 

Section 4.01           Payments Generally; Pro Rata Treatment; Sharing of
Set-offs.

 

(a)           Payments by the Borrower.  The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest, fees or
reimbursement of LC Disbursements, or of amounts payable under Section 5.01,
Section 5.02, Section 5.03 or otherwise) prior to 12:00 noon, New York City
time, on the date when due, in immediately available funds, without defense,
deduction, recoupment, set-off or counterclaim.  Fees, once paid, shall be fully
earned and shall not be refundable under any circumstances.  Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon.  All such payments
shall be made to the Administrative Agent at its offices specified in
Section 12.01, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Section 5.01,
Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto.  The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof.  If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension. 
All payments hereunder shall be made in dollars.

 

(b)           Application of Insufficient Payments.  If at any time insufficient
funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of principal and unreimbursed LC Disbursements then due to such parties.

 

(c)           Sharing of Payments by Lenders.  If any Lender shall, by
exercising any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans or participations in
LC Disbursements or Swingline Loans resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Loans and participations
in LC Disbursements of Swingline Loans and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements or Swingline Loans of other Lenders to
the extent necessary so that the benefit of all such payments shall be shared by
the Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in LC
Disbursements or Swingline Loans; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the

 

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Borrower pursuant to and in accordance with the express terms of this Agreement
or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in LC
Disbursements or Swingline Loans to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this Section 4.01(c) shall apply).  The Borrower consents to the foregoing
and agrees, to the extent it may effectively do so under applicable law, that
any Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.

 

Section 4.02           Presumption of Payment by the Borrower.  Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders or the Issuing Bank that the Borrower will not make such payment,
the Administrative Agent may assume that the Borrower has made such payment on
such date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Bank, as the case may be, the amount
due.  In such event, if the Borrower has not in fact made such payment, then
each of the Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

 

Section 4.03           Certain Deductions by the Administrative Agent.  If any
Lender shall fail to make any payment required to be made by it pursuant to
Section 2.05(a), Section 2.08(d), Section 2.08(e) or Section 4.02 then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.  If at any
time prior to the acceleration or maturity of the Loans, the Administrative
Agent shall receive any payment in respect of principal of a Loan or a
reimbursement of an LC Disbursement or Swingline Loan while one or more
Defaulting Lenders shall be party to this Agreement, the Administrative Agent
shall apply such payment first to the Borrowing(s) for which such Defaulting
Lender(s) shall have failed to fund its pro rata share until such time as such
Borrowing(s) are paid in full or each Lender (including each Defaulting Lender)
is owed its Applicable Percentage of all Loans then outstanding.  After
acceleration or maturity of the Loans, all principal will be paid ratably as
provided in Section 10.02(c).

 

Section 4.04           Disposition of Proceeds.  The Security Instruments
contain an assignment by the Borrower and/or the Guarantors unto and in favor of
the Administrative Agent for the benefit of the Lenders of all of the Borrower’s
or each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property.  The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby.  Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that

 

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they will neither notify the purchaser or purchasers of such production nor take
any other action to cause such proceeds to be remitted to the Administrative
Agent or the Lenders, but the Lenders will instead permit such proceeds to be
paid to the Borrower and its Subsidiaries and (b) the Lenders hereby authorize
the Administrative Agent to take such actions as may be necessary to cause such
proceeds to be paid to the Borrower and/or such Subsidiaries.

 

ARTICLE V
Increased Costs; Break Funding Payments; Taxes; Illegality

 

Section 5.01           Increased Costs.

 

(a)           Eurodollar Changes in Law.  If any Change in Law shall:

 

(i)            impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate);

 

(ii)           subject any Lender to any Taxes (other than (A) Indemnified
Taxes, (B) Taxes described in clauses (b) through (d) of the definition of
Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal,
letters of credit, commitments, or other obligations, or its deposits, reserves,
other liabilities or capital attributable thereto; or

 

(iii)          impose on any Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.

 

(b)           Capital Requirements.  If any Lender or the Issuing Bank
determines that any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s or the Issuing
Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding
company, if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the Issuing Bank, to a level below that which such Lender or
the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could
have achieved but for such Change in Law (taking into consideration such
Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the
Issuing Bank’s holding company with respect to capital adequacy), then from time
to time the Borrower will pay to such Lender or the Issuing Bank, as the case
may be, such additional amount or amounts as will compensate such Lender or the
Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such
reduction suffered.

 

(c)           Certificates.  A certificate of a Lender or the Issuing Bank
setting forth the amount or amounts necessary to compensate such Lender or the
Issuing Bank or its holding company, as the case may be, as specified in
Section 5.01(a) or (b) shall be delivered to the Borrower and shall be
conclusive absent manifest error.  The Borrower shall pay such Lender or

 

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the Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.

 

(d)           Effect of Failure or Delay in Requesting Compensation.  Failure or
delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section 5.01 shall not constitute a waiver of such Lender’s or
the Issuing Bank’s right to demand such compensation; provided that the Borrower
shall not be required to compensate a Lender or the Issuing Bank pursuant to
this Section 5.01(d) for any increased costs or reductions incurred more than
180 days prior to the date that such Lender or the Issuing Bank, as the case may
be, notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s or the Issuing Bank’s intention to
claim compensation therefor; provided further that, if the Change in Law giving
rise to such increased costs or reductions is retroactive, then the 180-day
period referred to above shall be extended to include the period of retroactive
effect thereof.

 

Section 5.02           Break Funding Payments.  In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan into an ABR Loan other than
on the last day of the Interest Period applicable thereto, (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 5.04(a), then, in any
such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event.  In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the Eurodollar market.

 

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

 

Section 5.03           Taxes.

 

(a)           Payments Free of Taxes.  Any and all payments by or on account of
any obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03(a)), the Administrative Agent, Lender or Issuing Bank (as the
case may

 

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be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

 

(b)           Payment of Other Taxes by the Borrower.  The Borrower shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law, or at the option of the Administrative Agent timely reimburse it
for the payment of, any Other Taxes.

 

(c)           Indemnification by the Borrower.  The Borrower and Guarantors
shall jointly and severally indemnify the Administrative Agent, each Lender and
the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section 5.03) and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority; provided that the Borrower
shall not be required to indemnify the Administrative Agent, such Lender or the
Issuing Bank pursuant to this Section 5.03(c) for any Indemnified Taxes or Other
Taxes paid more than 180 days prior to the date that the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, notifies the Borrower of
such payment.  A certificate of the Administrative Agent, a Lender or the
Issuing Bank as to the amount of such payment or liability under this
Section 5.03 shall be delivered to the Borrower and shall be conclusive absent
manifest error.

 

(d)           Indemnification by the Lenders.  Each Lender shall severally
indemnify the Administrative Agent, within 10 days after demand therefor, for
(i) any Indemnified Taxes attributable to such Lender (but only to the extent
that the Borrower or Guarantor has not already indemnified the Administrative
Agent for such Indemnified Taxes and without limiting the obligation of the
Borrower or the Guarantors to do so), (ii) any Taxes attributable to such
Lender’s failure to comply with the provisions of Section 12.04(c)(i) relating
to the maintenance of a Participant Register and (iii) any Excluded Taxes
attributable to such Lender, in each case, that are payable or paid by the
Administrative Agent in connection with any Loan Document, and any reasonable
expenses arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the amount of such payment or liability
delivered to any Lender by the Administrative Agent shall be conclusive absent
manifest error.  Each Lender hereby authorizes the Administrative Agent to set
off and apply any and all amounts at any time owing to such Lender under any
Loan Document or otherwise payable by the Administrative Agent to the Lender
from any other source against any amount due to the Administrative Agent under
this paragraph (d).

 

(e)           Evidence of Payments.  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return

 

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reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

 

(f)            Status of Lenders.  (i) Any Lender that is entitled to an
exemption from or reduction of withholding Tax with respect to payments made
under any Loan Document shall deliver to the Borrower and the Administrative
Agent, at the time or times reasonably requested by the Borrower or the
Administrative Agent, such properly completed and executed documentation
reasonably requested by the Borrower or the Administrative Agent as will permit
such payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender, if reasonably requested by the Borrower
or the Administrative Agent, shall deliver such other documentation prescribed
by applicable law or reasonably requested by the Borrower or the Administrative
Agent as will enable the Borrower or the Administrative Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements.  Notwithstanding anything to the contrary in the
preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in
Section 5.03(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in
the Lender’s reasonable judgment such completion, execution or submission would
subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.

 

(ii) Without limiting the generality of the foregoing,

 

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the
Administrative Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Administrative Agent), two executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

 

(B) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Administrative Agent (in such number of copies
as shall be requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), whichever of the following is applicable:

 

(i)  in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Loan Document, executed originals of IRS
Form W-8BEN establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “business profits” or “other income” article of
such tax treaty;

 

(ii)           executed originals of IRS Form W-8ECI;

 

(iii)          in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the

 

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form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank”
within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent
shareholder” of the Borrower within the meaning of Section 871(h)(3)(B) of the
Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of
the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS
Form W-8BEN; or

 

(iv)          to the extent a Foreign Lender is not the beneficial owner,
executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS
Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of
Exhibit F-2 or Exhibit F-3, IRS Form W-9, and/or other certification documents
from each beneficial owner, as applicable; provided that if the Foreign Lender
is a partnership and one or more direct or indirect partners of such Foreign
Lender are claiming the portfolio interest exemption, such Foreign Lender may
provide a U.S. Tax Compliance Certificate substantially in the form of
Exhibit F-4 on behalf of each such direct and indirect partner;

 

(C)           any Foreign Lender shall, to the extent it is legally entitled to
do so, deliver to the Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the reasonable request of the Borrower or the Administrative
Agent), executed originals of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower or the Administrative Agent
to determine the withholding or deduction required to be made; and

 

(D)          if a payment made to a Lender under any Loan Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to
fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Borrower and the Administrative Agent at the time or
times prescribed by law and at such time or times reasonably requested by the
Borrower or the Administrative Agent such documentation prescribed by applicable
law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such
additional documentation reasonably requested by the Borrower or the
Administrative Agent as may be necessary for the Borrower and the Administrative
Agent to comply with their obligations under FATCA and to determine that such
Lender has complied with such Lender’s obligations under FATCA or to determine
the amount to deduct and withhold from such payment.  Solely for purposes of
this clause (D), “FATCA” shall include any amendments made to FATCA after the
date of this Agreement.

 

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Administrative
Agent in writing of its legal inability to do so.

 

(g)           Survival.  Each party’s obligations under this Section 5.03 shall
survive the resignation or replacement of the Administrative Agent or any
assignment of rights by, or the

 

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replacement of, a Lender, the termination of the Commitments and the repayment,
satisfaction or discharge of all obligations under any Loan Document.

 

Section 5.04           Mitigation Obligations; Replacement of Lenders.

 

(a)           Designation of Different Lending Office.  If any Lender requests
compensation under Section 5.01, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 5.03, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to
pay all reasonable costs and expenses incurred by any Lender in connection with
any such designation or assignment.

 

(b)           Replacement of Lenders.  If any Lender requests compensation under
Section 5.01, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 5.03, or if any Lender defaults in its obligation to fund Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 12.04(a)), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that
(i) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 5.01 or payments required to be made pursuant to
Section 5.03, such assignment will result in a reduction in such compensation or
payments.  A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

 

Section 5.05           Illegality.  Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain Eurodollar
Loans either generally or having a particular Interest Period hereunder, then
(a) such Lender shall promptly notify the Borrower and the Administrative Agent
thereof and such Lender’s obligation to make such Eurodollar Loans shall be
suspended (the “Affected Loans”) until such time as such Lender may again make
and maintain such Eurodollar Loans and (b) all Affected Loans which would
otherwise be made by such Lender shall be made instead as ABR Loans (and, if
such Lender so requests by notice to the Borrower and the Administrative Agent,
all Affected Loans of such Lender then outstanding shall be automatically
converted into ABR Loans on the date specified by such Lender in such

 

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notice) and, to the extent that Affected Loans are so made as (or converted
into) ABR Loans, all payments of principal which would otherwise be applied to
such Lender’s Affected Loans shall be applied instead to its ABR Loans.

 

ARTICLE VI
Conditions Precedent

 

Section 6.01           Effective Date.  The obligations of the Lenders to make
Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not
become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 12.02):

 

(a)           The Administrative Agent and the Lenders shall have received all
commitment, facility and agency fees and all other fees and amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder (including, without limitation, the reasonable
and documented fees and expenses of Vinson & Elkins L.L.P., counsel to the
Administrative Agent).

 

(b)           The Administrative Agent shall have received a certificate of the
Secretary or an Assistant Secretary of the Borrower and each Guarantor setting
forth (i) resolutions of its board of directors with respect to the
authorization of the Borrower or such Guarantor to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions contemplated
in those documents, (ii) the officers of the Borrower or such Guarantor (y) who
are authorized to sign the Loan Documents to which the Borrower or such
Guarantor is a party and (z) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby,
(iii) specimen signatures of such authorized officers, and (iv) the articles or
certificate of incorporation and bylaws of the Borrower and such Guarantor,
certified as being true and complete.  The Administrative Agent and the Lenders
may conclusively rely on such certificate until the Administrative Agent
receives notice in writing from the Borrower to the contrary.

 

(c)           The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower and each Guarantor.

 

(d)           The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit D, duly and
properly executed by a Responsible Officer and dated as of the date of Effective
Date.

 

(e)           The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.

 

(f)            The Administrative Agent shall have received duly executed Notes
payable to the order of each Lender that has requested a Note in a principal
amount equal to its Maximum Credit Amount dated as of the date hereof.

 

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(g)           The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments, including the Guaranty
Agreement.  In connection with the execution and delivery of the Security
Instruments, the Administrative Agent shall:

 

(i)            be reasonably satisfied that the Security Instruments create
first priority, perfected Liens (subject only to Excepted Liens identified in
clauses (a) to (d) and (f) of the definition thereof, but subject to the
provisos at the end of such definition) on at least 75% of the total value of
the Oil and Gas Properties evaluated in the Initial Reserve Report; and

 

(ii)           have received certificates, together with undated, blank stock
powers for each such certificate, representing all of the issued and outstanding
Equity Interests of each of the Guarantors.

 

(h)           The Administrative Agent shall have received an opinion of
(i) Dorsey & Whitney, LLP, special counsel to the Borrower and (ii) local
counsel in North Dakota and any other jurisdictions requested by the
Administrative Agent, each in form and substance acceptable to the
Administrative Agent.  The opinion of Lathrop & Gage, LLP with regard to the Oil
and Gas Properties of the Borrower located on the Fort Berthold Indian
Reservation shall, among other things, conclude that (A) at least 95% of
Borrower’s Oil and Gas Properties thereon are on Federal leases, State leases,
allotted lands or fee simple, (B) the Credit Agreement, the Loan Documents and
the Transactions and the performance of the Borrower and its Subsidiaries of
their obligations thereunder do not violate the provisions of any Governmental
Requirement or tribal law, rule, regulation , or order, (C) all consents and
approvals have been received by the Borrower and its Subsidiaries by applicable
Governmental Authorities and tribal authorities, (D) the proposed mortgages
and/or deeds of trust are in proper form and create a valid Lien and security
interest in the Property mortgaged thereunder and (D) it is most probable that
proper venue for any suit regarding any of the Borrower’s Oil and Gas Properties
thereon would be the Federal Courts and not any tribal court.

 

(i)            The Administrative Agent shall have received a certificate of
insurance coverage of the Borrower evidencing that the Borrower is carrying
insurance in accordance with Section 7.12.

 

(j)            The Administrative Agent shall have received title information as
the Administrative Agent may reasonably require satisfactory to the
Administrative Agent setting forth the status of title to at least 80% of the
total value of the Oil and Gas Properties evaluated in the Initial Reserve
Report.

 

(k)           The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Subsidiaries.

 

(l)            The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that the Borrower has received
all consents and approvals required by Section 7.03.

 

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(m)          The Administrative Agent shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(c).

