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Exhibit 10.54    
  




$20,000,000 


AMENDED AND RESTATED SUBORDINATED CREDIT AGREEMENT  


among 


BRIGHAM OIL & GAS, L.P.,
  


as the Borrower, 


BRIGHAM EXPLORATION COMPANY,

and
 BRIGHAM, INC.,


as
Guarantors, 


THE LENDERS PARTY HERETO FROM TIME TO TIME
  


as Lenders, 


and



THE ROYAL BANK OF SCOTLAND plc,  


as Agent, 


March 21,
2003 








  



 
 

TABLE OF CONTENTS    
  



	 
	 	Page

	ARTICLE I DEFINITIONS AND ACCOUNTING TERMS	 	1
	 	

Section 1.01 Certain Defined Terms	
 	

1
	 	Section 1.02 Computation of Time Periods	 	13
	 	Section 1.03 Accounting Terms; Changes in GAAP	 	13
	 	Section 1.04 Miscellaneous	 	13
	

ARTICLE II CREDIT FACILITIES	
 	

14
	 	

Section 2.01 Advances.	
 	

14
	 	Section 2.02 Intentionally Omitted.	 	14
	 	Section 2.03 Intentionally Omitted.	 	14
	 	Section 2.04 Reduction of the Commitments.	 	14
	 	Section 2.05 Prepayment of Advances.	 	15
	 	Section 2.06 Repayment of Advances	 	15
	 	Section 2.07 Intentionally Omitted.	 	15
	 	Section 2.08 Intentionally Omitted.	 	15
	 	Section 2.09 Interest.	 	15
	 	Section 2.10 Payments and Computations.	 	16
	 	Section 2.11 Sharing of Payments, Etc	 	17
	 	Section 2.12 Intentionally Omitted.	 	17
	 	Section 2.13 Increased Costs	 	17
	 	Section 2.14 Taxes.	 	18
	

ARTICLE III CONDITIONS OF LENDING	
 	

19
	 	

Section 3.01 Conditions Precedent to Closing Date	
 	

19
	 	Section 3.02 Conditions Precedent to All Borrowings	 	22
	

ARTICLE IV REPRESENTATIONS AND WARRANTIES	
 	

22
	 	

Section 4.01 Corporate Existence; Subsidiaries	
 	

22
	 	Section 4.02 Corporate Power	 	22
	 	Section 4.03 Authorization and Approvals	 	23
	 	Section 4.04 Enforceable Obligations	 	23
	 	Section 4.05 Financial Statements.	 	23
	 	Section 4.06 True and Complete Disclosure	 	23
	 	Section 4.07 Litigation	 	23
	 	Section 4.08 Taxes.	 	24
	 	Section 4.09 Pension Plans	 	24
	 	Section 4.10 Condition of Property; Casualties.	 	25
	 	Section 4.11 Security Instruments.	 	26
	 	Section 4.12 No Burdensome Restrictions; No Defaults.	 	27
	 	Section 4.13 Environmental Condition	 	27
	 	Section 4.14 Gas Contracts	 	28
	 	Section 4.15 Compliance with Laws	 	28
	 	Section 4.16 Hedging Agreements	 	28
	 	Section 4.17 Material Agreements	 	28
	 	Section 4.18 Organizational Documents	 	29
	 	Section 4.19 Guarantors	 	29
	 	Section 4.20 Insurance	 	29



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	 	Section 4.21 Use of Proceeds	 	29
	 	Section 4.22 Investment Company Act	 	29
	 	Section 4.23 Public Utility Holding Company Act	 	29
	 	Section 4.24 Transmitting Utility	 	29
	

ARTICLE V AFFIRMATIVE COVENANTS	
 	

29
	 	

Section 5.01 Compliance with Laws, Etc	
 	

29
	 	Section 5.02 Maintenance of Insurance.	 	29
	 	Section 5.03 Preservation of Corporate Existence, Etc	 	30
	 	Section 5.04 Payment of Taxes, Etc	 	30
	 	Section 5.05 Inspection; Books and Records	 	30
	 	Section 5.06 Reporting Requirements	 	30
	 	Section 5.07 Maintenance of Property	 	33
	 	Section 5.08 Environmental Laws	 	33
	 	Section 5.09 Payment of Trade Payables	 	33
	 	Section 5.10 Use of Proceeds	 	33
	 	Section 5.11 Additional Collateral	 	33
	 	Section 5.12 New Subsidiaries	 	34
	 	Section 5.13 Title	 	34
	 	Section 5.14 Further Assurances	 	34
	

ARTICLE VI NEGATIVE COVENANTS	
 	

35
	 	

Section 6.01 Liens, Etc	
 	

35
	 	Section 6.02 Debts, Guaranties, and Other Obligations	 	35
	 	Section 6.03 Agreements Restricting Liens and Distributions	 	36
	 	Section 6.04 Merger or Consolidation	 	36
	 	Section 6.05 Sales of Assets	 	37
	 	Section 6.06 Restricted Payments	 	37
	 	Section 6.07 Investments and Acquisitions.	 	37
	 	Section 6.08 Affiliate Transactions	 	37
	 	Section 6.09 Compliance with ERISA	 	37
	 	Section 6.10 Sales and Leasebacks	 	38
	 	Section 6.11 Change of Business	 	38
	 	Section 6.12 Use of Proceeds	 	38
	 	Section 6.13 Gas Imbalances, Take-or-Pay or Other Prepayments	 	38
	 	Section 6.14 Additional Subsidiaries	 	39
	 	Section 6.15 Limitation on Leases	 	39
	 	Section 6.16 Environmental Matters	 	39
	 	Section 6.17 Borrower as Operator	 	39
	 	Section 6.18 Equity Interests of Partners	 	39
	 	Section 6.19 Speculative Trading	 	39
	 	Section 6.20 Change of Name; Fiscal Year; Accounting Method	 	39
	 	Section 6.21 Current Ratio	 	40
	 	Section 6.22 Interest Coverage Ratio	 	40
	 	Section 6.23 Restrictions on Limited Partners	 	40
	 	Section 6.24 Advance Payment Contracts	 	40
	

ARTICLE VII EVENTS OF DEFAULT; REMEDIES	
 	

40
	 	

Section 7.01 Events of Default	
 	

40
	 	Section 7.02 Optional Acceleration of Maturity	 	41
	 	Section 7.03 Automatic Acceleration of Maturity	 	42



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	 	Section 7.04 Right of Set off	 	42
	 	Section 7.05 Non-exclusivity of Remedies	 	42
	 	Section 7.06 Application of Proceeds	 	42
	