 

(n)           The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Subsidiaries for Delaware and any other jurisdiction requested
by the Administrative Agent; other than those being assigned or released on or
prior to the Effective Date or Liens permitted by Section 9.03.

 

(o)           [Reserved.]

 

(p)           The Administrative Agent shall have received and reviewed all
material contracts of the Borrower and its Subsidiaries and such material
contracts shall be in form and substance reasonably satisfactory to the
Administrative Agent.

 

(q)           The Administrative Agent shall have received such other documents
as the Administrative Agent or special counsel to the Administrative Agent may
reasonably request in advance in writing.

 

(r)            The Acquisition shall have closed on terms and conditions
acceptable to the Administrative Agent.

 

(s)           The Administrative Agent shall have received (i) a certificate of
a Responsible Officer of the Borrower certifying:  (A) that the Borrower is
concurrently consummating the Acquisition in accordance with the terms of the
Acquisition Documents (with all of the material conditions precedent thereto
having been satisfied in all material respects by the parties thereto) and
acquiring substantially all of the Acquisition Properties contemplated by the
Acquisition Documents; (B) as to the final purchase price for the Acquisition
Properties after giving effect to all adjustments as of the closing date
contemplated by the Acquisition Documents and specifying, by category, the
amount of such adjustment; (C) that attached thereto is a true and complete list
of the Acquisition Properties which have been excluded from the Acquisition
pursuant to the terms of the Acquisition Documents, specifying with respect
thereto the basis of exclusion as (1) title defect, (2) preferential purchase
right, (3) environmental or (4) casualty loss; (D) that attached thereto is a
true and complete list of all Acquisition Properties for which any seller has
elected to cure a title defect, (E) that attached thereto is a true and complete
list of all Acquisition Properties for which any seller has elected to remediate
an adverse environmental condition, and (F) that attached thereto is a true and
complete list of all Acquisition Properties which are currently pending final
decision by a third party regarding purchase of such property in accordance with
any preferential right; (ii) a true and complete executed copy of each of the
Acquisition Documents; (iii) original counterparts or copies, certified as true
and complete, of the assignments, deeds and leases for all of the Acquisition
Properties; and (iv) such other related documents and information as the
Administrative Agent shall have reasonably requested.

 

The Borrower recognizes and agrees that (a) it shall have delivered to the
Administrative Agent a preliminary draft of the certificate described herein not
less than three (3) days prior to the

 

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Effective Date identifying which Acquisition Properties will be excluded from
the Acquisition on the Effective Date, and (b) if the aggregate value as
reflected in the Initial Reserve Report of the Acquisition Properties excluded
under clause (i)(C) above is less than or equal to $5,000,000 but greater than
$500,000, the Borrowing Base shall be adjusted downward to reflect such
exclusions by an amount to be determined in good faith by the Administrative
Agent.  The Administrative Agent shall allocate a Borrowing Base value for each
such excluded Property and shall, promptly upon making such allocation, notify
the Borrower and each Lender of such allocation.  If the aggregate value as
reflected in the Initial Reserve Report of Acquisition Properties excluded under
clause (i)(C) above is less than or equal to $500,000, the Borrowing Base will
not be adjusted.  If either the aggregate value as reflected in the Initial
Reserve Report of Acquisition Properties excluded under clause (i)(C) above is
greater than $5,000,000 or any Acquisition Properties are excluded for other
reasons or any seller in respect thereof makes any adjustment to the purchase
price under the Acquisition Documents, then Administrative Agent shall suggest
to the Lenders a Borrowing Base value for each such excluded Property or such
Property subject of such adjustment and the Required Lenders shall reach a
consensus as to all allocation of value for such Property.  Promptly upon the
making by the Required Lenders of such allocation, the Administrative Agent
shall notify the Borrower and each Lender of such allocation.

 

(t)            The Second Lien Term Loan Facility shall be on terms and
conditions usual and customary for transactions of such nature and reasonably
acceptable to the Administrative Agent (including the Intercreditor Agreement)
and shall have commitments of no less than $75,000,000 and not more than
$100,000,000, and shall mature no earlier than the date which is six (6) months
after the Maturity Date.

 

(u)           The Borrower shall have at least $75,000,000 in cash and
availability under the Commitments after giving pro-forma effect to (i) the
Acquisition and (ii) the incurrence of Debt to finance the Acquisition.

 

(v)           The Borrower shall have entered into commodity hedges as set forth
on schedule 7.20 to support the Borrowing Base.

 

(w)          Other than in connection with the Acquisition, the Borrower shall
neither have acquired nor divested itself of, nor shall it have entered into any
agreement or commitment to acquire or divest itself of, any properties or assets
to the extent that the acquisition or divestiture of such properties or assets
had (or would have, upon the consummation of such transaction) a material impact
on the Borrower or the Borrowing Base.

 

(x)            The Existing Credit Agreement shall have been paid in full and
the commitments thereunder shall have been terminated.

 

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. 
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 12.02) at or prior to 12:00 noon, Denver, Colorado time, on
November 30, 2011 (and, in

 

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the event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).

 

Section 6.02           Each Credit Event.  The obligation of each Lender to make
a Loan on the occasion of any Borrowing (including the initial funding), and of
the Issuing Bank to issue, amend, renew or extend any Letter of Credit, is
subject to the satisfaction of the following conditions:

 

(a)           At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.

 

(b)           At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no event, development or circumstance has occurred or
shall then exist that has resulted in, or could reasonably be expected to have,
a Material Adverse Effect.

 

(c)           The representations and warranties of the Borrower and the
Guarantors set forth in this Agreement and in the other Loan Documents shall be
true and correct on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent any such representations and warranties are
expressly limited to an earlier date, in which case, on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of such
Letter of Credit, as applicable, such representations and warranties shall
continue to be true and correct as of such specified earlier date.

 

(d)           The making of such Loan or the issuance, amendment, renewal or
extension of such Letter of Credit, as applicable, would not conflict with, or
cause any Lender or the Issuing Bank to violate or exceed, any applicable
Governmental Requirement, and no Change in Law shall have occurred, and no
litigation shall be pending or threatened, which does or, with respect to any
threatened litigation, seeks to, enjoin, prohibit or restrain, the making or
repayment of any Loan, the issuance, amendment, renewal, extension or repayment
of any Letter of Credit or any participations therein or the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

 

(e)           The receipt by the Administrative Agent of a Borrowing Request in
accordance with Section 2.03 or a request for a Letter of Credit in accordance
with Section 2.08(b), as applicable.

 

Each request for a Borrowing and each request for the issuance, amendment,
renewal or extension of any Letter of Credit shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in Section 6.02(a) through (e).

 

ARTICLE VII
Representations and Warranties

 

The Borrower represents and warrants to the Lenders that:

 

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Section 7.01           Organization; Powers.  Each of the Borrower and the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.

 

Section 7.02           Authority; Enforceability.  The Transactions are within
the Borrower’s and each Guarantor’s corporate powers and have been duly
authorized by all necessary corporate and, if required, stockholder action
(including, without limitation, any action required to be taken by any class of
directors of the Borrower or any other Person, whether interested or
disinterested, in order to ensure the due authorization of the Transactions). 
Each Loan Document to which the Borrower and each Guarantor is a party has been
duly executed and delivered by the Borrower and such Guarantor and constitutes a
legal, valid and binding obligation of the Borrower and such Guarantor, as
applicable, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

Section 7.03           Approvals; No Conflicts.  The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority or any other third Person (including
shareholders or any class of directors, whether interested or disinterested, of
the Borrower or any other Person), nor is any such consent, approval,
registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full
force and effect other than (i) the recording and filing of the Security
Instruments as required by this Agreement, (ii) those third party approvals or
consents which, if not made or obtained, would not cause a Default hereunder,
could not reasonably be expected to have a Material Adverse Effect or do not
have an adverse effect on the enforceability of the Loan Documents and
(iii) with respect to the Allotted Mortgage, the Bureau of Indian Affairs and,
with respect to the Three Affiliated Tribes Mortgage, the Bureau of Indian
Affairs and the Three Affiliated Tribes, provided that provided that the
Borrower shall use commercially reasonable efforts to obtain all necessary
consents to grant a Lien and provide a mortgage in favor of Administrative Agent
on the Oil and Gas Properties subject to the Three Affiliated Tribes Mortgage
and the Allotted Mortgage as soon as practicable, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any Subsidiary or any order of any Governmental
Authority, (c) will not violate or result in a default under any material
indenture, agreement or other instrument binding upon the Borrower or any
Subsidiary or its Properties, or give rise to a right thereunder to require any
payment to be made by the Borrower or such Subsidiary and (d) will not result in
the creation or imposition of any Lien on any Property of the Borrower or any
Subsidiary (other than the Liens created by the Loan Documents).

 

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Section 7.04           Financial Condition; No Material Adverse Change.

 

(a)           The Borrower has heretofore furnished to the Lenders the
consolidated balance sheet and statements of income, stockholders equity and
cash flows of the Parent as of the fiscal year ended December 31, 2010,
certified by Hein & Associates, independent public accountants.  Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Parent, the Borrower and its
Consolidated Subsidiaries as of such date in accordance with GAAP.

 

(b)           Since December 31, 2010, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.

 

(c)           Neither the Borrower nor any Subsidiary has on the date hereof any
material Debt (including Disqualified Capital Stock) or any contingent
liabilities, off-balance sheet liabilities or partnerships, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in the Financial Statements.

 

Section 7.05           Litigation.

 

(a)           Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Subsidiary (i) as to which there is a
reasonable possibility of an adverse determination that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve any Loan Document or
the Transactions.

 

(b)           Since the date of this Agreement, there has been no change in the
status of the matters disclosed in Schedule 7.05 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.

 

Section 7.06           Environmental Matters.  Except for such matters as set
forth on Schedule 7.06 or that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Borrower:

 

(a)           the Borrower and the Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws.

 

(b)           the Borrower and the Subsidiaries have obtained all Environmental
Permits required for their respective operations and each of their Properties,
with all such Environmental Permits being currently in full force and effect,
and none of Borrower or the Subsidiaries has received any written notice or
otherwise has knowledge that any such existing Environmental Permit will be
revoked or that any application for any new Environmental Permit or renewal of
any existing Environmental Permit will be protested or denied.

 

(c)           there are no claims, demands, suits, orders, inquiries, or
proceedings concerning any violation of, or any liability (including as a
potentially responsible party) under,

 

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any applicable Environmental Laws that is pending or, to Borrower’s knowledge,
threatened against the Borrower or any Subsidiary or any of their respective
Properties or as a result of any operations at such Properties.

 

(d)           none of the Properties of the Borrower or any Subsidiary contain
or have contained any:  (i) underground storage tanks; (ii) asbestos-containing
materials; (iii) landfills or dumps; (iv) hazardous waste management units as
defined pursuant to RCRA or any comparable state law; or (v) sites on or
nominated for the National Priority List promulgated pursuant to CERCLA or any
state remedial priority list promulgated or published pursuant to any comparable
state law.

 

(e)           there has been no Release or, to the Borrower’s knowledge,
threatened Release, of Hazardous Materials at, on, under or from the Borrower’s
or any Subsidiary’s Properties, there are no investigations, remediations,
abatements, removals, or monitorings of Hazardous Materials required under
applicable Environmental Laws at such Properties and, to the knowledge of the
Borrower, none of such Properties are adversely affected by any Release or
threatened Release of a Hazardous Material originating or emanating from any
other real property.

 

(f)            neither the Borrower nor any Subsidiary has received any written
notice asserting an alleged liability or obligation under any applicable
Environmental Laws with respect to the investigation, remediation, abatement,
removal, or monitoring of any Hazardous Materials at, under, or Released or
threatened to be Released from any real properties offsite the Borrower’s or any
Subsidiary’s Properties and, to the Borrower’s knowledge, there are no
conditions or circumstances that could reasonably be expected to result in the
receipt of such written notice.

 

(g)           there has been no exposure of any Person or Property to any
Hazardous Materials as a result of or in connection with the operations and
businesses of any of the Borrower’s or the Subsidiaries’ Properties that could
reasonably be expected to form the basis for a claim for damages or
compensation.

 

(h)           The Borrower and the Subsidiaries have provided to the Lenders
complete and correct copies of all environmental site assessment reports,
investigations, studies, analyses, and correspondence on environmental matters
(including matters relating to any alleged non-compliance with or liability
under Environmental Laws) that are in any of the Borrower’s or the Subsidiaries’
possession or control and relating to their respective Properties or operations
thereon.

 

Section 7.07           Compliance with the Laws and Agreements; No Defaults.

 

(a)           Each of the Borrower and each Subsidiary is in compliance with all
Governmental Requirements applicable to it or its Property and all agreements
and other instruments binding upon it or its Property, and possesses all
licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

 

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(b)           Neither the Borrower nor any Subsidiary is in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default or
would require the Borrower or a Subsidiary to Redeem or make any offer to Redeem
under any indenture, note, credit agreement or instrument pursuant to which any
Material Indebtedness is outstanding or by which the Borrower or any Subsidiary
or any of their Properties is bound.

 

(c)           No Default has occurred and is continuing.

 

Section 7.08           Investment Company Act.  Neither the Borrower nor any
Subsidiary is an “investment company” or a company “controlled” by an
“investment company,” within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.

 

Section 7.09           Taxes.  Each of the Borrower and its Subsidiaries has
timely filed or caused to be filed all federal Tax returns and all other
material Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except (a) Taxes
that are being contested in good faith by appropriate proceedings and for which
the Borrower or such Subsidiary, as applicable, has set aside on its books
adequate reserves in accordance with GAAP or (b) to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect.  The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of Taxes and other governmental charges are, in the
reasonable opinion of the Borrower, adequate.  No Tax Lien has been filed and,
to the knowledge of the Borrower, no claim is being asserted with respect to any
such Tax or other such governmental charge.

 

Section 7.10           ERISA.

 

(a)           The Borrower, the Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.

 

(b)           Each Plan is, and has been, established and maintained in
substantial compliance with its terms, ERISA and, where applicable, the Code.

 

(c)           No act, omission or transaction has occurred which could
reasonably be expected to result in imposition on the Borrower, any Subsidiary
or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to subsections (c), (i), (l) or (m) of section 502 of
ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or
(ii) breach of fiduciary duty liability damages under section 409 of ERISA.

 

(d)           Full payment when due has been made of all amounts which the
Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of
each Plan or applicable law to have paid as contributions to such Plan as of the
date hereof.

 

(e)           Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its
sole discretion at any time without any material liability.

 

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(f)            Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

 

Section 7.11           Disclosure; No Material Misstatements.  The Borrower has
disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its
Subsidiaries is subject, and all other matters known to it, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.  None of the other reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower or any Subsidiary
to the Administrative Agent or any Lender or any of their Affiliates in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or under any other Loan Document (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.  There
is no fact peculiar to the Borrower or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect or in the future is reasonably likely
to have a Material Adverse Effect and which has not been set forth in this
Agreement or the Loan Documents or the other documents, certificates and
statements furnished to the Administrative Agent or the Lenders by or on behalf
of the Borrower or any Subsidiary prior to, or on, the date hereof in connection
with the transactions contemplated hereby.  There are no statements or
conclusions in any Reserve Report which are based upon or include misleading
information or fail to take into account material information regarding the
matters reported therein, it being understood that projections concerning
volumes attributable to the Oil and Gas Properties of the Borrower and the
Subsidiaries and production and cost estimates contained in each Reserve Report
are necessarily based upon professional opinions, estimates and projections and
that the Borrower and the Subsidiaries do not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate.

 

Section 7.12           Insurance.  The Borrower has, and has caused all of its
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Subsidiaries. 
The Administrative Agent, on behalf of the Lenders, has been named as additional
insured in respect of such liability insurance policies and the Administrative
Agent has been named as loss payee with respect to Property loss insurance.

 

Section 7.13           Restriction on Liens.  Neither the Borrower nor any of
the Subsidiaries is a party to any material agreement or arrangement (other than
Capital Leases creating Liens permitted by Section 9.03(c) and agreements
related to the deferred purchase price of Property creating Liens permitted by
Section 9.03(d), but then only on the Property subject of such

 

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Capital Lease or deferred purchase price), or subject to any order, judgment,
writ or decree, which either restricts or purports to restrict its ability to
grant Liens to the Administrative Agent and the Lenders on or in respect of
their Properties to secure the Indebtedness and the Loan Documents.

 

Section 7.14           Subsidiaries.  Except as set forth on Schedule 7.14 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.14, the Borrower
has no Subsidiaries, and the Borrower has no Foreign Subsidiaries.

 

Section 7.15           Location of Business and Offices.  The Borrower’s
jurisdiction of organization is Colorado; the name of the Borrower as listed in
the public records of its jurisdiction of organization is Kodiak Oil & Gas (USA)
Inc.; and the entity identification number of the Borrower in its jurisdiction
of organization is 20031303362 (or, in each case, as set forth in a notice
delivered to the Administrative Agent pursuant to Section 8.01(n) in accordance
with Section 12.01).  The Borrower’s principal place of business and chief
executive offices are located at the address specified in Section 12.01 (or as
set forth in a notice delivered pursuant to Section 8.01(n) and
Section 12.01(c)).  Each Subsidiary’s jurisdiction of organization, name as
listed in the public records of its jurisdiction of organization, organizational
identification number in its jurisdiction of organization, and the location of
its principal place of business and chief executive office is stated on Schedule
7.14 (or as set forth in a notice delivered pursuant to Section 8.01(n)).

 

Section 7.16           Properties; Titles, Etc.

 

(a)           Each of the Borrower and the Subsidiaries has good and defensible
title to the Oil and Gas Properties evaluated in the most recently delivered
Reserve Report and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 9.03.  After giving
full effect to the Excepted Liens, the Borrower or the Subsidiary specified as
the owner owns the net interests in production attributable to the Hydrocarbon
Interests as reflected in the most recently delivered Reserve Report, and the
ownership of such Properties shall not in any material respect obligate the
Borrower or such Subsidiary to bear the costs and expenses relating to the
maintenance, development and operations of each such Property in an amount in
excess of the working interest of each Property set forth in the most recently
delivered Reserve Report that is not offset by a corresponding proportionate
increase in the Borrower’s or such Subsidiary’s net revenue interest in such
Property.

 

(b)           All material leases and agreements necessary for the conduct of
the business of the Borrower and the Subsidiaries are valid and subsisting, in
full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.

 

(c)           The rights and Properties presently owned, leased or licensed by
the Borrower and the Subsidiaries including, without limitation, all easements
and rights of way, include all rights and Properties necessary to permit the
Borrower and the Subsidiaries to

 

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conduct their business in all material respects in the same manner as its
business has been conducted prior to the date hereof.

 

(d)           All of the Properties of the Borrower and the Subsidiaries which
are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.

 

(e)           The Borrower and each Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.  The Borrower and its
Subsidiaries either own or have valid licenses or other rights to use all
databases, geological data, geophysical data, engineering data, seismic data,
maps, interpretations and other technical information used in their businesses
as presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons, with
such exceptions as could not reasonably be expected to have a Material Adverse
Effect.

 

Section 7.17           Maintenance of Properties.  Except for such acts or
failures to act as could not be reasonably expected to have a Material Adverse
Effect, the Oil and Gas Properties (and Properties unitized therewith) of the
Borrower and its Subsidiaries have been maintained, operated and developed in a
good and workmanlike manner and in conformity with all Governmental Requirements
and in conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and its
Subsidiaries.  Specifically in connection with the foregoing, except for those
as could not be reasonably expected to have a Material Adverse Effect, (i) no
Oil and Gas Property of the Borrower or any Subsidiary is subject to having
allowable production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) and (ii) none of the wells comprising a part
of the Oil and Gas Properties (or Properties unitized therewith) of the Borrower
or any Subsidiary is deviated from the vertical more than the maximum permitted
by Governmental Requirements, and such wells are, in fact, bottomed under and
are producing from, and the well bores are wholly within, the Oil and Gas
Properties (or in the case of wells located on Properties unitized therewith,
such unitized Properties) of the Borrower or such Subsidiary.  All pipelines,
wells, gas processing plants, platforms and other material improvements,
fixtures and equipment owned in whole or in part by the Borrower or any of its
Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect to
such of the foregoing which are operated by the Borrower or any of its
Subsidiaries or other third party operators, in a manner consistent with the
Borrower’s or its Subsidiaries’ past practices, or, if operated by a third
party, consistent with other oil and gas operators in the area of the respective
Oil and Gas Properties (other than those the failure of which to maintain in
accordance with this Section 7.17 could not reasonably be expected to have a
Material Adverse Effect).

 

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Section 7.18           Gas Imbalances, Prepayments.  Except as set forth on
Schedule 7.18 or on the most recent certificate delivered pursuant to
Section 8.12(c), on a net basis there are no gas imbalances, take or pay or
other prepayments which would require the Borrower or any of its Subsidiaries to
deliver Hydrocarbons produced from their Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor exceeding 1.5
bcf of gas (on an mcf equivalent basis) in the aggregate.

 

Section 7.19           Marketing of Production.  Except for contracts listed and
in effect on the date hereof on Schedule 7.19, and thereafter either disclosed
in writing to the Administrative Agent or included in the most recently
delivered Reserve Report (with respect to all of which contracts the Borrower
represents that it or its Subsidiaries are receiving a price for all production
sold thereunder which is computed substantially in accordance with the terms of
the relevant contract and are not having deliveries curtailed substantially
below the subject Property’s delivery capacity), no material agreements exist
which are not cancelable on 60 days notice or less without penalty or detriment
for the sale of production from the Borrower’s or its Subsidiaries’ Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that
(a) pertain to the sale of production at a fixed price and (b) have a maturity
or expiry date of longer than six (6) months from the date hereof.

 

Section 7.20           Swap Agreements.  Schedule 7.20, as of the date hereof,
and after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(f), sets forth, a true and complete list of all Swap
Agreements of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.

 

Section 7.21           Use of Loans and Letters of Credit.  The proceeds of the
Loans and the Letters of Credit shall be used to (a) finance acquisitions,
including the Acquisition and fees and expenses related thereto (b) finance the
exploration and development of oil and gas assets of the Borrower and its
Subsidiaries and (c) provide for working capital for and for general corporate
purposes of the Borrower and its Subsidiaries.  The Borrower and its
Subsidiaries are not engaged principally, or as one of its or their important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board).  No part of the proceeds of
any Loan or Letter of Credit will be used for any purpose which violates the
provisions of Regulations T, U or X of the Board.

 

Section 7.22           Solvency.  After giving effect to the transactions
contemplated hereby, (a) the aggregate assets (after giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement), at a fair valuation, of the Borrower and the
Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and
the Guarantors on a consolidated basis, as the Debt becomes absolute and
matures, (b) each of the Borrower and the Guarantors will not have incurred or
intended to incur, and will not believe that it will incur, Debt beyond its
ability to pay such Debt (after taking into account the timing and amounts of
cash to be received by each of the Borrower and the Guarantors and the amounts
to be payable on or in respect of its liabilities, and giving effect to amounts
that could reasonably

 

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be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrower and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.

 

Section 7.23           Foreign Corrupt Practices.  Neither the Borrower nor any
of its Subsidiaries, nor any director, officer, agent, employee or Affiliate of
the Borrower or any of its Subsidiaries is aware of or has taken any action,
directly or indirectly, that would result in a material violation by such
Persons of the FCPA, including without limitation, making use of the mails or
any means or instrumentality of interstate commerce corruptly in furtherance of
an offer, payment, promise to pay or authorization of the payment of any money,
or other property, gift, promise to give, or authorization of the giving of
anything of value to any “foreign official” (as such term is defined in the
FCPA) or any foreign political party or official thereof or any candidate for
foreign political office, in contravention of the FCPA; and, the Borrower, its
Subsidiaries and its and their Affiliates have conducted their business in
material compliance with the FCPA and have instituted and maintain policies and
procedures designed to ensure, and which are reasonably expected to continue to
ensure, continued compliance therewith.

 

Section 7.24           Money Laundering.  The operations of the Borrower and its
Subsidiaries are and have been conducted at all times in material compliance
with applicable financial recordkeeping and reporting requirements of the Money
Laundering Laws, and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Borrower
or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Borrower, threatened.

 

Section 7.25           OFAC.  Neither the Borrower nor any of its Subsidiaries,
nor any director, officer, agent, employee or Affiliate of the Borrower or any
of its Subsidiaries is currently subject to any material U.S. sanctions
administered by OFAC, and the Borrower will not directly or indirectly use the
proceeds from the Loans or lend, contribute or otherwise make available such
proceeds to any Subsidiary, joint venture partner or other Person, for the
purpose of financing the activities of any Person currently subject to any U.S.
sanctions administered by OFAC.

 

ARTICLE VIII
Affirmative Covenants

 

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 8.01           Financial Statements; Ratings Change; Other Information. 
The Borrower will furnish to the Administrative Agent and each Lender:

 

(a)           Annual Financial Statements.  As soon as available, but in any
event in accordance with then applicable law and not later than ninety (90) days
after the end of each

 

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fiscal year of the Parent, its audited consolidated balance sheet and related
statements of operations, stockholders’ equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all reported on by Hein & Associates or other
independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Parent and its Consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied.

 

(b)           Quarterly Financial Statements.  As soon as available, but in any
event in accordance with then applicable law and not later than forty-five (45)
days after the end of each of the first three fiscal quarters of each fiscal
year of the Parent, its consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by one of its Financial Officers as presenting fairly
in all material respects the financial condition and results of operations of
the Parent and its Consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes.

 

(c)           Consolidating Financials.   At the time of delivery of the
financial statements described under Section 8.01(a) and Section 8.01(b), a
consolidating balance sheet and related statements of operations, stockholders’
equity and cashflows for the same dates and periods of the Borrower and its
subsidiaries.

 

(d)           Certificate of Financial Officer — Compliance.  Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit D hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 8.13(b) and Section 9.01 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 7.04 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate.

 

(e)           Certificate of Accounting Firm — Defaults.  Concurrently with any
delivery of financial statements under Section 8.01(a), a certificate of the
accounting firm that reported on such financial statements stating whether they
obtained knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the extent
required by accounting rules or guidelines).

 

(f)            Certificate of Financial Officer — Swap Agreements.  Concurrently
with the delivery of each financial report set forth in Section 8.01(a) or
Section 8.01(b), a certificate of a Financial Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of such date, a true
and complete list of all Swap Agreements of the Borrower and each

 

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Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark-to-market
value therefor, any new credit support agreements relating thereto not listed on
Schedule 7.20, any margin required or supplied under any credit support
document, and the counterparty to each such agreement.

 

(g)           Certificate of Insurer — Insurance Coverage.  Concurrently with
any delivery of financial statements under Section 8.01(a), a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.

 

(h)           Other Accounting Reports.  Promptly upon receipt thereof, a copy
of each other report or letter submitted to the Parent, the Borrower or any of
its Subsidiaries by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Parent, the Borrower
or any such Subsidiary, and a copy of any response by the Parent, the Borrower
or any such Subsidiary, or the Board of Directors of the Parent, the Borrower or
any such Subsidiary, to such letter or report.

 

(i)            SEC and Other Filings; Reports to Shareholders.  Promptly after
the same become publicly available, copies of all periodic and other reports,
proxy statements and other materials filed by the Parent, the Borrower or any
Subsidiary with the SEC, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may be.

 

(j)            Notices Under Material Instruments.  Promptly after the
furnishing thereof, copies of any financial statement, report or notice
furnished to or by any Person pursuant to the terms of any preferred stock
designation, indenture, loan or credit or other similar agreement, other than
this Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.

 

(k)           Lists of Purchasers.  Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to Section 8.12, a list of
all Persons purchasing Hydrocarbons from the Borrower or any Subsidiary.

 

(l)            Notice of Sales of Oil and Gas Properties.  In the event the
Borrower or any Subsidiary intends to sell, transfer, assign or otherwise
dispose of any Oil or Gas Properties or any Equity Interests in any Subsidiary
in accordance with Section 9.12, prior written notice of such disposition, the
price thereof and the anticipated date of closing and any other details thereof
requested by the Administrative Agent or any Lender.

 

(m)          Notice of Casualty Events.  Prompt written notice, and in any event
within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event, in each case, with respect to the Property of the
Borrower or any of its Subsidiaries having a fair market value in excess of
$1,000,000.

 

(n)           Information Regarding Borrower and Guarantors.  Prompt written
notice (and in any event within thirty (30) days prior thereto) of any change
(i) in the Borrower or any

 

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Guarantor’s corporate name or in any trade name used to identify such Person in
the conduct of its business or in the ownership of its Properties, (ii) in the
location of the Borrower or any Guarantor’s chief executive office or principal
place of business, (iii) in the Borrower or any Guarantor’s identity or
corporate structure or in the jurisdiction in which such Person is incorporated
or formed, (iv) in the Borrower or any Guarantor’s jurisdiction of organization
or such Person’s organizational identification number in such jurisdiction of
organization, and (v) in the Borrower or any Guarantor’s federal taxpayer
identification number or foreign equivalent.

 

(o)           Production Report and Lease Operating Statements.  Within
forty-five (45) days after the end of each fiscal quarter, a report setting
forth, for each calendar month during the then current fiscal year to date, the
volume of production and sales attributable to production (and the prices at
which such sales were made and the revenues derived from such sales) for each
such calendar month from the Oil and Gas Properties, and setting forth the
related ad valorem, severance and production taxes and lease operating expenses
attributable thereto and incurred for each such calendar month.

 

(p)           Notices of Certain Changes.  Promptly, but in any event within
five (5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the certificate or articles of incorporation,
by-laws, any preferred stock designation or any other organic document of the
Borrower or any Subsidiary.

 

(q)           Other Requested Information.  Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any Subsidiary (including, without
limitation, any Plan and any reports or other information required to be filed
with respect thereto under the Code or under ERISA), or compliance with the
terms of this Agreement or any other Loan Document, as the Administrative Agent
or any Lender may reasonably request.

 

Any financial statement required to be furnished pursuant to Section 8.01(a) or
Section 8.01(b) shall be deemed to have been furnished on the date on which the
Borrower has notified the Administrative Agent that the Parent or the Borrower
has filed such financial statement with the Securities and Exchange Commission
and such financial statement is available on the EDGAR website at www.sec.gov or
any successor government website that is freely and readily available to the
Administrative Agent and the Lenders without charge.  Notwithstanding the
foregoing, if the Administrative Agent requests the Borrower to furnish paper
copies of any such financial statement, the Borrower shall deliver such paper
copies to the Administrative Agent until the Administrative Agent gives written
notice to cease delivering such paper copies.

 

Section 8.02           Notices of Material Events.  The Borrower will furnish to
the Administrative Agent and each Lender prompt written notice of the following:

 

(a)           the occurrence of any Default;

 

(b)           the filing or commencement of, or the threat in writing of, any
action, suit, proceeding, investigation or arbitration by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Affiliate thereof not previously disclosed in writing to the Lenders or any
material adverse development in any action, suit, proceeding, investigation or

 

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arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in
liability in excess of $250,000, not fully covered by insurance, subject to
normal deductibles; and

 

(c)           any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.

 

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

 

Section 8.03           Existence; Conduct of Business.  The Borrower will, and
will cause each Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.11.

 

Section 8.04           Payment of Obligations.  The Borrower will, and will
cause each Subsidiary to, pay its obligations, including Tax liabilities of the
Borrower and all of its Subsidiaries before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect or result in the
seizure or levy of any Property of the Borrower or any Subsidiary.

 

Section 8.05           Performance of Obligations under Loan Documents.  The
Borrower will pay the Notes according to the reading, tenor and effect thereof,
and the Borrower will, and will cause each Subsidiary to, do and perform every
act and discharge all of the obligations to be performed and discharged by them
under the Loan Documents, including, without limitation, this Agreement, at the
time or times and in the manner specified.