ARTICLE VIII THE GUARANTY	
 	

43
	 	

Section 8.01 Liabilities Guaranteed	
 	

43
	 	Section 8.02 Nature of Guaranty	 	43
	 	Section 8.03 Agent's Rights	 	43
	 	Section 8.04 Guarantor's Waivers.	 	43
	 	Section 8.05 Maturity of Obligations, Payment	 	44
	 	Section 8.06 Agent's Expenses	 	44
	 	Section 8.07 Liability	 	44
	 	Section 8.08 Events and Circumstances Not Reducing or Discharging any Guarantor's Obligations	 	44
	 	Section 8.09 Subordination of All Guarantor Claims	 	46
	 	Section 8.10 Claims in Bankruptcy	 	46
	 	Section 8.11 Payments Held in Trust	 	47
	 	Section 8.12 Liens Subordinate	 	47
	 	Section 8.13 Guarantor's Enforcement Rights	 	47
	

ARTICLE IX THE AGENT	
 	

47
	 	

Section 9.01 Authorization and Action	
 	

47
	 	Section 9.02 Agent's Reliance, Etc	 	47
	 	Section 9.03 The Agent and Its Affiliates	 	48
	 	Section 9.04 Lender Credit Decision	 	48
	 	Section 9.05 Indemnification	 	48
	 	Section 9.06 Successor Agent	 	49
	 	Section 9.07 Collateral Matters.	 	49
	

ARTICLE X MISCELLANEOUS	
 	

50
	 	

Section 10.01 Amendments, Etc	
 	

50
	 	Section 10.02 Notices, Etc	 	50
	 	Section 10.03 No Waiver; Remedies	 	51
	 	Section 10.04 Costs and Expenses	 	51
	 	Section 10.05 Binding Effect	 	51
	 	Section 10.06 Lender Assignments and Participations	 	51
	 	Section 10.07 Indemnification	 	53
	 	Section 10.08 Execution in Counterparts	 	53
	 	Section 10.09 Survival of Representations, Etc	 	53
	 	Section 10.10 Severability	 	53
	 	Section 10.11 Governing Law	 	53
	 	Section 10.12 Submission To Jurisdiction; Waivers	 	54
	 	Section 10.13 Waiver of Jury Trial	 	54
	 	Section 10.14 Oral Agreements	 	54
	 	Section 10.15 Dissemination of Information	 	55
	 	Section 10.16 Production Proceeds	 	55
	 	Section 10.17 Amendment and Restatement	 	55
	 	 	

EXHIBITS	
 	

 
	 	 	

EXHIBIT A Form of Assignment and Acceptance	
 	

 
	 	 	EXHIBIT B Form of Compliance Certificate	 	 




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	 	 	EXHIBIT C [Reserved]	 	 
	 	 	EXHIBIT D [Reserved]	 	 
	 	 	EXHIBIT E Form of Subordinated Note	 	 
	 	 	EXHIBIT F Form of Second Mortgage Amendment	 	 
	 	 	EXHIBIT G Form of Second Pledge Agreement	 	 
	 	 	EXHIBIT H Form of Second Security Agreement	 	 
	 	 	

SCHEDULES	
 	

 
	 	 	

SCHEDULE 1 Notice Information, Commitments	
 	

 
	 	 	SCHEDULE 1.01 Preferred Shareholders	 	 
	 	 	SCHEDULE 4.01 Subsidiaries	 	 
	 	 	SCHEDULE 4.07 Litigation	 	 
	 	 	SCHEDULE 4.10 Title	 	 
	 	 	SCHEDULE 4.14 Gas Contracts	 	 
	 	 	SCHEDULE 4.16 Hedging Agreements	 	 
	 	 	SCHEDULE 4.17 Material Agreements	 	 
	 	 	SCHEDULE 6.01 Permitted Liens	 	 
	 	 	SCHEDULE 6.02 Debt	 	 
	 	 	SCHEDULE 6.02(i) Additional Permitted Debt	 	 
	 	 	SCHEDULE 6.07 Permitted Investments	 	 




iv







 
 

AMENDED AND RESTATED SUBORDINATED CREDIT AGREEMENT    
  


        THIS
AMENDED AND RESTATED SUBORDINATED CREDIT AGREEMENT dated as of March 21, 2003 is among BRIGHAM OIL & GAS, L.P., a Delaware limited partnership (the
"Borrower"), BRIGHAM EXPLORATION COMPANY, a Delaware corporation ("Brigham Exploration"),
BRIGHAM, INC., a Nevada corporation (the "General Partner"), the lenders party hereto from time to time (the
"Lenders"), and THE ROYAL BANK OF SCOTLAND plc, as agent (in such capacity, the "Agent"). 


 
 

INTRODUCTION    
  


        A.    The
Borrower, the lenders party thereto, and The Royal Bank of Scotland plc, as agent, are parties to that certain Subordinated Credit Agreement dated October 31,
2000, as amended on or before the date hereof (the "Existing Subordinated Credit Agreement"). 



        B.    The
Borrower, the Lenders and the Agent desire to refinance the indebtedness and obligations arising under the Existing Subordinated Credit Agreement, and the
indebtedness and liens arising under the Existing Subordinated Credit Agreement shall be assigned to the Agent and the Lenders pursuant hereto, so that all indebtedness and obligations arising
hereunder shall be secured by such liens and security interests as were created pursuant to the Existing Subordinated Credit Agreement and such other liens as provided for herein, and the terms of the
Borrower's financing shall hereafter be amended and restated in its entirety as set forth herein. 


        C.    Reference
is made to that certain Second Amended and Restated Credit Agreement dated as of the date hereof (the "Senior Credit
Agreement") among the Borrower, Brigham Exploration, the General Partner, the lenders party thereto from time to time (the "Senior
Lenders"), Société Générale, as lead arranger (the "Lead Arranger"),
as administrative agent for the Senior Lenders (the "Senior Agent") and as issuing lender for the Senior Lenders (the "Issuing
Lender"), The Royal Bank of Scotland plc, as co-arranger (the "Co-Arranger") and as documentation agent
(the "Documentation Agent"), and Bank of America, N.A., as Syndication Agent (the "Syndication Agent"). 