 

Section 8.06           Operation and Maintenance of Properties.  The Borrower,
at its own expense, will, and will cause each Subsidiary to:

 

(a)           operate its Oil and Gas Properties and other material Properties
or cause such Oil and Gas Properties and other material Properties to be
operated in a careful and efficient manner in accordance with the practices of
the industry and in compliance with all applicable contracts and agreements and
in compliance with all Governmental Requirements, including, without limitation,
applicable pro ration requirements and Environmental Laws, and all applicable
laws, rules and regulations of every other Governmental Authority from time to
time constituted to regulate the development and operation of its Oil and Gas
Properties and the production and sale of Hydrocarbons and other minerals
therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.

 

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(b)           keep and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted
preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its material Oil and Gas Properties and
other material Properties, including, without limitation, all equipment,
machinery and facilities.

 

(c)           promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will take such
reasonable further actions necessary to keep unimpaired their rights with
respect thereto and prevent any forfeiture thereof or default thereunder.

 

(d)           promptly perform or make reasonable and customary efforts to cause
to be performed, in accordance with industry standards, the obligations required
by each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties.

 

(e)           operate its Oil and Gas Properties and other material Properties
or cause or make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in accordance with the
practices of the industry and in material compliance with all applicable
contracts and agreements and in compliance in all material respects with all
Governmental Requirements.

 

(f)            to the extent the Borrower is not the operator of any Property,
the Borrower shall use reasonable efforts to cause the operator to comply with
this Section 8.06.

 

Section 8.07           Insurance.  The Borrower will, and will cause each
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations.  The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will endeavor
to give at least 30 days prior notice of any cancellation to the Administrative
Agent.

 

Section 8.08           Books and Records; Inspection Rights.  The Borrower will,
and will cause each Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities.  The Borrower will, and will cause
each Subsidiary to, permit any representatives designated by the Administrative
Agent, upon reasonable prior notice, to visit and inspect its Properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested; provided,
that so long as no Event of Default has occurred and is continuing, the Borrower
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.

 

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Section 8.09           Compliance with Laws.  The Borrower will, and will cause
each Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

 

Section 8.10           Environmental Matters.

 

(a)           The Borrower shall at its sole expense: (i) comply, and shall
cause its Properties and operations and each Subsidiary and each Subsidiary’s
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not Release or threaten to Release, and shall cause each Subsidiary not to
Release or threaten to Release, any Hazardous Material on, under, about or from
any of the Borrower’s or its Subsidiaries’ Properties or any other property
offsite the Property to the extent caused by the Borrower’s or any of its
Subsidiaries’ operations except in compliance with applicable Environmental
Laws, the Release or threatened Release of which could reasonably be expected to
have a Material Adverse Effect; (iii) timely obtain or file, and shall cause
each Subsidiary to timely obtain or file, all Environmental Permits, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future Release or threatened Release of any Hazardous Material on, under, about
or from any of the Borrower’s or its Subsidiaries’ Properties, which failure to
commence and diligently prosecute to completion could reasonably be expected to
have a Material Adverse Effect; (v) conduct, and cause its Subsidiaries to
conduct, their respective operations and businesses in a manner that will not
expose any Property or Person to Hazardous Materials that could reasonably be
expected to form the basis for a claim for damages or compensation; and
(vi) establish and implement, and shall cause each Subsidiary to establish and
implement, such procedures as may be necessary to continuously determine and
assure that the Borrower’s and its Subsidiaries’ obligations under this
Section 8.10(a) are timely and fully satisfied, which failure to establish and
implement could reasonably be expected to have a Material Adverse Effect.

 

(b)           The Borrower will promptly, but in no event later than five days
of the occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any Person against
the Borrower or its Subsidiaries or their Properties of which the Borrower has
knowledge in connection with any Environmental Laws if the Borrower could
reasonably anticipate that such action will result in liability (whether
individually or in the aggregate) in excess of $250,000, not fully covered by
insurance, subject to normal deductibles.

 

(c)           The Borrower will, and will cause each Subsidiary to, provide
environmental assessments, audits and tests in accordance with the most current
version of the

 

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American Society of Testing Materials standards upon request by the
Administrative Agent and the Lenders and no more than once per year in the
absence of any Event of Default (or as otherwise required to be obtained by the
Administrative Agent or the Lenders by any Governmental Authority), in
connection with any future acquisitions of Oil and Gas Properties or other
Properties.

 

Section 8.11           Further Assurances.

 

(a)           The Borrower at its sole expense will, and will cause each
Subsidiary to, promptly execute and deliver to the Administrative Agent all such
other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any
Subsidiary, as the case may be, in the Loan Documents, including the Notes, or
to further evidence and more fully describe the collateral intended as security
for the Indebtedness, or to correct any omissions in this Agreement or the
Security Instruments, or to state more fully the obligations secured therein, or
to perfect, protect or preserve any Liens created pursuant to this Agreement or
any of the Security Instruments or the priority thereof, or to make any
recordings, file any notices or obtain any consents, all as may be reasonably
necessary or appropriate, in the sole discretion of the Administrative Agent, in
connection therewith.

 

(b)           The Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Property without the signature of
the Borrower or any other Guarantor where permitted by law.  A carbon,
photographic or other reproduction of the Security Instruments or any financing
statement covering the Mortgaged Property or any part thereof shall be
sufficient as a financing statement where permitted by law.

 

Section 8.12           Reserve Reports.

 

(a)           On or before March 1st and September 1st of each year, commencing
March 1, 2012, the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report evaluating the Oil and Gas Properties of the Borrower
and its Subsidiaries as of the immediately preceding December 31st and
July 1st.  The Reserve Report as of December 31st of each year shall be prepared
by one or more Approved Petroleum Engineers, and the July 1 Reserve Report of
each year shall be prepared by or under the supervision of the chief engineer of
the Borrower who shall certify such Reserve Report to be true and accurate and
to have been prepared in accordance with the procedures used in the immediately
preceding December 31 Reserve Report.

 

(b)           In the event of an Interim Redetermination, the Borrower shall
furnish to the Administrative Agent and the Lenders a Reserve Report prepared by
or under the supervision of the chief engineer of the Borrower who shall certify
such Reserve Report to be true and accurate and to have been prepared in
accordance with the procedures used in the immediately preceding December 31
Reserve Report.  For any Interim Redetermination requested by the Administrative
Agent or the Borrower pursuant to Section 2.07(b), or any redetermination
pursuant to Section 2.07(e) or Section 2.07(f), the Borrower shall provide such
Reserve Report

 

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with an “as of” date as required by the Administrative Agent as soon as
possible, but in any event no later than thirty (30) days following the receipt
of such request.

 

(c)           With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (ii) the Borrower or its
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any Subsidiary to deliver Hydrocarbons either
generally or produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor, (iv) none of their
Oil and Gas Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail
as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the date hereof or the most recently delivered Reserve Report which the
Borrower could reasonably be expected to have been obligated to list on Schedule
7.19 had such agreement been in effect on the date hereof and (vi) attached
thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
Report that are Mortgaged Properties and demonstrating the percentage of the
total value of the Oil and Gas Properties that the value of such Mortgaged
Properties represent in compliance with Section 8.14(a).

 

Section 8.13                                Title Information.

 

(a)           On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 8.12(a), the Borrower will
deliver title information in form and substance acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties included in the most recent
Borrowing Base that were not included in the immediately preceding Reserve
Report, so that the Administrative Agent shall have received together with title
information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the total value of the Oil and Gas Properties
evaluated by such Reserve Report, including evidence that at least 95% of the
total value of the Borrower’s Oil and Gas Properties included in the most recent
Borrowing Base are on Federal leases, State leases, allotted lands or fee
simple.

 

(b)           If the Borrower has provided title information for additional
Properties under Section 8.13(a), the Borrower shall, within 60 days of notice
from the Administrative Agent that material title defects or exceptions exist
with respect to such additional Properties, either (i) cure any such title
defects or exceptions (including defects or exceptions as to priority) which are
not permitted by Section 9.03 raised by such information, (ii) substitute
acceptable Mortgaged Properties with no material title defects or exceptions
except for Excepted Liens (other than Excepted Liens described in clauses (e),
(g) and (h) of such definition) having an equivalent value or (iii) deliver
title information in form and substance acceptable to the Administrative Agent
so that the Administrative Agent shall have received, together with title

 

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information previously delivered to the Administrative Agent, satisfactory title
information on at least 80% of the value of the Oil and Gas Properties included
in the most recent Borrowing Base.

 

(c)           If the Borrower is unable to cure any material title defect
requested by the Administrative Agent or the Lenders to be cured within the
60-day period or the Borrower does not comply with the requirements to provide
acceptable title information covering 80% of the value of the Oil and Gas
Properties included in the most recent Borrowing Base, such default shall not be
a Default, but instead the Administrative Agent and/or the Majority Lenders
shall have the right to exercise the following remedy in their sole discretion
from time to time, and any failure to so exercise this remedy at any time shall
not be a waiver as to future exercise of the remedy by the Administrative Agent
or the Lenders.  To the extent that the Administrative Agent or the Majority
Lenders are not satisfied with title to any Mortgaged Property after the 60-day
period has elapsed, such unacceptable Mortgaged Property shall not count towards
the 80% requirement, and the Administrative Agent may send a notice to the
Borrower and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by the Majority Lenders to cause the Borrower
to be in compliance with the requirement to provide acceptable title information
on 80% of the value of the Oil and Gas Properties evaluated in the most recent
Reserve Report.  This new Borrowing Base shall become effective immediately
after receipt of such notice.

 

Section 8.14                                Additional Collateral; Additional
Guarantors.

 

(a)           In connection with each redetermination of the Borrowing Base, the
Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.12(c)(vi)) to ascertain whether the
Mortgaged Properties represent at least 80% of the total value of the Oil and
Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production.  In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its Subsidiaries to, grant, within thirty (30) days of delivery of the
certificate required under Section 8.12(c), to the Administrative Agent as
security for the Indebtedness a first-priority Lien interest (provided that
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof may exist, but subject to the provisos at the end of such
definition) on additional Oil and Gas Properties not already subject to a Lien
of the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 80% of such total value.  All such Liens will
be created and perfected by and in accordance with the provisions of deeds of
trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the
Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes.  In order to
comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas
Properties and such Subsidiary is not a Guarantor, then it shall become a
Guarantor and comply with Section 8.14(b).

 

(b)           In the event that the Borrower or any Subsidiary acquires or forms
any Subsidiary, the Borrower shall promptly cause such Subsidiary to guarantee
the Indebtedness pursuant to the Guaranty Agreement.  In connection with any
such guaranty, the Borrower shall, or shall cause such Subsidiary to,
(i) execute and deliver a supplement to the Guaranty

 

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Agreement executed by such Subsidiary, (ii) pledge all of the Equity Interests
of such new Subsidiary (including, without limitation, delivery of original
stock certificates evidencing the Equity Interests of such Subsidiary, together
with an appropriate undated stock powers for each certificate duly executed in
blank by the registered owner thereof) and (iii) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

 

(c)           The Borrower will at all times cause the other material tangible
and intangible assets of the Borrower and each Subsidiary to be subject to a
Lien of the Security Instruments in accordance with the terms thereof.

 

(d)           The Borrower will not, and will not permit any Subsidiary to,
grant a Lien on any Property to secure the Second Lien Notes not already subject
to a first-priority Lien in favor of the Administrative Agent for the benefit of
the Lenders without first (i) giving fifteen (15) days’ prior written notice to
the Administrative Agent thereof and (ii) granting to the Administrative Agent
to secure the Indebtedness a first-priority, perfected Lien on the same Property
pursuant to Security Instruments in form and substance satisfactory to the
Administrative Agent (provided that Excepted Liens of the type described in
clauses (a) to (d) and (f) of the definition thereof may exist, but subject to
the provisos at the end of such definition).  In connection therewith, the
Borrower shall, or shall cause its Subsidiaries to, execute and deliver such
other additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

 

Section 8.15                                ERISA Compliance.  The Borrower will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Administrative Agent (i) promptly after the filing
thereof with the United States Secretary of Labor or the Internal Revenue
Service, copies of each annual and other report with respect to each Plan or any
trust created thereunder, and (ii) immediately upon becoming aware of the
occurrence of any “prohibited transaction,” as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying
the nature thereof, what action the Borrower, the Subsidiary or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service or the Department
of Labor with respect thereto.

 

Section 8.16                                Marketing Activities.

 

(a)           The Borrower will not, and will not permit any of its Subsidiaries
to, engage in marketing activities for any Hydrocarbons or enter into any
contracts related thereto other than (i) contracts for the sale of Hydrocarbons
scheduled or reasonably estimated to be produced from their proved Oil and Gas
Properties during the period of such contract, (ii) contracts for the sale of
Hydrocarbons scheduled or reasonably estimated to be produced from proved Oil
and Gas Properties of third parties during the period of such contract
associated with the Oil and Gas Properties of the Borrower and its Subsidiaries
that the Borrower or one of its Subsidiaries has the right to market pursuant to
joint operating agreements, unitization agreements or other similar contracts
that are usual and customary in the oil and gas business and (iii) other
contracts for the purchase and/or sale of Hydrocarbons of third parties (A)
which have

 

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generally offsetting provisions (i.e. corresponding pricing mechanics, delivery
dates and points and volumes) such that no “position” is taken and (B) for which
appropriate credit support has been taken to alleviate the material credit risks
of the counterparty thereto.

 

(b)           The Borrower will not, and will not permit any Subsidiary to,
amend in any material respect the written Hydrocarbon Marketing Policy delivered
to the Lenders pursuant to Section  6.01(o) without the prior written consent of
the Administrative Agent and the Majority Lenders.

 

ARTICLE IX
Negative Covenants

 

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

 

Section 9.01                                Financial Covenants.

 

(a)           Ratio of Total Debt to EBITDAX.  The Borrower will not, as of the
last day of any fiscal quarter, permit its ratio of Total Debt as of such time
to EBITDAX for the four fiscal quarters ending on the last day of the fiscal
quarter immediately preceding the date of determination for which financial
statements are available to be greater than (i) 4.0 to 1.0.  Notwithstanding the
foregoing, for the purpose of determining EBITDAX of the Borrower and its
Subsidiaries for this Section 9.01(a) for the four fiscal quarters ending
(i) December 31, 2011, EBITDAX shall be equal to the EBITDAX of the Borrower and
its Subsidiaries for the fiscal quarter ending on such date multiplied by 4,
(ii) March 31, 2012, EBITDAX shall be equal to the EBITDAX of the Borrower and
its Subsidiaries for the two fiscal quarters ending on such date multiplied by 2
and (iii) June 30, 2012, EBITDAX shall be equal to the EBITDAX of the Borrower
and its Subsidiaries for the three fiscal quarters ending on such date
multiplied by 4/3.

 

(b)           Current Ratio.  The Borrower will not permit, as of the last day
of any fiscal quarter, its ratio of (i) consolidated current assets (including
the unused amount of the total Commitments, but excluding non-cash current
assets under FAS 133) to (ii) consolidated current liabilities (excluding
non-cash current obligations under FAS 133 and current maturities under this
Agreement) to be less than 1.0 to 1.0.

 

Section 9.02                                Debt.  The Borrower will not, and
will not permit any Subsidiary to, incur, create, assume or suffer to exist any
Debt, except:

 

(a)           the Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents.

 

(b)           Debt of the Borrower and its Subsidiaries existing on the date
hereof that is reflected in the Financial Statements.

 

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(c)           accounts payable and accrued expenses, liabilities or other
obligations to pay the deferred purchase price of Property or services
(including the provision of services pursuant to drilling contracts), from time
to time incurred in the ordinary course of business which are not greater than
ninety (90) days past the date of invoice or delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP.

 

(d)           Debt under Capital Leases not to exceed $500,000.

 

(e)           Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and Gas
Properties.