        D.    Pursuant
to that certain Amended and Restated Intercreditor and Subordination Agreement dated as of the date hereof (the "Intercreditor and
Subordination Agreement") among the Senior Agent, the Agent, the Borrower and the Guarantors, the Subordinated Obligations (as hereinafter defined) are expressly subordinated
to the Senior Obligations (as hereinafter defined). 



        Therefore,
the Borrower, the Guarantors (as defined below), the Lenders and the Agent agree as follows: 


 
 

ARTICLE I    
    
    DEFINITIONS AND ACCOUNTING TERMS    
  


        Section 1.01    Certain Defined Terms.    As used in this Agreement, the terms defined above shall have the
meanings set forth therein and the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the
terms defined): 



        "Acceptable Security Interest" in any Property means a Lien which (a) exists in favor of the Agent for the benefit of the Agent and
the Lenders, (b) is superior to all Liens or rights of any other Person in the Property encumbered thereby, other than Permitted Liens, (c) secures the Subordinated Obligations, and
(d) is perfected and enforceable. 


        "Advance" means any advance hereunder of monies by a Lender to the Borrower as part of a Borrowing. 


        "Advance Payment Contract" means any contract whereby any Person either receives or becomes entitled to receive (either directly or
indirectly through a third party for such Person's 






 





account or benefit) any payment (an "Advance Payment") to be applied toward the payment of the purchase price of Hydrocarbons produced or to be
produced from any Oil and Gas Properties owned by such Person and which Advance Payment is paid or to be paid more than 90 days in advance of actual delivery of such production to or for the
account of the purchaser regardless of such production, and the Advance Payment is, or is to be, applied as payment in full for such production when sold and delivered or is, or is to become applied
as payment for a portion only of the purchase price thereof or for a percentage or a share of such production. 



        "Affiliate" of any Person shall mean (a) any Person directly or indirectly controlled by, controlling or under common control with
such first Person, (b) any director or officer of such first Person or of any Person referred to in clause (a) above and (c) if any Person in clause (a) above is an
individual, any member of the immediate family (including parents, spouse and children) of such individual and any trust whose principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust. For purposes of this definition, any Person which owns directly or indirectly 20% or more of the securities having
ordinary voting power for the election of directors or other governing body of a corporation or 20% or more of the partnership or other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to "control" (including, with its correlative meanings, "controlled by" and "under common control with") such corporation or other Person;  provided,
however, that "Affiliate" shall not include any Affiliates of the Preferred Shareholders or GA
Partners. 


        "Affiliated Fund" means with respect to GA Partners or any Preferred Shareholder, any other fund that is managed or advised by the same
manager, general partner or investment advisor as GA Partners or such Preferred Shareholder or by an Affiliate of such manager, general partner or investment advisor. 


        "Agent" means The Royal Bank of Scotland plc, in its capacity as agent pursuant to Article IX and any successor agent pursuant to
Section 9.06. 


        "Agreement" means this Amended and Restated Subordinated Credit Agreement, as the same may be amended, supplemented, and otherwise
modified from time to time. 


        "Applicable Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Lending Office" opposite its
name on Schedule 1 or such other office of such Lender as such Lender may from time to time specify to the Borrower and the Agent. 


        "Assignment and Acceptance" means an assignment and acceptance entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of the attached Exhibit A. 


        "Borrower" has the meaning given thereto in the Preamble. 


        "Borrowing" means a borrowing of Advances renewed and extended by each Lender pursuant to Section 2.01. 


        "Borrowing Base" has the meaning assigned to it now and from time to time hereafter in the Senior Credit Agreement. 



        "Brigham Exploration" has the meaning given thereto in the Preamble. 


        "Business Day" means a day of the year on which banks are not required or authorized to close in New York, New York. 


        "Capital Leases" means, as applied to any Person, any lease of any Property by such Person as lessee which would, in accordance with GAAP,
be required to be classified and accounted for as a capital lease on the balance sheet of such Person. 



2





 




        "Capital Stock" means any and all shares, interest, participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interest in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. 



        "Cash Equivalents" means (a) 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 or less from the date of creation thereof, (b) commercial paper maturing within one year from the date of creation thereof
rated in the highest grade by Standard and Poor's Ratings Group ("S&P") and by Moody's Investors Service, Inc.
("Moody's"), (c) 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, Canada or England or any other bank or trust company which is organized under the laws of the United States, Canada or England or any state or
province thereof, has capital, surplus and undivided profits aggregating at least $100,000,000.00 (as of the date of such Lender's or bank or trust company's most recent financial reports) and has a
short term deposit rating of not lower than A2 or P2, as such rating is set forth from time to time by S&P or Moody's, respectively, and (d) deposits in money market funds investing exclusively
in investments described in clauses (a) through (c) of this definition. 


        "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, state and local analogs, and
all rules and regulations and requirements thereunder in each case as now or hereafter in effect. 



        "Change of Control" means any of the following: (a) any acquisition pursuant to which any Person or group (as defined in
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than the Preferred Shareholders) has become the direct or indirect beneficial owner (as defined in Rule 13d-3 under
the Exchange Act) of more than 35% of the Voting Stock of Brigham Exploration; (b) any transaction or acquisition pursuant to which any one or more of the Preferred Shareholders have become
(whether pursuant to any Preferred Shareholder Transaction or otherwise) the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 47%
of the Voting Stock of Brigham Exploration; (c) Brigham Exploration is merged with or into or consolidated with another Person except as otherwise permitted by Section 6.04;
(d) Brigham Exploration, either individually or in conjunction with one or more of its Subsidiaries, sells, conveys, transfers or leases, or its Subsidiaries sell, convey, transfer or lease,
all or substantially all of the assets of Brigham Exploration and its Subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of its
Subsidiaries, to any Person except as otherwise permitted by Section 6.04; (e) the first day on which a majority of the individuals who constitute the Board of Directors of Brigham
Exploration are not Continuing Directors or (f) Brigham Exploration shall cease to own, directly or indirectly, 100% of the Capital Stock of the Borrower. 



        "Closing Date" means the date on which the conditions set forth in Section 3.01 are satisfied, which date shall not be later than
March 31, 2003. 


        "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute. 


        "Collateral" means Property of the Credit Parties, now owned or hereafter acquired, that is subject to any Lien in favor of the Agent, or
the Lenders, to secure, directly or indirectly, the Subordinated Obligations. 