 

(f)            intercompany Debt between the Borrower and any Subsidiary or
between Subsidiaries to the extent permitted by Section 9.05(g); provided that
such Debt is not held, assigned, transferred, negotiated or pledged to any
Person other than the Borrower or one of its Wholly-Owned Subsidiaries, and,
provided further, that any such Debt owed by either the Borrower or a Guarantor
shall be subordinated to the Indebtedness on terms set forth in the Guaranty
Agreement.

 

(g)           endorsements of negotiable instruments for collection in the
ordinary course of business.

 

(h)           Subordinated Parent Debt.

 

(i)            Debt under the Second Lien Term Loan Agreement and any guarantees
thereof, the principal amount of which Debt does not exceed $100,000,000 in the
aggregate.

 

(j)            other Debt not to exceed $1,000,000 in the aggregate at any one
time outstanding.

 

(k)           Debt under the Senior Notes not to exceed $400,000,000 outstanding
in the aggregate at any time and any guarantees thereof by the Guarantors but
only if (A) all Debt outstanding under the Second Lien Term Loan Agreement has
been paid in full either before or on the date of issuance of the Senior Notes,
and (B) the Second Lien Term Loan Documents and the Intercreditor Agreement have
been terminated, cancelled or released to the satisfaction of the Administrative
Agent.

 

Section 9.03                                Liens.  The Borrower will not, and
will not permit any Subsidiary to, create, incur, assume or permit to exist any
Lien on any of its Properties (now owned or hereafter acquired), except:

 

(a)           Liens securing the payment of any Indebtedness.

 

(b)           Excepted Liens.

 

(c)           Liens securing Capital Leases permitted by Section 9.02(d) but
only on the Property under lease.

 

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(d)           Liens in connection with the deferred purchase price of Property,
as permitted by Section 9.02(c), but only with respect to the Property being
purchased therunder.

 

(e)           Liens created pursuant to the Second Lien Term Loan Documents.

 

(f)            Liens on Property not constituting collateral for the
Indebtedness and not otherwise permitted by the foregoing clauses of this
Section 9.03; provided that the aggregate principal or face amount of all Debt
secured under this Section 9.03(e) shall not exceed $1,000,000 at any time.

 

Section 9.04                                Dividends, Distributions,
Redemptions and Restricted Payments.

 

(a)           The Borrower will not, and will not permit any of its Subsidiaries
to, declare or make, or agree to pay or make, directly or indirectly, any
Restricted Payment, return any capital to its stockholders or make any
distribution of its Property to its Equity Interest holders, except that if no
Event of Default has occurred and is outstanding, or would result therefrom
(i) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Capital Stock), (ii) Subsidiaries may declare and pay
dividends ratably with respect to their Equity Interests, (iii) the Borrower may
make cash distributions to the Parent with respect to the payment of reasonable
fees and expenses incurred in the ordinary course of business in connection with
the maintenance of its corporate existence, reporting obligations, tax and
accounting preparation and other similar fees and expenses, (iv) the Borrower
may make Restricted Payments pursuant to and in accordance with stock option
plans or other benefit plans for management or employees of the Borrower and its
Subsidiaries, (v) the Borrower may make regularly scheduled interest payments
pursuant to the Second Lien Term Loan Agreement and (vi) the Borrower may repay
all Debt outstanding under the Second Lien Term Loan Agreement with proceeds
from the issuance of the Senior Notes.

 

(b)           Second Lien Notes.  The Borrower will not, and will not permit any
Subsidiary to amend, modify, waive or otherwise change, consent or agree to any
amendment, modification, waiver or other change to, any of the terms of any
Second Lien Term Loan Document except as permitted by the Intercreditor
Agreement, provided that the foregoing shall not prohibit the execution of
supplemental agreements to add guarantors if required by the terms thereof
provided that any such guarantor also guarantees the Indebtedness pursuant to
the Guaranty Agreement and each of the Borrower and such guarantor otherwise
complies with Section 8.14(b).

 

Section 9.05                                Investments, Loans and Advances. 
The Borrower will not, and will not permit any Subsidiary to, make or permit to
remain outstanding any Investments in or to any Person, except that the
foregoing restriction shall not apply to:

 

(a)           Investments reflected in the Financial Statements or which are
disclosed to the Lenders in Schedule 9.05.

 

(b)           accounts receivable arising in the ordinary course of business.

 

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(c)           direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.

 

(d)           commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by S&P or Moody’s.

 

(e)           deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
office located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $100,000,000 (as of the date
of such bank or trust company’s most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody’s, respectively.

 

(f)            deposits in money market funds investing exclusively in
Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).

 

(g)           Investments (i) made by the Borrower in or to the Guarantors or
(ii) made by any Subsidiary in or to the Borrower or any Guarantor.

 

(h)           Subject to Section 9.06, Investments (including, without
limitation, capital contributions) in general or limited partnerships or other
types of entities (each a “venture”) entered into by the Borrower or a
Subsidiary with others in the ordinary course of business; provided that (i) any
such venture is engaged exclusively in oil and gas exploration, development,
production, processing and related activities, including transportation,
(ii) the interest in such venture is acquired in the ordinary course of business
and on fair and reasonable terms and (iii) such venture interests acquired and
capital contributions made (valued as of the date such interest was acquired or
the contribution made) do not exceed, in the aggregate at any time outstanding
an amount equal to $1,000,000.

 

(i)            Subject to Section 9.06, Investments in direct ownership
interests in additional Oil and Gas Properties and gas gathering systems related
thereto or related to farm-out, farm-in, joint operating, joint venture or area
of mutual interest agreements, gathering systems, pipelines or other similar
arrangements which are usual and customary in the oil and gas exploration and
production business located within the geographic boundaries of the United
States of America.

 

(j)            Loans or advances to employees, officers or directors in the
ordinary course of business of the Borrower or any of its Subsidiaries, in each
case only as permitted by applicable law, including Section 402 of the Sarbanes
Oxley Act of 2002, but in any event not to exceed $100,000 in the aggregate at
any time.

 

(k)           Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrower or any Subsidiary as a result of a bankruptcy or other
insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any of its Subsidiaries;
provided that the Borrower shall give the Administrative Agent prompt written

 

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notice in the event that the aggregate amount of all Investments held at any one
time under this Section 9.05(k) exceeds $100,000.

 

(l)            Other Investments not to exceed $1,000,000 in the aggregate at
any time.

 

Section 9.06                                Nature of Business; International
Operations.  The Borrower will not, and will not permit any Subsidiary to,
(i) allow any material change to be made in the character of its business as an
independent oil and gas exploration and production company and (ii) engage
directly or indirectly in any business or conduct any operations except in
connection with or incidental to its present businesses and operations.  From
and after the date hereof, the Borrower and its Subsidiaries will not acquire or
make any expenditure (whether such expenditure is capital, operating or
otherwise) in or related to, any Oil and Gas Properties not located within the
geographical boundaries of the United States.

 

Section 9.07                                Limitation on Leases.  The Borrower
will not, and will not permit any Subsidiary to, create, incur, assume or suffer
to exist any obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal but excluding Capital Leases, leases of Hydrocarbon
Interests and drilling contracts), under leases or lease agreements which would
cause the aggregate amount of all payments made by the Borrower and the
Subsidiaries pursuant to all such leases or lease agreements, including, without
limitation, any residual payments at the end of any lease, to exceed $1,000,000
in any period of twelve consecutive calendar months during the life of such
leases.

 

Section 9.08                                Proceeds of Notes.  The Borrower
will not permit the proceeds of the Notes to be used for any purpose other than
those permitted by Section 7.21.  Neither the Borrower nor any Person acting on
behalf of the Borrower has taken or will take any action which might cause any
of the Loan Documents to violate Regulations T, U or X or any other regulation
of the Board or to violate Section 7 of the Securities Exchange Act of 1934 or
any rule or regulation thereunder, in each case as now in effect or as the same
may hereinafter be in effect.  If requested by the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form U-1 or such
other form referred to in Regulation U, Regulation T or Regulation X of the
Board, as the case may be.

 

Section 9.09                                ERISA Compliance.  The Borrower will
not, and will not permit any Subsidiary to, at any time:

 

(a)           engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, a Subsidiary or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed by
Chapter 43 of Subtitle D of the Code.

 

(b)           fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto.

 

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(c)           contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to
(i) any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability, or (ii) any
employee pension benefit plan, as defined in section 3(2) of ERISA, that is
subject to Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

 

Section 9.10                                Sale or Discount of Receivables. 
Except for receivables obtained by the Borrower or any Subsidiary out of the
ordinary course of business or the settlement of joint interest billing accounts
in the ordinary course of business or discounts granted to settle collection of
accounts receivable or the sale of defaulted accounts arising in the ordinary
course of business in connection with the compromise or collection thereof and
not in connection with any financing transaction, the Borrower will not, and
will not permit any Subsidiary to, discount or sell (with or without recourse)
any of its notes receivable or accounts receivable.

 

Section 9.11                                Mergers, Etc.  The Borrower will
not, and will not permit any Subsidiary to, merge into or with or consolidate
with any other Person, or permit any other Person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
Property to any other Person (whether now owned or hereafter acquired) (any such
transaction, a “consolidation”), or liquidate or dissolve; provided that any
Subsidiary may participate in a consolidation with any other Subsidiary and the
Borrower may consolidate with any Subsidiary so long as the Borrower of a
Guarantor is the survivor.

 

Section 9.12                                Sale of Properties.  The Borrower
will not, and will not permit any Subsidiary to, sell, assign, farm-out, convey
or otherwise transfer any Property except for (a) the sale of Hydrocarbons in
the ordinary course of business; (b) farmouts of undeveloped acreage to which no
proved reserves are attributed and assignments in connection with such farmouts;
(c) the sale or transfer of equipment that is no longer necessary for the
business of the Borrower or such Subsidiary or is replaced by equipment of at
least comparable value and use; (d) the sale or other disposition (including
Casualty Events) of any Oil and Gas Property or any interest therein or any
Subsidiary owning Oil and Gas Properties; provided that (i) 100% of the
consideration received in respect of such sale or other disposition shall be
cash, (ii) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property, interest therein or Subsidiary subject of such sale or other
disposition (as reasonably determined by the board of directors of the Borrower
and, if requested by the Administrative Agent, the Borrower shall deliver a
certificate of a Responsible Officer of the Borrower certifying to that effect),
(iii) if such sale or other disposition of Oil and Gas Property or Subsidiary
owning Oil and Gas Properties included in the most recently delivered Reserve
Report during any period between two successive Scheduled Redetermination Dates
has a value in the then current Borrowing Base in excess of 5% of the then
current Borrowing Base, individually or in the aggregate, the Borrowing Base
shall be reduced, effective immediately upon such sale or disposition, by an
amount equal to the value, if any, assigned such Property in the Borrowing Base
by the Administrative Agent in its sole discretion and (iv) if any such sale or
other disposition is of a Subsidiary owning Oil and Gas Properties, such sale or
other disposition shall include all the Equity Interests of such Subsidiary;
(e) the sale or other disposition of Oil

 

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and Gas Properties for other Oil and Gas Properties held by third parties to the
extent such exchanged Oil and Gas Property is not currently included in the then
applicable Borrowing Base and where the consideration therefore is solely other
Oil and Gas Properties of materially equivalent fair market value; (f) sales and
other transfers of Oil and Gas Properties not regulated by Section 9.12(a) to
(e) and not currently included in the then applicable Borrowing Base having a
fair market value not to exceed $2,000,000 during any 12-month period; (g) the
sale of equipment that is obsolete or has no or di minimis value; and (h) the
sale or transfer of Property to the Borrower or a Subsidiary that is a
Guarantor.

 

Section 9.13           Environmental Matters.  The Borrower will not, and will
not permit any Subsidiary to, cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to a Release or threatened Release of Hazardous Materials,
exposure to any Hazardous Materials, or to any Remedial Work under any
Environmental Laws, assuming disclosure to the applicable Governmental Authority
of all relevant facts, conditions and circumstances, if any, pertaining to such
Property where such violations, Release or threatened Release, exposure, or
Remedial work could reasonably be expected to have a Material Adverse Effect.

 

Section 9.14           Transactions with Affiliates.  The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

 

Section 9.15           Subsidiaries.  The Borrower will not, and will not permit
any Subsidiary to, create or acquire any additional Subsidiary unless the
Borrower gives written notice to the Administrative Agent of such creation or
acquisition and complies with Section 8.14(b).  The Borrower shall not, and
shall not permit any Subsidiary to, sell, assign or otherwise dispose of any
Equity Interests in any Subsidiary except in compliance with Section 9.12(d). 
Neither the Borrower nor any Subsidiary shall have any Subsidiaries that are
organized under the laws of a jurisdiction other than the United States of
America, any state thereof or the District of Columbia.

 

Section 9.16           Negative Pledge Agreements; Dividend Restrictions.  The
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any contract, agreement or understanding (other than this
Agreement, the Security Instruments or Capital Leases creating Liens permitted
by Section 9.03(c)) which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property in favor of
the Administrative Agent and the Lenders or restricts any Subsidiary from paying
dividends or making distributions to the Borrower or any Guarantor, or which
requires the consent of or notice to other Persons in connection therewith.

 

Section 9.17           Gas Imbalances, Take-or-Pay or Other Prepayments.  The
Borrower will not, and will not permit any Subsidiary to, allow gas imbalances,
take-or-pay or other

 

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prepayments with respect to the Oil and Gas Properties of the Borrower or any
Subsidiary that would require the Borrower or such Subsidiary to deliver
Hydrocarbons at some future time without then or thereafter receiving full
payment therefor to exceed 1.5 bcf of gas (on an mcf equivalent basis) in the
aggregate.

 

Section 9.18                                Swap Agreements.

 

(a)           The Borrower will not, and will not permit any Subsidiary to,
enter into any Swap Agreements with any Person other than (i) Swap Agreements in
respect of commodities (A) with an Approved Counterparty, (B) the tenor of which
is not more than 60 months from the date such Swap Agreement is executed, and
(C) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, (1) until the First Anniversary, 95% and (2) after
the First Anniversary, 90% of the reasonably anticipated projected production
from proved, developed, producing Oil and Gas Properties for each month during
the period during which such Swap Agreement is in effect for each of crude oil,
natural gas and natural gas liquids, calculated separately, and (ii) Swap
Agreements in respect of interest rates with an Approved Counterparty, as
follows:  (A) Swap Agreements effectively converting interest rates from fixed
to floating, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Subsidiaries then in effect effectively
converting interest rates from fixed to floating) do not exceed 75% of the then
anticipated principal amount of the Borrower’s Debt for borrowed money which
bears interest at a fixed rate and (B) Swap Agreements effectively converting
interest rates from floating to fixed, the notional amounts of which (when
aggregated with all other Swap Agreements of the Borrower and its Subsidiaries
then in effect effectively converting interest rates from floating to fixed) do
not exceed 75% of the then outstanding principal amount of the Borrower’s Debt
for borrowed money which bears interest at a floating rate.  Except as provided
herein, in no event shall any Swap Agreement contain any requirement, agreement
or covenant for the Borrower or any Subsidiary to post collateral or margin to
secure their obligations under such Swap Agreement or to cover market exposures
and such Swap Agreements shall not be for speculative purposes.  Notwithstanding
the foregoing, the Borrower and any Subsidiary may enter into Swap Agreements in
respect of crude oil or natural gas that are puts or floors, provided that such
puts and floors are independent and are not matched with a ceiling or call
(i.e., costless collars or participating structures).

 

(b)           So long as no Default exists, the Borrower or any Subsidiary will
not unwind, sell, terminate, restructure, modify or otherwise affect (each a
“Restructuring”) any Swap Agreement in respect of commodities that was in effect
at the time of the most recent Borrowing Base determination if the aggregate net
marked to market economic effect of all such Restructurings between any two
successive Scheduled Redetermination Dates on the date of each such Restructure
is negative (which amount, if such Restructuring is settled for cash only, shall
equal the net amount of cash paid by the Borrower or its Subsidiary to the
counterparty) unless the aggregate negative net marked to market effect of such
Restructuring or Restructurings (between any two successive Scheduled
Redetermination Dates) is less than or equal to five percent (5%) of the then
current Borrowing Base as determined by the Administrative Agent in its sole
discretion.  Notwithstanding the foregoing, the Borrower or any Subsidiary may
complete a Restructuring or Restructurings with an aggregate negative net marked
to market

 

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economic effect between any two successive Scheduled Redetermination Dates
greater than five percent (5%) of the then current Borrowing Base as determined
by the Administrative Agent in its sole discretion if the Borrower provides 10
days prior written notice of such Restructuring or Restructurings to the
Administrative Agent and the Administrative Agent shall have the right to
immediately redetermine the Borrowing Base pursuant to Section 2.07(e).

 

(c)           Secured Swap Agreements constitute senior secured Debt of the
Borrower and any Subsidiaries and rank pari passu with all obligations under
this Agreement.

 

ARTICLE X
Events of Default; Remedies

 

Section 10.01                          Events of Default.  One or more of the
following events shall constitute an “Event of Default”:

 

(a)           the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof, by acceleration or otherwise.

 

(b)           the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
(3) Business Days.

 

(c)           any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with any Loan Document or
any amendment or modification of any Loan Document or waiver under such Loan
Document, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been incorrect
in any material respect when made or deemed made.

 

(d)           the Borrower or any Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 8.01(n), Section 8.02,
Section 8.03, Section 8.14, Section 8.15 or in Article IX.

 

(e)           the Borrower or any Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in this Agreement (other than
those specified in Section 10.01(a), Section 10.01(a) or Section 10.01(c)) or
any other Loan Document, and such failure shall continue unremedied for a period
of 30 days after the earlier to occur of (A) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (B) a Responsible Officer of the Borrower or such Subsidiary
otherwise becoming aware of such default.

 

(f)            the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable.

 

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(g)           any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
Redemption thereof or any offer to Redeem to be made in respect thereof, prior
to its scheduled maturity or require the Borrower or any Subsidiary to make an
offer in respect thereof; provided that the cure of an occurrence of the
aforementioned shall be deemed a cure of the event giving rise to an Event of
Default under this Section 10.01(g).

 

(h)           an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for 30
days or an order or decree approving or ordering any of the foregoing shall be
entered.

 

(i)            the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in Section 10.01(g), (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing; or any stockholder of the Borrower shall make any request or take
any action for the purpose of calling a meeting of the stockholders of the
Borrower to consider a resolution to dissolve and wind-up the Borrower’s
affairs.

 

(j)            the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due.

 

(k)           (i) one or more judgments for the payment of money in an aggregate
amount in excess of $1,000,000 (to the extent not covered by independent third
party insurance provided by insurers of the highest claims paying rating or
financial strength as to which the insurer does not dispute coverage and is not
subject to an insolvency proceeding) or (ii) any one or more non-monetary
judgments that have, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, shall be rendered against the
Borrower, any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Subsidiary to
enforce any such judgment.

 

(l)            the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding

 

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and enforceable in accordance with their terms against the Borrower or a
Guarantor party thereto or shall be repudiated by any of them, or cease to
create a valid and perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, except to the extent permitted by
the terms of this Agreement, or the Borrower or any Subsidiary or any of their
Affiliates shall so state in writing.

 

(m)          a Change in Control shall occur.

 

(n)           an Event of Default under the Second Lien Term Loan Agreement (as
such term is defined therein).

 

(o)           the Intercreditor Agreement, after delivery thereof shall for any
reason, except (i) to the extent permitted by the terms thereof or (ii) solely
attributable to the actions (or failure to act) of the Administrative Agent,
cease to be in full force and effect and valid, binding and enforceable in
accordance with its terms against the Borrower or any party thereto or holder of
the Debt subject thereto or shall be repudiated by any of them, or cause the
payment of the obligations of the Second Lien Notes to be senior in right to the
payment or obligations of this Agreement or any payment by the Borrower or any
Guarantor in violation of the terms of the Intercreditor Agreement..

 

Section 10.02                          Remedies.

 

(a)           In the case of an Event of Default other than one described in
Section 10.01(g), Section 10.01(h) or Section 10.01(i), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and at the request of the Majority Lenders, shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times: 
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes and the Loans then outstanding to be due
and payable in whole (or in part, in which case any principal not so declared to
be due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and all fees and other obligations of the Borrower
and the Guarantors accrued hereunder and under the Notes and the other Loan
Documents (including, without limitation, the payment of cash collateral to
secure the LC Exposure as provided in Section 2.08(j)), shall become due and
payable immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor; and in case of an Event of
Default described in Section 10.01(g), Section 10.01(h) or Section 10.01(i), the
Commitments shall automatically terminate and the Notes and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
the other obligations of the Borrower and the Guarantors accrued hereunder and
under the Notes and the other Loan Documents (including, without limitation, the
payment of cash collateral to secure the LC Exposure as provided in
Section 2.08(j)), shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.

 

(b)           In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.

 

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(c)           All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:

 

(i)            first, to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the
Administrative Agent in its capacity as such;

 

(ii)           second, pro rata to payment or reimbursement of that portion of
the Indebtedness constituting fees, expenses and indemnities payable to the
Lenders;

 

(iii)          third, pro rata to payment of accrued interest on the Loans;

 

(iv)          fourth, to serve as cash collateral to be held by the
Administrative Agent to secure the LC Exposure;

 

(v)           fifth, (i) pro rata to payment of principal outstanding on the
Loans, and (ii) Indebtedness referred to in Clause (b) of the definition of
Indebtedness owing to a Lender or an Affiliate of a Lender;

 

(vi)          sixth, pro rata to any other Indebtedness; and

 

(vii)         seventh, any excess, after all of the Indebtedness shall have been
indefeasibly paid in full in cash, shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.

 

ARTICLE XI
The Agents

 

Section 11.01                          Appointment; Powers.  Each of the Lenders
and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its
agent and authorizes the Administrative Agent to take such actions on its behalf
and to exercise such powers as are delegated to the Administrative Agent by the
terms hereof and the other Loan Documents, together with such actions and powers
as are reasonably incidental thereto.

 

Section 11.02                          Duties and Obligations of Administrative
Agent.  The Administrative Agent shall not have any duties or obligations except
those expressly set forth in the Loan Documents.  Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing (the use of the term “agent” herein and in the other
Loan Documents with reference to the Administrative Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law; rather, such term is used merely as a
matter of market custom, and is intended to create or reflect only an
administrative relationship between independent contracting parties), (b) the
Administrative Agent shall have no duty to take any discretionary action or
exercise any discretionary powers, except as provided in Section 11.03, and
(c) except as expressly set forth herein, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is

 

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communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity.  The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or under any other Loan Document or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or in any
other Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, (v) the satisfaction of any condition set forth in
Article VI or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent or as to those conditions
precedent expressly required to be to the Administrative Agent’s satisfaction,
(vi) the existence, value, perfection or priority of any collateral security or
the financial or other condition of the Borrower and its Subsidiaries or any
other obligor or guarantor, or (vii) any failure by the Borrower or any other
Person (other than itself) to perform any of its obligations hereunder or under
any other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein.  For
purposes of determining compliance with the conditions specified in Article VI,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless the
Administrative Agent shall have received written notice from such Lender prior
to the proposed closing date specifying its objection thereto.

 

Section 11.03         Action by Administrative Agent.  The Administrative Agent
shall have no duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise in writing as directed by the Majority Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02) and in all cases the Administrative
Agent shall be fully justified in failing or refusing to act hereunder or under
any other Loan Documents unless it shall (a) receive written instructions from
the Majority Lenders or the Lenders, as applicable, (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02) specifying the action to be taken and (b) be
indemnified to its satisfaction by the Lenders against any and all liability and
expenses which may be incurred by it by reason of taking or continuing to take
any such action.  The instructions as aforesaid and any action taken or failure
to act pursuant thereto by the Administrative Agent shall be binding on all of
the Lenders.  If a Default has occurred and is continuing, then the
Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 11.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders.  In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law.  If a Default has occurred and
is continuing, neither the

 

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Syndication Agent nor the Documentation Agent shall have any obligation to
perform any act in respect thereof.  The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith INCLUDING ITS OWN
ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.

 

Section 11.04         Reliance by Administrative Agent.  The Administrative
Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing believed by it to be genuine and to have been signed
or sent by the proper Person.  The Administrative Agent also may rely upon any
statement made to it orally or by telephone and believed by it to be made by the
proper Person, and shall not incur any liability for relying thereon and each of
the Borrower, the Lenders and the Issuing Bank hereby waives the right to
dispute the Administrative Agent’s record of such statement, except in the case
of gross negligence or willful misconduct by the Administrative Agent.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.  The Administrative Agent
may deem and treat the payee of any Note as the holder thereof for all purposes
hereof unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Administrative Agent.

 

Section 11.05         Subagents.  The Administrative Agent may perform any and
all its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent.  The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties.  The exculpatory provisions
of the preceding Sections of this Article XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

 

Section 11.06         Resignation or Removal of Administrative Agent.  Subject
to the appointment and acceptance of a successor Administrative Agent as
provided in this Section 11.06, the Administrative Agent may resign at any time
by notifying the Lenders, the Issuing Bank and the Borrower, and the
Administrative Agent may be removed at any time with or without cause by the
Majority Lenders.  Upon any such resignation or removal, the Majority Lenders
shall have the right, in consultation with the Borrower, to appoint a
successor.  If no successor shall have been so appointed by the Majority Lenders
and shall have accepted such appointment within 30 days after the retiring Agent
gives notice of its resignation or removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders and the Issuing Bank, appoint a
successor Agent which shall be a bank with an office in New York, New York, or
an Affiliate of any such bank.  Upon the acceptance of its appointment as Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers,

 

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privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder.  The fees payable by the
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor. 
After the Agent’s resignation hereunder, the provisions of this Article XI and
Section 12.03 shall continue in effect for the benefit of such retiring Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting as Agent.

 

Section 11.07                          Agents as Lenders.  Each bank serving as
an Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not an
Agent, and such bank and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of business with the Borrower or any Subsidiary
or other Affiliate thereof as if it were not an Agent hereunder.

 

Section 11.08                          No Reliance.  Each Lender acknowledges
that it has, independently and without reliance upon the Administrative Agent,
any other Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement and each other Loan Document to which it is a party.  Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent, any other Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.  The Agents shall not be required to
keep themselves informed as to the performance or observance by the Borrower or
any of its Subsidiaries of this Agreement, the Loan Documents or any other
document referred to or provided for herein or to inspect the Properties or
books of the Borrower or its Subsidiaries.  Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of such Agent or any of
its Affiliates.  In this regard, each Lender acknowledges that Vinson & Elkins
L.L.P. is acting in this transaction as special counsel to the Administrative
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document.  Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.

 

Section 11.09                          Administrative Agent May File Proofs of
Claim.  In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(a)           to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of

 

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the Lenders and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Section 12.03)
allowed in such judicial proceeding; and

 

(b)           to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.

 

Section 11.10                          Authority of Administrative Agent to
Release Collateral and Liens.  Each Lender and the Issuing Bank hereby
authorizes the Administrative Agent to release any collateral that is permitted
to be sold or released pursuant to the terms of the Loan Documents.  Each Lender
and the Issuing Bank hereby authorizes the Administrative Agent to execute and
deliver to the Borrower, at the Borrower’s sole cost and expense, any and all
releases of Liens, termination statements, assignments or other documents
reasonably requested by the Borrower in connection with any sale or other
disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.12 or is otherwise authorized by the terms
of the Loan Documents.

 

Section 11.11                          The Syndication Agent and the
Documentation Agent.  The Syndication Agent and the Documentation Agent shall
have no duties, responsibilities or liabilities under this Agreement and the
other Loan Documents other than their duties, responsibilities and liabilities
in their capacity as Lenders hereunder.

 

Section 11.12                          Intercreditor Agreement.  Each of the
Lenders hereby acknowledges that it has received and reviewed the Intercreditor
Agreement and agrees to be bound by the terms thereof as if such Lender was a
signatory thereto.  Each Lender (and each person that becomes a Lender hereunder
pursuant to Section 12.04(b)) hereby (i) acknowledges that the Administrative
Agent is acting under the Intercreditor Agreement as the First Lien
Administrative Agent, and that the Second Lien Agent is acting under the
Intercreditor Agreement as the Second Lien Administrative Agent and that the
Administrative Agent and the Second Lien Agent are Affiliates and (ii) waives
any conflict of interest, now contemplated or arising hereafter, in connection
therewith and agrees not to assert against the Administrative Agent or the
Second Lien Agent any claims, cause of action, damages or liabilities of
whatever kind or nature relating thereto.  Each Lender (and each Person that
becomes a Lender hereunder pursuant to Section

 

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12.04(b)) hereby authorizes and directs the Administrative Agent to enter into
the Intercreditor Agreement on behalf of such Lender and agrees that each of the
Administrative Agent and the Second Lien Agent, in its various capacities
thereunder, may take such actions on its behalf as is contemplated by the terms
of the Intercreditor Agreement.

 

ARTICLE XII
Miscellaneous

 

Section 12.01                          Notices.

 

(a)           Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:

 

(i)            if to the Borrower, to it at Kodiak Oil & Gas (USA) Inc., 1625
Broadway, Suite 250, Denver, Colorado 80202 , Attention of James P. Henderson
(Telecopy No. 303.592.8071);

 

(ii)           if to the Administrative Agent, to it at Wells Fargo Bank, N.A.,
1700 Lincoln, Sixth Floor, MAC: C7300-061, Denver, Colorado, Attention of Oleg
Kogan (Telecopy No. 303.863.5196);

 

(iii)          if to the Issuing Bank, to it at Wells Fargo Bank, N.A., 1700
Lincoln, Sixth Floor, MAC: C7300-061, Denver, Colorado, Attention of Oleg Kogan
(Telecopy No. 303.863.5196); and

 

(iv)          if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.

 

(b)           Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II, Article III, Article IV and Article V
unless otherwise agreed by the Administrative Agent and the applicable Lender. 
The Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.

 

(c)           Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto.  All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.

 

Section 12.02                          Waivers; Amendments.

 

(a)           No failure on the part of the Administrative Agent, any other
Agent, the Issuing Bank or any Lender to exercise and no delay in exercising,
and no course of dealing with

 

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respect to, any right, power or privilege, or any abandonment or discontinuance
of steps to enforce such right, 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, power or privilege.  The rights and remedies of the Administrative Agent,
any other Agent, the Issuing Bank and the Lenders hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have.  No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by the Borrower therefrom
shall in any event be effective unless the same shall be permitted by
Section 12.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.  Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any other Agent, any Lender or the Issuing Bank may
have had notice or knowledge of such Default at the time.

 

(b)           Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Majority Lenders or by the Borrower and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall
(i) increase the Commitment or the Maximum Credit Amount of any Lender without
the written consent of such Lender, (ii) increase the Borrowing Base without the
written consent of each Lender, decrease or maintain the Borrowing Base without
the consent of the Required Lenders, or modify Section 2.07 in any manner
without the consent of each Lender (other than any Defaulting Lender); provided
that a Scheduled Redetermination may be postponed by the Required Lenders,
(iii) reduce the principal amount of any Loan or LC Disbursement or reduce the
rate of interest thereon, or reduce any fees payable hereunder, or reduce any
other Indebtedness hereunder or under any other Loan Document, without the
written consent of each Lender affected thereby, (iv) postpone the scheduled
date of payment or prepayment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the
amount of, waive or excuse any such payment, or postpone or extend the
Termination Date without the written consent of each Lender affected thereby,
(v) change Section 4.01(b) or Section 4.01(c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (vi) waive or amend Section 3.04(b), Section 6.01, Section 8.14,
Section 10.02(c) or Section 12.14 or change the definition of the term
“Subsidiary”, without the written consent of each Lender (other than any
Defaulting Lender), (vii) release any Guarantor (except as set forth in the
Guaranty Agreement), release any of the collateral (other than as provided in
Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less
than 80%, without the written consent of each Lender (other than any Defaulting
Lender), or (viii) change any of the provisions of this Section 12.02(b) or the
definitions of “Majority Lenders”, “Required Lenders” or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender (other than any Defaulting Lender);
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent, any other Agent, the Issuing
Bank, or the Swingline Lender hereunder or under any other Loan Document without
the prior written

 

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consent of the Administrative Agent, any other Agent, the Issuing Bank, or the
Swingline Lender, as the case may be.  Notwithstanding the foregoing, any
supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by
delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders.