        "Commitment" means, for any Lender, the amount set opposite such Lender's name on  Schedule 1 as its "Commitment", or if such Lender has entered into any Assignment
and Acceptance, as set forth for such Lender as its Commitment
in the Register maintained by the Agent pursuant to Section 10.06(c), as such amount may be reduced or terminated pursuant to 



3





 





Section 2.04 or Article VII or otherwise under this Agreement. The original aggregate amount of the Commitments is $20,000,000 (plus an amount equal to $3,000,000 to reflect any
interest paid in kind pursuant to Section 2.09(a)). 


        "Compliance Certificate" means a compliance certificate in the form of the attached  Exhibit B signed by a Responsible Officer of Brigham Exploration. 


        "Consolidated Net Income" means, with respect to Brigham Exploration and its consolidated Subsidiaries, for any period, the aggregate of
the net income (or loss) of Brigham Exploration and its consolidated Subsidiaries after allowances for taxes for such period as determined on a consolidated basis in accordance with GAAP;  provided that
there shall be excluded from the calculation of such net income (to the extent otherwise included therein) the following: (a) the
net income of any Person in which Brigham Exploration 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 Brigham Exploration and its consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in such period by such other
Person to Brigham Exploration or to a consolidated Subsidiary, as the case may be; (b) the net income (but not loss) of any consolidated Subsidiary to the extent 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 Legal
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 gains or losses, including gains or losses
attributable to Property sales not in the ordinary course of business; and (e) the cumulative effect of a change in accounting principles and any gains or losses attributable to writeups or
writedowns of assets. 


        "Continuing Director" means an individual who (a) is a member of the full Board of Directors of Brigham Exploration and
(b) either (i) was a member of the Board of Directors of Brigham Exploration on the Closing Date or (ii) whose nomination for election or election to the Board of Directors of
Brigham Exploration was approved by vote of at least two-thirds of the directors then still in office who were either directors on the Closing Date or whose election or nomination for
election was previously so approved. 


        "Controlled Group" means all members of a controlled group of corporations and all businesses (whether or not incorporated) under common
control which, together with the Borrower, are treated as a single employer under Section 414 of the Code. 


        "Credit Parties" means the Borrower and the Guarantors. 


        "Debt" means, for any Person, without duplication: 



        (a)  indebtedness
of such Person for borrowed money; 


        (b)  obligations
of such Person evidenced by bonds, debentures, notes or other similar instruments; 


        (c)  obligations
of such Person (whether contingent or otherwise) in respect to letters of credit, bankers' acceptances, surety or other bonds and similar instruments, and
agreements relating to the issuance of letters of credit or acceptance financing; 


        (d)  obligations
of such Person to pay the deferred purchase price of Property or services (other than current trade liabilities incurred in the ordinary course of business
and payable in accordance with customary practices and accrued current liabilities incurred in the ordinary course of business); 




4





 





        (e)  all
obligations of such Person under Capital Leases; 


        (f)    all
indebtedness created or arising under any conditional-sale or other title-retention agreement with respect to Property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property); 


        (g)  obligations
of such Person under any Interest Hedge Agreement or Hydrocarbon Hedge Agreement; 


        (h)  obligations
of such Person under any Advance Payment Contract; 


        (i)    obligations
of such Person owing in respect of redeemable preferred stock of such Person; 


        (j)    any
obligations in connection with any volumetric or production payments; 


        (k)  obligations
of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (j) above; and 



        (l)    indebtedness
or obligations of others of the kinds referred to in clauses (a) through (k) above secured by any Lien on or in respect of any Property of
such Person. 




        "Default" means (a) an Event of Default or (b) any event or condition which with notice or lapse of time or both would
become an Event of Default. 


        "Dollars" and "$" means lawful money of the United States of America. 



        "EBITDA" means, without duplication, for Brigham Exploration and its consolidated Subsidiaries for any period, (a) Consolidated Net
Income for such period plus (b) to the extent deducted in determining Consolidated Net Income for such period, Interest Expense, taxes, depreciation, depletion, amortization and other
non-cash charges for such period, minus (c) to the extent added in determining Consolidated Net Income for such period, all non-cash income during such period, in each
case determined in accordance with GAAP and without duplication of amounts. 


        "Eligible Assignee" means (a) any Lender or any Affiliate of any Lender and (b) any commercial bank or other financial
institution approved by (i) the Agent in its reasonable discretion and (ii) provided that no Default or Event of Default has occurred and
is continuing, the Borrower (which consent shall not be unreasonably withheld or delayed). 


        "Engineering Report" means any "Engineering Report" as such term is defined in the Senior Credit Agreement. 


        "Environment" or "Environmental" shall have the meanings set forth in 43 U.S.C. 9601(8)
(1988). 


        "Environmental Claim" means any third party (including governmental agencies and employees) action, lawsuit, claim, demand, regulatory
action or proceeding, order, decree, consent agreement or notice of potential or actual responsibility or violation (including claims or proceedings under the Occupational Safety and Health Acts or
similar laws or requirements relating to health or safety of employees) which seeks to impose liability under any Environmental Law. 


        "Environmental Law" means, as to any Credit Party, all Legal Requirements or common law theories applicable to any Credit Party arising
from, relating to, or in connection with the 



5





 





Environment, including without limitation CERCLA, relating to (a) pollution, contamination, injury, destruction, loss, protection, cleanup, reclamation or restoration of the air, surface
water, groundwater,
land surface or subsurface strata, or other natural resources; (b) solid, gaseous or liquid waste generation, treatment, processing, recycling, reclamation, cleanup, storage, disposal or
transportation; (c) exposure to pollutants, contaminants, hazardous, medical infections, or toxic substances, materials or wastes; or (d) the manufacture, processing, handling,
transportation, distribution in commerce, use, storage or disposal of hazardous or toxic substances, materials or wastes. 


        "Environmental Permit" means any permit, license, order, approval, registration or other authorization under Environmental Law. 


        "Equity Interest" means with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of
corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person. 



        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 


        "Event of Default" has the meaning specified in Section 7.01. 


        "Excepted Liens" means (a) Liens for taxes, assessments or other governmental charges or levies not yet due 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 workmen's compensation, unemployment
insurance or other social security, old age pension or public liability obligations not yet due or which are being contested in good faith by appropriate action and for which adequate reserves have
been maintained in accordance with GAAP; (c) operators', vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction or other like Liens arising in the
ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties or customary landlord's liens, each of which is in respect of obligations
that have not been outstanding more than 90 days or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with
GAAP; (d) any Liens reserved in leases, farmout agreements, exploration agreements, operating agreements or participation agreements for rent or royalties and for compliance with the terms of
such agreements or leases in the case of leasehold estates, to the extent 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 or materially impair the value of such Property subject thereto; (e) encumbrances (other than to secure the payment of borrowed money or the deferred
purchase price of Property or services), easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any rights of way or other Property 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, and defects, irregularities, zoning restrictions and deficiencies in the title of any rights of way or other Property which in the aggregate do
not materially impair the use of such rights of way or other Property for the purposes of which such rights of way and other Property are held or materially impair the value of such Property subject
thereto; (f) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature
incurred in the ordinary course of business; and (g) minor defects in the chain of title to the Oil and Gas Properties that are customarily accepted in the oil and gas industry;  provided that none
of such defects interfere with the ordinary conduct of the business of any of the Credit Parties or materially detract from the value
or use of the Property to which such defects apply. 



6





 




        "Exchange Act" means the Securities Exchange Act of 1934, as amended. 


        "Existing Second Mortgages" means the collective reference to every Second Mortgage, Deed of Trust, Assignment of Production, Second
Security Agreement and Financing Statement from the Borrower to the Trustee named therein and Bank of Montreal (or any successor thereto), covering the assets of the Borrower located in the
continental United States, as amended prior to the Closing Date. 


        "Existing Subordinated Credit Agreement" has the meaning given thereto in the Recitals. 


        "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for any such
day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. 


        "Federal Reserve Board" means the Board of Governors of the Federal Reserve System or any of its successors. 


        "Financial Statements" means the audited consolidated balance sheet of Brigham Exploration and its consolidated Subsidiaries as at
December 31, 2002 and the related consolidated statement of income, stockholders' equity and cash flow of Brigham Exploration and its consolidated Subsidiaries for the fiscal year ended on such
date. 


        "Fixed Rate" has the meaning given thereto in Section 2.09(a) 


        "GA Partners" means General Atlantic Partners III, L.P., together with its successors, assigns and transferees of its shares of Capital
Stock of Brigham Exploration that are an Affiliated Fund of GA Partners. 



        "GAAP" means United States generally accepted accounting principles as in effect from time to time, applied on a basis consistent with the
requirements of Section 1.03. 


        "General Partner" has the meaning given thereto in the Preamble. 


        "Governmental Authority" means, as to any Person in connection with any subject, any foreign, national, state or provincial governmental
authority, or any political subdivision of any state thereof, or any agency, department, commission, board, authority or instrumentality, bureau or court, in each case having jurisdiction over such
Person or such Person's Property in connection with such subject. 


        "Guarantor" means Brigham Exploration, the General Partner, and each Subsidiary of the Borrower. 


        "Hazardous Substance" means the substances identified as such pursuant to CERCLA and those regulated under any other Environmental Law,
including without limitation pollutants, contaminants, petroleum, petroleum products, radionuclides, radioactive materials, and medical and infectious waste. 



        "Hazardous Waste" means the substances regulated as such pursuant to any Environmental Law. 


        "Hydrocarbon Hedge Agreement" means a swap, collar, floor, cap, option, forward sale or purchase or other contract (excluding sales
contracts with fixed or floating prices for Hydrocarbons sold) that is intended to reduce or eliminate the risk of fluctuations in the price of Hydrocarbons. 



7





 




        "Hydrocarbon Interests" means (a) all oil and gas and/or oil, gas and mineral leases and leasehold interests, fee mineral
interests, term mineral interests, subleases, farmouts, royalties, overriding royalties, net profits interests, production payments and similar interests or estates including any reversionary or
carried interests relating to any of the foregoing and interests under any exploration agreements, operating agreements and participation agreements, and (b) all production units and drilling
and spacing units (and the Properties covered thereby) which may affect all or any portion of such interests including those units and any units created by agreement or designation or under orders,
regulations, rules or other official acts of any Federal, state or other governmental body or agency having jurisdiction. 


        "Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, and all other
liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith from a well bore and all products, by-products, and other substances derived therefrom or the processing
thereof, and all other minerals and substances produced in conjunction with such substances, including, but not limited to, sulfur, geothermal steam, water, carbon dioxide, helium, and any and all
minerals, ores, or substances of value and the products and proceeds therefrom. 



        "Independent Engineer" means Cawley, Gillespie & Associates or any other engineering firm reasonably acceptable to either the Agent
or the Majority Lenders. 


        "Intercreditor and Subordination Agreement" has the meaning given thereto in the Recitals. 


        "Interest Coverage Ratio" means, for Brigham Exploration and its consolidated Subsidiaries, as of the end of any fiscal quarter, the ratio
of (a) EBITDA calculated for the four fiscal quarters then ended, to (b) Interest Expense for such period. 



        "Interest Expense" means, for Brigham Exploration and its consolidated Subsidiaries for any period, total interest, letter of credit fees,
and other fees and expenses incurred in connection with any Debt for such period, whether paid or accrued, including, without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net costs under Interest Hedge Agreements and Hydrocarbon Hedge Agreements, all as determined in conformity with GAAP. 


        "Interest Hedge Agreement" means an interest hedge, rate swap, cap or collar, or similar arrangement between the Borrower and one or more
financial institutions providing for the exchange of nominal interest obligations between the Borrower and such financial institution. 


        "Interest Payment Date" has the meaning given thereto in Section 2.09(a). 



8











  




        "Investment" means any investment, made directly or indirectly, in any Person, whether by acquisition of Equity Interests, indebtedness or
other obligations or securities or by loan, advance, capital contribution or otherwise. 



        "Legal Requirement" means, as to any Person, any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or
official interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, including, but not limited to, Regulations D, T, U, and X, which is
applicable to such Person. 


        "Lenders" has the meaning given thereto in the Preamble. 


        "Lien" means any mortgage, lien, pledge, assignment, charge, deed of trust, security interest, hypothecation, preference, deposit
arrangement or encumbrance (or other type of arrangement having the practical effect of the foregoing) to secure or provide for the payment of any obligation of any Person, whether arising by
contract, operation of law, or otherwise (including, without limitation, the interest of a vendor or lessor under any conditional sale agreement, synthetic lease, Capital Lease, or other title
retention agreement). 


        "Limited Partners" means Brigham Holdings I, LLC, a Nevada limited liability company, and Brigham Holdings II, LLC, a Nevada limited
liability company. 


        "Majority Lenders" means, at any time, the Agent and Lenders holding at least 75% of the then aggregate unpaid principal amount of the
Subordinated Notes held by the Lenders. 