 

Section 12.03                          Expenses, Indemnity; Damage Waiver.

 

(a)           The Borrower shall pay (i) all reasonable and documented
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates,
including, without limitation, the reasonable fees, charges and disbursements of
counsel and other outside consultants for the Administrative Agent, the
reasonable travel, photocopy, mailing, courier, telephone and other similar
expenses, and the cost of environmental invasive and non-invasive assessments
and audits and surveys and appraisals, in connection with the syndication of the
credit facilities provided for herein, the preparation, negotiation, execution,
delivery and administration (both before and after the execution hereof and
including advice of counsel to the Administrative Agent as to the rights and
duties of the Administrative Agent and the Lenders (including the Swingline
Lender) with respect thereto) of this Agreement and the other Loan Documents and
any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable costs, expenses,
Taxes, assessments and other charges incurred by any Agent or any Lender
(including the Swingline Lender) in connection with any filing, registration,
recording or perfection of any security interest contemplated by this Agreement
or any Security Instrument or any other document referred to therein, (iii) all
reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder, (iv) all reasonable out-of-pocket expenses
incurred by any Agent, the Issuing Bank or any Lender (including the Swingline
Lender), including the fees, charges and disbursements of any counsel for any
Agent, the Issuing Bank or any Lender (including the Swingline Lender), in
connection with the enforcement or protection of its rights in connection with
this Agreement or any other Loan Document, including its rights under this
Section 12.03, or in connection with the Loans made or Letters of Credit issued
hereunder, including, without limitation, all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans or Letters of Credit.

 

(b)           THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ISSUING BANK AND EACH
LENDER (INCLUDING THE SWINGLINE LENDER), AND EACH RELATED PARTY OF ANY OF THE
FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND
DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES,
CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR
ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE
PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF
THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE

 

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CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE
TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE
LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE
PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE
ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH,
(v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES,
(vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES OR
OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED
RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF
HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (ix) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE
BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR
TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF THE
PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR
ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED
OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL
LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR
(xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH
THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH
INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN

 

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AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF
NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE
OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY
ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO
ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

 

(c)           To the extent that the Borrower fails to pay any amount required
to be paid by it to any Agent, the Issuing Bank or the Swingline Lender under
Section 12.03(a) or (b), each Lender severally agrees to pay to such Agent, the
Issuing Bank, or the Swingline Lender as the case may be, such Lender’s
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against such Agent, the Issuing Bank or the Swingline Lender in its capacity as
such.

 

(d)           To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit
or the use of the proceeds thereof.

 

(e)           All amounts due under this Section 12.03 shall be payable not
later than 30 days after written demand therefor.

 

Section 12.04                          Successors and Assigns.

 

(a)           The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

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(b)                                 Assignments:

 

(i)                                     Subject to the conditions set forth in
Section 12.04(b)(ii), any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld) of:

 

(A)          the Borrower, provided that no consent of the Borrower shall be
required if such assignment is to a Lender, an Affiliate of a Lender, an
Approved Fund or, if an Event of Default has occurred and is continuing, is to
any other assignee; and

 

(B)           the Administrative Agent, provided that no consent of the
Administrative Agent shall be required for an assignment to an assignee that is
a Lender immediately prior to giving effect to such assignment.

 

(ii)                                  Assignments shall be subject to the
following additional conditions:

 

(A)          except in the case of an assignment to a Lender or an Affiliate of
a Lender or an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, which consent of the
Borrower shall not be unreasonably withheld, provided that no such consent of
the Borrower shall be required if an Event of Default has occurred and is
continuing;

 

(B)           each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement;

 

(C)           the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

 

(D)          the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

(iii)                               Subject to Section 12.04(b)(iv) and the
acceptance and recording thereof, from and after the effective date specified in
each Assignment and Assumption the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Assumption,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Section 5.01, Section 5.02, Section 5.03 and Section 12.03).  Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 12.04 shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with Section 12.04(c).

 

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(iv)          The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
(and stated interest) of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary.  The Register shall
be available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.  In
connection with any changes to the Register, if necessary, the Administrative
Agent will reflect the revisions on Annex I and forward a copy of such revised
Annex I to the Borrower, the Issuing Bank and each Lender.

 

(v)           Upon its receipt of a duly completed Assignment and Assumption
executed by an assigning Lender and an assignee, the assignee’s completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in
Section 12.04(a) and any written consent to such assignment required by
Section 12.04(a), the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register.  No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this Section 12.04(a).

 

(c)                                  Participations.

 

(i)            Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the proviso to
Section 12.02 that affects such Participant.  In addition such agreement must
provide that the Participant be bound by the provisions of Section 12.03. 
Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall
be entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 12.04(a).  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 12.08 as though it
were a Lender, provided such Participant agrees to be subject to
Section 4.01(c) as though it were a Lender.  Each Lender that sells a
participation shall, acting solely for this purpose as an agent of the Borrower,
maintain a register on which it enters the name and address of each Participant
and

 

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the principal amounts (and stated interest) of each Participant’s interest in
the Loans or other obligations under the Loan Documents (the “Participant
Register”); provided that no Lender shall have any obligation to disclose all or
any portion of the Participant Register (including the identity of any
Participant or any information relating to a Participant’s interest in any
commitments, loans, letters of credit or its other obligations under any Loan
Document) to any Person except to the extent that such disclosure is necessary
to establish that such commitment, loan, letter of credit or other obligation is
in registered form under Section 5f.103-1(c) of the United States Treasury
Regulations.  The entries in the Participant Register shall be conclusive absent
manifest error, and such Lender shall treat each Person whose name is recorded
in the Participant Register as the owner of such participation for all purposes
of this Agreement notwithstanding any notice to the contrary.  For the avoidance
of doubt, the Administrative Agent (in its capacity as Administrative Agent)
shall have no responsibility for maintaining a Participant Register.

 

(ii)           A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.03 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower’s prior written consent.  A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 5.03 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with Section 5.03(d) as though it were a Lender.

 

(d)           Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

 

Section 12.05                          Survival; Revival; Reinstatement.

 

(a)           All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, any other Agent, the Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not expired or terminated.  The provisions of Section 5.01, Section 5.02,
Section 5.03 and Section 12.03 and Article XI shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the

 

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expiration or termination of the Letters of Credit and the Commitments or the
termination of this Agreement, any other Loan Document or any provision hereof
or thereof.

 

(b)           To the extent that any payments on the Indebtedness 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 Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

 

Section 12.06                          Counterparts; Integration; Effectiveness.

 

(a)           This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.

 

(b)           This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof.  THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO 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.

 

(c)           Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy, facsimile or
other electronic means shall be effective as delivery of a manually executed
counterpart of this Agreement.

 

Section 12.07                          Severability.  Any provision of this
Agreement or any other Loan Document held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability without
affecting the validity, legality and enforceability of the remaining provisions
hereof or thereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

 

Section 12.08                          Right of Setoff.  If an Event of Default
shall have occurred and be continuing, each Lender and each of its Affiliates is
hereby authorized at any time and from time

 

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to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other obligations (of whatsoever kind, including, without
limitations obligations under Swap Agreements) at any time owing by such Lender
or Affiliate to or for the credit or the account of the Borrower or any
Subsidiary against any of and all the obligations of the Borrower or any
Subsidiary owed to such Lender now or hereafter existing under this Agreement or
any other Loan Document, irrespective of whether or not such Lender shall have
made any demand under this Agreement or any other Loan Document and although
such obligations may be unmatured.  The rights of each Lender under this
Section 12.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender or its Affiliates may have.

 

Section 12.09                          GOVERNING LAW; JURISDICTION; CONSENT TO
SERVICE OF PROCESS.

 

(a)           THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT THAT
UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE,
RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH
LENDER IS LOCATED.

 

(b)           ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, EACH PARTY 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 PARTY 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 A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.

 

(c)           EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, 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 WAIVES, 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) CERTIFIES 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

 

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LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES 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 12.09.

 

Section 12.10         Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

Section 12.11         Confidentiality.  Each of the Administrative Agent, the
Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement or any other
Loan Document, (e) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 12.11, to (i) any assignee of or Participant in,
or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty
(or its advisors) to any Swap Agreement relating to the Borrower and its
obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 12.11 or (ii) becomes available to the Administrative Agent, the
Issuing Bank or any Lender on a nonconfidential basis from a source other than
the Borrower.  For the purposes of this Section 12.11, “Information” means all
information received from the Borrower or any Subsidiary relating to the
Borrower or any Subsidiary and their businesses, other than any such information
that is available to the Administrative Agent, the Issuing Bank or any Lender on
a nonconfidential basis prior to disclosure by the Borrower or a Subsidiary;
provided that, in the case of information received from the Borrower or any
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential.  Any Person required to maintain the
confidentiality of Information as provided in this Section 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information. 
Notwithstanding anything herein to the contrary, “Information” shall not
include, and the Borrower, the Borrower’s Subsidiaries, the Administrative
Agent, each Lender and the respective Affiliates of each of the foregoing (and
the respective partners, directors, officers, employees, agents, advisors and
other representatives of the aforementioned Persons), and any other party, may
disclose to any and all Persons, without limitation of any kind (a) any
information with respect to the U.S. federal and state income tax treatment of
the transactions contemplated hereby and any facts that may be relevant to
understanding the U.S. federal or state income tax treatment of such
transactions (“tax structure”), which facts shall not include for this purpose
the names of the parties or any other person named herein, or information that
would permit identification of the parties or such other persons, or any pricing

 

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terms or other nonpublic business or financial information that is unrelated to
such tax treatment or tax structure, and (b) all materials of any kind
(including opinions or other tax analyses) that are provided to the Borrower,
the Administrative Agent or such Lender relating to such tax treatment or tax
structure.

 

Section 12.12         Interest Rate Limitation.  It is the intention of the
parties hereto that each Lender shall conform strictly to usury laws applicable
to it.  Accordingly, if the transactions contemplated hereby would be usurious
as to any Lender under laws applicable to it (including the laws of the United
States of America and the State of Texas or any other jurisdiction whose laws
may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows:  (i) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Notes shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and if theretofore paid shall be credited by such Lender on the principal amount
of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower); and (ii) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower).  All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law.  If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.

 

Section 12.13         EXCULPATION PROVISIONS.  EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE

 

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AND KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; 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 OTHER LOAN
DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS 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 OTHER LOAN DOCUMENTS ON THE
BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT “CONSPICUOUS.”

 

Section 12.14         Collateral Matters; Swap Agreements.  The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to, and be available as
security for, obligations and amounts owed by the Borrower or any Subsidiary
under any Secured Swap Agreement.  No Lender or any Affiliate of a Lender shall
have any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Secured Swap Agreements.

 

Section 12.15         No Third Party Beneficiaries.  This Agreement, the other
Loan Documents, and the agreement of the Lenders to make Loans and the Issuing
Bank to issue, amend, renew or extend Letters of Credit hereunder are solely for
the benefit of the Borrower, and no other Person (including, without limitation,
any Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier
or materialsman) shall have any rights, claims, remedies or privileges hereunder
or under any other Loan Document against the Administrative Agent, any other
Agent, the Issuing Bank or any Lender for any reason whatsoever.  There are no
third party beneficiaries.

 

Section 12.16         USA Patriot Act Notice.  Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

 

Section 12.17         Existing Credit Agreement.  On the date of this Agreement,
the Existing Credit Agreement shall be amended and restated in its entirety by
this Agreement, and the Existing Credit Agreement shall be replaced hereby;
provided that the Borrower, the Administrative Agent and the Lenders agree that
on the date of the initial funding of Loans hereunder, the loans and other
Indebtedness of the Borrower under the Existing Credit Agreement shall be
renewed, rearranged, modified and extended with the proceeds of the initial

 

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funding and the “Commitments” of the lenders under the Existing Credit Agreement
shall be superseded by this Agreement and terminated.  This Agreement is not in
any way intended to constitute a novation of the obligations and liabilities
existing under the Existing Credit Agreement or evidence payment of all or any
portion of such obligations and liabilities.  The terms and conditions of this
Agreement and the Administrative Agent’s, the Lenders’ and the Issuing Banks’
rights and remedies under this Agreement and the other Loan Documents shall
apply to all of the Indebtedness incurred under the Existing Credit Agreement
and in respect of the Existing Letters of Credit.  The undersigned hereby waive
(i) any right to receive any notice of such termination, (ii) any right to
receive any notice of prepayment of amounts owed under the Existing Credit
Agreement, and (iii) any right to receive compensation under Section 5.02 of the
Existing Credit Agreement in respect of Eurodollar Loans outstanding under the
Existing Credit Agreement resulting from such rearrangement.  Each Lender that
was a party to the Existing Credit Agreement hereby agrees to return to the
Borrower, with reasonable promptness, any promissory note delivered by the
Borrower to such Lender in connection with the Existing Credit Agreement.

 

Section 12.18         No Fiduciary Duty.  Each Lender and their Affiliates
(collectively, solely for purposes of this paragraph, the “Lenders”), may have
economic interests that conflict with those of the Loan Parties, their
stockholders and/or their affiliates.  The Loan Parties acknowledge and agree
that (i) the transactions contemplated by the Loan Documents (including the
exercise of rights and remedies hereunder and thereunder) are arm’s-length
commercial transactions between the Lenders, on the one hand, and the Loan
Parties, on the other, and (ii) in connection therewith and with the process
leading thereto, (x) no Lender has assumed an advisory or fiduciary
responsibility in favor of any Loan Party, its stockholders or its affiliates
with respect to the transactions contemplated hereby (or the exercise of rights
or remedies with respect thereto) or the process leading thereto (irrespective
of whether any Lender has advised, is currently advising or will advise any Loan
Party, its stockholders or its Affiliates on other matters) or any other
obligation to any Loan Party except the obligations expressly set forth in the
Loan Documents and (y) each Lender is acting solely as principal and not as the
agent or fiduciary of any Loan Party, its management, stockholders, creditors or
any other Person.  Each Loan Party acknowledges and agrees that it has consulted
its own legal and financial advisors to the extent it deemed appropriate and
that it is responsible for making its own independent judgment with respect to
such transactions and the process leading thereto.  Each Loan Party agrees that
it will not claim that any Lender has rendered advisory services of any nature
or respect, or owes a fiduciary or similar duty to such Loan Party, in
connection with such transaction or the process leading thereto.

 

[SIGNATURES BEGIN NEXT PAGE]

 

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The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

 

BORROWER:

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

By:

/s/ James P. Henderson

 

 

James P. Henderson

 

 

Chief Financial Officer

 

[Signature Page- Credit Agreement]

 

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

 

ADMINISTRATIVE AGENT,

WELLS FARGO BANK, N.A.,

ISSUING BANK and
SWINGLINE LENDER:

 

 

 

 

By:

/s/ Suzanne F. Ridenhour

 

 

Suzanne F. Ridenhour

 

 

Vice President

 

[Signature Page- Credit Agreement]

 

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

 

LENDERS:

WELLS FARGO BANK, N.A., as a Lender

 

 

 

 

 

By:

/s/ Suzanne F. Ridenhour

 

 

Suzanne F. Ridenhour

 

 

Vice President

 

[Signature Page- Credit Agreement]

 

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

 

 

BMO Harris Financing, Inc., as a Lender

 

 

 

 

 

By:

/s/ James V. Ducote

 

Name:

James V. Ducote

 

Title:

Director

 

[Signature Page- Credit Agreement]

 

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

 

 

Royal Bank of Canada, as a Lender

 

 

 

 

 

By:

/s/ Don J. McKinnerney

 

Name:

Don J. McKinnerney

 

Title:

Authorized Signatory

 

[Signature Page- Credit Agreement]

 

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

 

 

KeyBank National Association, as a Lender

 

 

 

 

 

By:

/s/ David Morris

 

Name:

David Morris

 

Title:

Vice President

 

[Signature Page- Credit Agreement]

 

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

 

 

Credit Suisse AG, Cayman Islands Branch, as a Lender

 

 

 

 

 

By:

/s/ Nupur Kumar

 

Name:

Nupur Kumar

 

Title:

Vice President

 

 

 

 

 

By:

/s/ Michael D. Spaight

 

Name:

Michael D. Spaight

 

Title:

Associate

 

[Signature Page- Credit Agreement]

 

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

 

ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS

 

Aggregate Maximum Credit Amounts

 

Name of Lender

 

Applicable Percentage

 

Maximum Credit Amount

 

Wells Fargo Bank, National Association

 

28.8888889

%

$

216,666,666.67

 

BMO Harris Financing, Inc.