        "Material Adverse Change" means (a) a material adverse change in the business, Property (including the Oil and Gas Properties),
assets, liabilities, conditions (financial or otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole, (b) a material adverse effect on any Credit Party's ability to
perform its obligations under this Agreement, any Subordinated Note, or any other Subordinated Loan Document and (c) a material adverse effect on the validity or enforceability against any
Credit Party of any of the Subordinated Loan Documents or the rights or remedies of the Agent or the Lenders thereunder. 


        "Maturity Date" means October 31, 2005. 


        "Maximum Rate" means the maximum nonusurious interest rate under applicable law (determined under such laws after giving effect to any
items which are required by such laws to be construed as interest in making such determination, including without limitation if required by such laws, certain fees and other costs). 



        "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. 


        "Oil and Gas Properties" means (a) all Hydrocarbon Interests; (b) all operating agreements, contracts and other 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; (c) all
Hydrocarbons in and under and which may be produced, saved, processed or attributable to the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; (d) all accounts (including accounts resulting from the sale of Hydrocarbons at the
wellhead), contract rights and general intangibles, including all accounts, contract rights and general intangibles now or hereafter arising regardless of whether any of the foregoing is in connection
with the sale or other disposition of any Hydrocarbons or otherwise, including all Liens securing the same; (e) all Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or hereafter acquired, used or held for use in connection with the operating, working or development of any of such Hydrocarbon
Interests or Property and including any and all oil wells, 



9





 





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, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, and similar equipment;
and (f) all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. 


        "Partners" means the General Partner and the Limited Partners. 


        "Partnership Agreement" means the Agreement of Limited Partnership of the Borrower among the Partners dated as of December 30,
1997, as heretofore or hereafter amended, supplemented or restated from time to time. 


        "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 



        "Permit" means any approval, certificate of occupancy, consent, waiver, exemption, variance, franchise, order, permit, authorization,
right or license of or from any Governmental Authority, including without limitation, an Environmental Permit. 


        "Permitted Liens" has the meaning given in Section 6.01. 


        "Person" means an individual, partnership, corporation (including a business trust), joint stock company, limited liability corporation or
company, limited liability partnership, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof or any trustee, receiver,
custodian or similar official. 


        "Plan" means an employee benefit plan (other than a Multiemployer Plan) maintained for employees of the Borrower or any member of the
Controlled Group and covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code. 


        "Preferred Shareholders" means each of the Persons listed on Schedule 1.01 who hold
preferred shares in Brigham Exploration (or common shares in Brigham Exploration following consummation of Preferred Shareholder Transactions), together with its successors, assigns and transferees of
its shares of Capital Stock of Brigham Exploration that are Affiliated Funds of such Preferred Shareholders. 


        "Preferred Shareholder Transaction" means any transaction in which any of the Preferred Shareholders exercises (whether voluntarily or as
required by Brigham Exploration) its warrants to purchase common stock issued by Brigham Exploration pursuant to the terms of such warrants or the applicable certificate of designations of Brigham
Exploration. 


        "Property" of any Person means any property or assets (whether real, personal, or mixed, tangible or intangible) of such Person. 


        "Pro Rata Share" means, with respect to any Lender, either (a) the ratio (expressed as a percentage) of such Lender's Commitment at
such time to the aggregate Commitments at such time or (b) if the Commitments have been terminated, the ratio (expressed as a percentage) of such Lender's aggregate outstanding Advances at such
time to the aggregate outstanding Advances of all the Lenders at such time. 


        "Proven Reserves" means, at any particular time, the estimated quantities of Hydrocarbons which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs attributable to Oil and Gas Properties under then existing economic and operating conditions (i.e., prices and costs as of the date the estimate is made). 


        "Register" has the meaning set forth in of Section 10.06(c). 



10





 




        "Regulations D, T, U, and X" mean Regulations D, T, U, and X of the Federal Reserve Board, as the same are from time to time in effect,
and all official rulings and interpretations thereunder or thereof. 


        "Release" shall have the meaning set forth in CERCLA or under any other Environmental Law. 



        "Response" shall have the meaning set forth in CERCLA or under any other Environmental Law. 


        "Responsible Officer" means (a) with respect to any Person that is a corporation, such Person's Chief Executive Officer, President,
Executive Vice President, Chief Financial Officer, or Vice President-Controller, (b) with respect to any Person that is a limited liability company, a manager (or such Person's Chief Executive
Officer, President, Executive Vice President, Chief Financial Officer, or Vice President-Controller, if any) or the Responsible Officer of such Person's managing member or manager, and (c) with
respect to any Person that is a general partnership or a limited liability partnership, the Responsible Officer of such Person's general partner or partners. 


        "Restricted Payment" means, with respect to any Person, any direct or indirect dividend or distribution (whether in cash, securities or
other property) or any direct or indirect payment of any kind or character (whether in cash, securities or other property) in consideration for or otherwise in connection with any retirement,
purchase, redemption or other acquisition of any Equity Interest of such Person, or any options, warrants or rights to purchase or acquire any such Equity Interest of such Person;  provided that the term
"Restricted Payment" shall not include any dividend or distribution payable solely in Equity Interests of Brigham Exploration or
warrants, options or other rights to purchase such Equity Interests. 


        "SEC "means the U.S. Securities and Exchange Commission. 


        "Second Mortgage" means each Second Mortgage Amendment or any other mortgage or deed of trust executed by any one or more of the Borrower
and its Subsidiaries in favor of the Agent for the ratable benefit of the Agent and the Lenders, as the same may be amended, modified, restated or
supplemented from time to time and "Second Mortgages" shall mean all of such Second Mortgage Amendments, mortgages and deeds of trust collectively. 



        "Second Mortgage Amendment" means each of the amended and restated mortgages or deeds of trust to be entered into on or before the Closing
Date to amend and restate in their entirety the Existing Second Mortgages, in substantially the form of the attached Exhibit F. 


        "Second Pledge Agreements" means each of the Amended and Restated Second Pledge Agreements substantially in the form of  Exhibit G, executed by each of Brigham
Exploration, the General Partner and the Borrower, as the same may be amended, modified, restated or
supplemented from time to time. 


        "Second Security Agreements" means each of the Amended and Restated Second Security Agreements, in substantially the form of the attached  Exhibit H, executed by
each of the Borrower and its Subsidiaries, as the same may be amended, modified, or supplemented from time to time. 


        "Senior Credit Agreement" has the meaning given thereto in the Recitals. 


        "Senior Agent" has the meaning given thereto in the Recitals. 


        "Senior Lenders" has the meaning given thereto in the Recitals. 


        "Senior Loan Documents" means the Senior Credit Agreement, the notes executed and delivered pursuant to agreements, instruments or
documents executed at any time in connection with securing the Senior Obligations, and each other agreement, instrument, or document executed 



11





 





by any Credit Party or any of their officers at any time in connection with the Senior Credit Agreement. 


        "Senior Obligations" means the "Obligations" as defined in the Senior Credit Agreement. 


        "Side Letter Agreement" means the letter agreement dated as of the Closing Date among the Borrower, the Guarantors, the Senior Agent and
the Agent. 


        "Significant PUD Location" means a particular drilling location or proven, undeveloped reserve prospect identified or designated as "PUD"
or "proven undeveloped" reserves in the applicable Engineering Report, that has been assigned a discounted present value equal to or in excess of $2,000,000.00 in such Engineering Report. 


        "Solvent" means, with respect to any Person as of the date of any determination, that on such date (a) the fair value of the
Property of such Person (both at fair valuation and at present fair saleable value) is greater than the total liabilities, including contingent liabilities, of such Person, (b) the present fair
saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured,
(c) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations, and other commitments as they mature in the normal course of business,
(d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (e) such
Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving
due consideration to current and anticipated future capital requirements and current and anticipated future business conduct and the prevailing practice in the industry in which such Person is
engaged. In computing the amount of contingent liabilities at any time, such liabilities shall be computed at the amount that, in light of the facts and circumstances existing at such time, represents
the amount that can reasonably be expected to become an actual or matured liability. 


        "Subordinated Loan Documents" means this Agreement, the Subordinated Notes, the Subordinated Security Instruments, the Intercreditor and
Subordination Agreement, the Side Letter Agreement and each other agreement, instrument, or document executed by any Credit Party or any of their officers at any time in connection with this
Agreement. 


        "Subordinated Note" means a promissory note of the Borrower payable to the order of any Lender, in substantially the form of the attached  Exhibit E, evidencing
indebtedness of the Borrower to such Lender resulting from Advances owing to such Lender. 


        "Subordinated Obligations" means all principal, interest, fees, reimbursements, indemnifications, and other amounts payable by any Credit
Party to the Agent or the Lenders under the Subordinated Loan Documents. 


        "Subordinated Security Instruments" means, collectively, (a) the Second Mortgages, (b) the Second Pledge Agreements,
(c) the Second Security Agreements, (d) each other agreement, instrument or document executed at any time in connection with the Second Pledge Agreements, the Second Security Agreements
and the Second Mortgages, and (e) each other agreement, instrument or document executed at any time in connection with securing the Subordinated Obligations. 


        "Subsidiary" of a Person means any corporation or other entity of which more than 50% of the outstanding Equity Interests having ordinary
voting power under ordinary circumstances to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether at such time Equity
Interests of any other class or classes of such corporation or other entity shall or might have voting power upon the occurrence of any 



12





 





contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more Subsidiaries of such Person or by one or more Subsidiaries of such Person. Unless
otherwise indicated herein, each reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower. 



        "Termination Event" means (a) a Reportable Event described in Section 4043 of ERISA and the regulations issued thereunder
(other than a Reportable Event not subject to the provision for 30-day notice to the PBGC under such regulations), (b) the withdrawal of the Borrower or any of its Affiliates from a
Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or (e) any other event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. 



        "Voting Stock" means, with respect to any Person, securities of any class or classes of Capital Stock or other interests (including
partnership interests) in such Person entitling the holders thereof (whether at all times or at the time that such class of Capital Stock) has voting power by reason of the happening of any
contingency to vote in the election of members of the board of directors or comparable body of such Person. 




        Section 1.02    Computation of Time Periods.    In this Agreement, with respect to the computation of periods
of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". 


        Section 1.03    Accounting Terms; Changes in GAAP.    Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless
otherwise disclosed to the Lenders in writing at the time of delivery thereof) be prepared, in accordance with GAAP applied on a basis consistent with those used in the preparation of the Financial
Statements. In addition, all calculations and defined accounting terms used herein shall, unless expressly provided otherwise, when referring to any Person, refer to such Person on a consolidated
basis and mean such Person and its consolidated subsidiaries. 


        Section 1.04    Miscellaneous.    Article, Section, Schedule, and Exhibit references are to Articles and
Sections of and Schedules and Exhibits to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents,
contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The words "hereof", "herein", and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term "including" means "including, without limitation,".
Paragraph headings have been inserted in this Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Agreement and shall not be
used in the interpretation of any provision of this Agreement. All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Pronouns in masculine, feminine and neuter
genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. 


13





 


 
 

ARTICLE II    
    
    CREDIT FACILITIES    
  


        Section 2.01    Advances.    



        (a)  Each
Lender severally agrees, on the terms and conditions set forth in this Agreement (i) to renew and extend the Advance outstanding under the Existing
Subordinated Credit Agreement on the Closing Date in a ratable amount for each Lender not to exceed such Lender's Commitment and (ii) to make Advances of the amounts of interest paid in kind
pursuant to Section 2.09(a), the aggregate of which amounts shall not exceed such Lender's Pro Rata Share of $3,000,000. Principal payments made after the Closing Date may not be reborrowed. 


        (b)    Subordinated Notes.    The indebtedness of the Borrower to each Lender resulting from the Advances owing to
such Lender shall be evidenced by a Subordinated Note of the Borrower payable to the order of such Lender in an amount equal to such Lender's Commitment plus such Lender's Pro Rata Share of $3,000,000
(to accommodate deemed Advances through payment in kind pursuant to Section 2.09(a)). 


        (c)    Agent Reliance.    Unless the Agent shall have received notice from a Lender before the date of any Borrowing
that such Lender shall not make available to the Agent such Lender's Pro Rata Share of a Borrowing, the Agent may assume that such Lender has made its Pro Rata Share of such Borrowing available to the
Agent on the date of such Borrowing in accordance with this Agreement and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to
the extent that such Lender shall not have so made its Pro Rata Share
of such Borrowing available to the Agent, such Lender and the Borrower severally agree to immediately repay to the Agent on demand such corresponding amount, together with interest on such amount, for
each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable on such
day to Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate for such day. If such Lender shall repay to the Agent such corresponding amount and
interest as provided above, such corresponding amount so repaid shall constitute such Lender's Advance as part of such Borrowing for purposes of this Agreement even though not made on the same day as
the other Advances comprising such Borrowing. 