 

20.0000000

%

$

150,000,000.00

 

Royal Bank of Canada

 

20.0000000

%

$

150,000,000.00

 

KeyBank, N.A.

 

20.0000000

%

$

150,000.000.00

 

Credit Suisse AG

 

11.1111111

%

$

83,333,333.33

 

TOTAL

 

100.00

%

$

750,000,000.00

 

 

Annex I - 1

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

 

EXHIBIT A
FORM OF NOTE

 

$[          ]

[          ], 201[     ]                

 

FOR VALUE RECEIVED, KODIAK OIL & GAS (USA) INC., a Colorado corporation (the
“Borrower”) hereby promises to pay [          ] (the “Lender”) or its registered
assigns, at the principal office of WELLS FARGO BANK, NATIONAL ASSOCIATION (the
“Administrative Agent”), the principal sum of [          ] Dollars
($[          ]) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.

 

The date, amount, Type, interest rate, Interest Period and maturity of each Loan
made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and may be
endorsed by the Lender on the schedules attached hereto or any continuation
thereof or on any separate record maintained by the Lender.  Failure to make any
such notation or to attach a schedule shall not affect any Lender’s or the
Borrower’s rights or obligations in respect of such Loans.

 

This Note is one of the Notes referred to in the Amended and Restated Credit
Agreement dated as of [ ], 2011 among the Borrower, the Administrative Agent,
and the other agents and lenders signatory thereto (including the Lender), and
evidences Loans made by the Lender thereunder (such Credit Agreement as the same
may be amended, supplemented or restated from time to time, the “Credit
Agreement”).  Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.

 

This Note is issued pursuant to, and is subject to the terms and conditions set
forth in, the Credit Agreement and is entitled to the benefits provided for in
the Credit Agreement and the other Loan Documents.  The Credit Agreement
provides for the acceleration of the maturity of this Note upon the occurrence
of certain events, for prepayments of Loans upon the terms and conditions
specified therein and other provisions relevant to this Note.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.

 

 

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit A - 1

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EXHIBIT B
FORM OF BORROWING REQUEST

 

[                   ], 201[   ]

 

KODIAK OIL & GAS (USA) INC., a Colorado corporation (the “Borrower”), pursuant
to Section 2.03 of the Amended and Restated Credit Agreement dated as of [ ],
2011 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, Wells Fargo
Bank, National Association, as Administrative Agent and the other agents and
lenders (the “Lenders”) which are or become parties thereto (unless otherwise
defined herein, each capitalized term used herein is defined in the Credit
Agreement), hereby requests a Borrowing as follows:

 

(i)            Aggregate amount of the requested Borrowing is
$[                   ];

 

(ii)           Date of such Borrowing is [                   ], 201[   ];

 

(iii)          Requested Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing];

 

(iv)          In the case of a Eurodollar Borrowing, the initial Interest Period
applicable thereto is [                   ];

 

(v)           Amount of Borrowing Base in effect on the date hereof is
$[                   ];

 

(vi)          Total Revolving Credit Exposures on the date hereof (i.e.,
outstanding principal amount of Loans and total LC Exposure) is
$[                   ]; and

 

(vii)         Pro forma total Revolving Credit Exposures (giving effect to the
requested Borrowing) is $[                   ]; and

 

(viii)        Location and number of the Borrower’s account to which funds are
to be disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:

 

[                                                        ]

[                                                        ]

[                                                        ]

[                                                        ]

[                                                        ]

 

Exhibit B - 1

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

 

The undersigned certifies that he/she is the [                ] of the Borrower,
and that as such he/she is authorized to execute this certificate on behalf of
the Borrower.  The undersigned further certifies, represents and warrants on
behalf of the Borrower that the Borrower is entitled to receive the requested
Borrowing under the terms and conditions of the Credit Agreement.

 

 

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit B - 2

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

 

EXHIBIT C
FORM OF INTEREST ELECTION REQUEST

 

[                ], 201[   ]

 

KODIAK OIL & GAS (USA) INC., a Colorado corporation (the “Borrower”), pursuant
to Section 2.04 of the Amended and Restated Credit Agreement dated as of [ ],
2011 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, Wells Fargo
Bank, National Association, as Administrative Agent and the other agents and
lenders (the “Lenders”) which are or become parties thereto (unless otherwise
defined herein, each capitalized term used herein is defined in the Credit
Agreement), hereby makes an Interest Election Request as follows:

 

(i)            The Borrowing to which this Interest Election Request applies,
and if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing (in
which case the information specified pursuant to (iii) and (iv) below shall be
specified for each resulting Borrowing) is [                ];

 

(ii)           The effective date of the election made pursuant to this Interest
Election Request is [                ], 201[   ];[and]

 

(iii)          The resulting Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing][; and]

 

[(iv)         [If the resulting Borrowing is a Eurodollar Borrowing] The
Interest Period applicable to the resulting Borrowing after giving effect to
such election is [                ]].

 

The undersigned certifies that he/she is the [                ] of the Borrower,
and that as such he/she is authorized to execute this certificate on behalf of
the Borrower.  The undersigned further certifies, represents and warrants on
behalf of the Borrower that the Borrower is entitled to receive the requested
continuation or conversion under the terms and conditions of the Credit
Agreement.

 

 

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit C - 1

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

 

EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE

 

The undersigned hereby certifies that he/she is the [          ] of KODIAK OIL &
GAS (USA) INC., a Colorado corporation (the “Borrower”), and that as such he/she
is authorized to execute this certificate on behalf of the Borrower.  With
reference to the Amended and Restated Credit Agreement dated as of [ ], 2011
(together with all amendments, restatements, supplements or other modifications
thereto being the “Agreement”) among the Borrower, Wells Fargo Bank, National
Association, as Administrative Agent, and the other agents and lenders (the
“Lenders”) which are or become a party thereto, and such Lenders, the
undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Agreement unless otherwise
specified):

 

(a)           The representations and warranties of the Borrower contained in
Article VII of the Agreement and in the Loan Documents and otherwise made in
writing by or on behalf of the Borrower pursuant to the Agreement and the Loan
Documents were true and correct when made, and are repeated at and as of the
time of delivery hereof and are true and correct in all material respects at and
as of the time of delivery hereof, except to the extent such representations and
warranties are expressly limited to an earlier date or the Majority Lenders have
expressly consented in writing to the contrary.

 

(b)           The Borrower has performed and complied with all agreements and
conditions contained in the Agreement and in the Loan Documents required to be
performed or complied with by it prior to or at the time of delivery hereof [or
specify default and describe].

 

(c)           Since [same date as audited financials in Section 7.04(a)], no
change has occurred, either in any case or in the aggregate, in the condition,
financial or otherwise, of the Borrower or any Subsidiary which could reasonably
be expected to have a Material Adverse Effect [or specify event].

 

(d)           There exists no Default or Event of Default [or specify Default
and describe].

 

(e)           Attached hereto are the detailed computations necessary to
determine whether the Borrower is in compliance with Section 9.01 and
Section 8.14 as of the end of the [fiscal quarter][fiscal year] ending
[          ].

 

(f)            Attached hereto are the filings, if any, since the delivery of
the most recent Compliance Certificate, made by the Borrower or any Subsidiary
of the Borrower, or through any agent, employee, licensee or designee of the
foregoing, for the registration of any Patent or Trademark (as such terms are
defined in the Guaranty Agreement) with the United States Patent and Trademark
Office or any similar office or agency in any other country or any political
subdivision thereof.

 

(g)           Attached hereto is a description of all Letter-of-Credit Rights in
excess of $500,000, if any, since the delivery of the most recent Compliance
Certificate, for which the Borrower or any Subsidiary of the Borrower is
entitled to.

 

Exhibit D - 1

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

 

EXECUTED AND DELIVERED this [          ] day of [          ].

 

 

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

Exhibit D - 2

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

 

EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”).  Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part
of this Assignment and Assumption as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”).  Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

1.

Assignor:

 

 

 

 

2.

Assignee:

 

 

 

 

 

 

[and is an Affiliate/Approved Fund of [identify Lender](1)]

 

 

 

3.

Borrower:

 

 

 

 

4.

Administrative Agent:

                                           , as the administrative agent under
the Credit Agreement

 

 

 

5.

Credit Agreement:

The Amended and Restated Credit Agreement dated as of [ ], 2011 among Kodiak
Oil & Gas (USA) Inc., the Lenders parties thereto, Wells Fargo Bank, National
Association, as Administrative Agent, and the other agents parties thereto]

 

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

(1)  Select as applicable.

 

Exhibit E - 1

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

 

6.                                       Assigned Interest:

 

Commitment Assigned

 

Aggregate Amount of
Commitment/Loans for
all Lenders

 

Amount of
Commitment/Loans
Assigned

 

Percentage Assigned of
Commitment/Loans(2)

 

 

 

$

 

 

$

 

 

 

%

 

 

$

 

 

$

 

 

 

%

 

 

$

 

 

$

 

 

 

%

 

Effective Date:                                    , 201       [TO BE INSERTED
BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

 

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

 

ASSIGNOR

 

 

 

[NAME OF ASSIGNOR]

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

ASSIGNEE

 

 

 

[NAME OF ASSIGNEE]

 

 

 

 

 

By:

 

 

 

Title:

 

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

(2)  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Lenders thereunder.

 

Exhibit E - 2

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

 

Consented to and Accepted:

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as

 

Administrative Agent

 

 

 

 

 

By

 

 

 

Title:

 

 

 

 

 

Consented to:

 

 

 

KODIAK OIL & GAS (USA) INC.

 

 

 

 

 

By

 

 

 

Title:

 

 

Exhibit E - 3

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

 

ANNEX 1

 

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1.  Representations and Warranties.

 

1.1   Assignor.  The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

 

1.2.  Assignee.  The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 8.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

 

2.   Payments.    From and after the Effective Date, the Administrative Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees and other amounts) to the Assignor for amounts
which have accrued to but excluding the Effective Date and to the Assignee for
amounts which have accrued from and after the Effective Date.

 

3.  General Provisions. This Assignment and Assumption shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.  This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument.  Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and

 

Exhibit E - 4

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

 

Assumption.  This Assignment and Assumption shall be governed by, and construed
in accordance with, the law of the State of New York.

 

Exhibit E - 5

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

 

EXHIBIT F-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of [ ] (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Kodiak Oil & Gas (USA) Inc. (“Borrower”) and each Lender from time to time
party thereto.

 

Pursuant to the provisions of Section 5.03(f) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and
(iv) it is not a controlled foreign corporation related to the Borrower as
described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with a
certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and
the Administrative Agent, and (2) the undersigned shall have at all times
furnished the Borrower and the Administrative Agent with a properly completed
and currently effective certificate in either the calendar year in which each
payment is to be made to the undersigned, or in either of the two calendar years
preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]

 

By:

Name:

Title:

Date:                      , 20[ ]

 

Exhibit F - 1

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

 

EXHIBIT F-2

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of [ ] (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Kodiak Oil & Gas (USA) Inc. (“Borrower”) and each Lender from time to time
party thereto.

 

Pursuant to the provisions of Section 5.03(f) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

 

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender in writing, and
(2) the undersigned shall have at all times furnished such Lender with a
properly completed and currently effective certificate in either the calendar
year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]

 

By:

Name:

Title:

Date:                      , 20[ ]

 

Exhibit F - 2

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

 

EXHIBIT F-3

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

 

Reference is hereby made to the Credit Agreement dated as of [ ] (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Kodiak Oil & Gas (USA) Inc. (“Borrower”) and each Lender from time to time
party thereto.

 

Pursuant to the provisions of Section 5.03(f) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an
IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned,
or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]

 

By:

Name:

Title:

Date:                      , 20[ ]

 

Exhibit F - 3

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

 

EXHIBIT F-4

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

 

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

Reference is hereby made to the Credit Agreement dated as of [ ] (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Kodiak Oil & Gas (USA) Inc. (“Borrower”) and each Lender from time to time
party thereto.

 

Pursuant to the provisions of Section 5.03(f) of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it
is providing this certificate, (ii) its direct or indirect partners/members are
the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing
such Loan(s)), (iii) with respect to the extension of credit pursuant to this
Credit Agreement or any other Loan Document, neither the undersigned nor any of
its direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of the Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

 

The undersigned has furnished the Administrative Agent and the Borrower with IRS
Form W-8IMY accompanied by one of the following forms from each of its
partners/members that is claiming the portfolio interest exemption: (i) an IRS
Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from
each of such partner’s/member’s beneficial owners that is claiming the portfolio
interest exemption. By executing this certificate, the undersigned agrees that
(1) if the information provided on this certificate changes, the undersigned
shall promptly so inform the Borrower and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

 

Unless otherwise defined herein, terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]

 

By:

Name:

Title:

Date:                      , 20[ ]

 

Exhibit F - 4

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

 

SCHEDULE 6.01

HEDGES

 

Existing Hedges:

 

Year

 

Existing Hedged Volumes
(Mbbls)

 

Collar
Floor

 

Collar
Ceiling

 

Swap
Price

 

2012

 

412.45

 

$

79.69

 

$

109.56

 

—

 

2012

 

94.9

 

—

 

 

 

$

86.83

 

2013

 

182.5

 

$

85.00

 

$

117.00

 

—

 

2013

 

193.45

 

—

 

—

 

$

87.75

 

2014

 

164.25

 

—

 

—

 

$

87.73

 

2015 (through 9/30/15)

 

115.628

 

—

 

—

 

$

87.91

 

 

Acquisition Hedges:

 

Year

 

Additional Volumes to
be Hedged (Mbbls)

 

Swap
Price

 

2012

 

355.000

 

$

86.74

 

2013

 

320.000

 

$

86.74

 

2014

 

403.000

 

$

86.74

 

 

Schedule 7.05 - 1

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

 

SCHEDULE 7.05

LITIGATION

 

None.

 

Schedule 7.05 - 1

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

 

SCHEDULE 7.14
SUBSIDIARIES AND PARTNERSHIPS

 

None.

 

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

 

SCHEDULE 7.18
GAS IMBALANCES

 

None.

 

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

 

SCHEDULE 7.19

MARKETING CONTRACTS

 

None.

 

Schedule 7.19 - 1

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

 

SCHEDULE 7.20

SWAP AGREEMENTS

 

1.             [Crude Oil Commodity Option Transaction between BP Corporation
North America Inc. and the Borrower dated as of February 19, 2010, pursuant to
that certain ISDA Master Agreement dated as of February 11, 2010.

 

Effective Date: March 1, 2010

Termination Date: December 31, 2010

Notional Quantity per Month (BBL):

 

March 2010

 

6,200

April 2010

 

6,000

May 2010

 

6,200

June 2010

 

6,000

July 2010

 

6,200

August 2010

 

6,200

September 2010

 

6,000

October 2010

 

6,200

November 2010

 

6,000

December 2010

 

6,200

 

Net Mark to Market Value: $73,194]

 

Schedule 7.20 - 1

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

 

SCHEDULE 9.05

INVESTMENTS

 

None.

 

Schedule 9.05 - 1

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