        (d)    Lender Obligations Several.    The failure of any Lender to make the Advance to be made by it as part of any
Borrowing shall not relieve any other Lender of its obligation, if any, to make its Advance on the date of such Borrowing. No Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing. 


        Section 2.02    Intentionally Omitted.    


        Section 2.03    Intentionally Omitted.    


        Section 2.04    Reduction of the Commitments.    


        (a)  The
Borrower shall have the right, upon at least five Business Days' irrevocable notice to the Agent, to terminate in whole or reduce ratably in part the unused portion
of the Commitments; provided that each partial reduction shall be in the aggregate amount of $1,000,000 or in integral multiples of $1,000,000 in excess
thereof. 


        (b)  Any
reduction and termination of the Commitments pursuant to this Section 2.04 shall be applied ratably to each Lender's Commitment and shall be permanent, with
no obligation of the Lenders to reinstate such Commitments. 


14





 



        Section 2.05    Prepayment of Advances.    


        (a)    Optional.    The Borrower may prepay the Advances, without premium or penalty, after giving, by
12:00 p.m. (New York time) on the same Business Day, irrevocable prior written notice to the Agent
stating the proposed date and aggregate principal amount of such prepayment. If any such notice is given, the Borrower shall prepay the Advances in an aggregate principal amount equal to the amount
specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided that each partial
prepayment shall be made in an amount not less than $1,000,000 and in integral multiples of $500,000 in excess thereof (or the remaining aggregate principal balance outstanding). Full prepayments of
the Subordinated Obligations are permitted without restriction of amounts. Notwithstanding the foregoing, no prepayment of the Subordinated Obligations that is inconsistent with the rights and
obligations of the Senior Agent and the Senior Lenders under the Intercreditor and Subordinate Agreement shall be permitted. 


        (b)    Reduction of Commitments.    On the date of each reduction of the aggregate Commitments pursuant to
Section 2.04, the Borrower agrees to make a prepayment in respect of the outstanding amount of the Advances to the extent, if any, that the aggregate unpaid principal amount of all Advances
exceeds the aggregate Commitments, as so reduced. Each prepayment pursuant to this Section 2.05(b) shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment.
Each prepayment under this Section 2.05(b) shall be applied to the Advances as provided in Section 2.10(a). 


        (c)    No Additional Right.    The Borrower shall have no right to prepay any principal amount of any Advance except
as provided in this Section 2.05, and all notices given pursuant to this Section 2.05 shall be irrevocable and binding upon the Borrower. 



        Section 2.06    Repayment of Advances.    The Borrower shall repay to the Agent for the ratable benefit of the
Lenders the outstanding principal amount of each Advance, together with any accrued interest on the Maturity Date or such earlier date pursuant to Section 7.02 or Section 7.03. 


        Section 2.07    Intentionally Omitted.    


        Section 2.08    Intentionally Omitted.    


        Section 2.09    Interest.    


        (a)  The
Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of such Advance until such principal amount shall be
paid in full, at a rate per annum equal at all times to 10.75% (the "Fixed Rate"), payable quarterly in arrears on the last day of each January, April,
July and October, beginning April 30, 2003 (each an "Interest Payment Date") and on the Maturity Date,  provided that upon the occurrence and
continuance of an Event of Default, such Advances shall bear interest from the date on which such Event of Default
occurred until such Event of Default has been cured or waived, payable on demand, at a rate per annum equal at all times to the Fixed Rate plus 2.00%. On any Interest Payment Date occurring on or
before October 2004, the Borrower shall have the absolute right to pay 50% of all accrued interest on the Advances in kind,
instead of in cash. In the event any accrued interest due on any particular Interest Payment Date is paid in kind, it shall be deemed an advance of principal under the Subordinated Notes and, as of
the Interest Payment Date, shall be added to the outstanding principal balance of the Subordinated Notes (notwithstanding that the outstanding principal balance may exceed, in the aggregate, the face
amount of the Subordinated Notes). In order to exercise its option to pay interest in kind under this Section 2.09(a), the Borrower shall, on or at any time before the applicable Interest
Payment Date, deliver written notice to the Agent, executed by a Responsible Officer of the Borrower, specifying its election to pay interest in kind. Should the Borrower fail to deliver such written
notice in a timely fashion, the Borrower shall be deemed to have irrevocably elected to make payment of such accrued 


15





 




interest in cash. In the event that the Borrower elects to pay interest in kind, such interest shall be calculated at the Fixed Rate. 


        (b)    Usury Recapture.    



          (i)  If,
with respect to any Lender, the effective rate of interest contracted for under the Subordinated Loan Documents, including the stated rates of interest and fees
contracted for hereunder and any other amounts contracted for under the Subordinated Loan Documents which are deemed to be interest, at any time exceeds the Maximum Rate, then the outstanding
principal amount of the loans made by such Lender hereunder shall bear interest at a rate which would make the effective rate of interest for such Lender under the Subordinated Loan Documents equal
the Maximum Rate until the difference between the amounts which would have been due at the stated rates and the amounts which were due at the Maximum Rate (the "Lost
Interest") has been recaptured by such Lender. 


        (ii)  If,
when the loans made hereunder are repaid in full, the Lost Interest has not been fully recaptured by such Lender pursuant to the preceding paragraph (i),
then, to the extent permitted by law, for the loans made hereunder by such Lender the interest rates charged under this Section 2.09 shall be retroactively increased such that the effective
rate of interest under the Subordinated Loan Documents was at the Maximum Rate since the effectiveness of this Agreement to the extent necessary to recapture the Lost Interest not recaptured pursuant
to the preceding sentence and, to the extent allowed by law, the Borrower shall pay to such Lender the amount of the Lost Interest remaining to be recaptured by such Lender. 



        (iii)  NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS AGREEMENT AND THE SUBORDINATED LOAN DOCUMENTS TO THE CONTRARY, IT IS THE INTENTION OF
EACH LENDER AND THE BORROWER TO CONFORM STRICTLY TO ANY APPLICABLE USURY LAWS. ACCORDINGLY, IF ANY LENDER CONTRACTS FOR, CHARGES, OR RECEIVES ANY CONSIDERATION WHICH CONSTITUTES INTEREST IN EXCESS OF
THE MAXIMUM RATE, THEN ANY SUCH EXCESS SHALL BE CANCELED AUTOMATICALLY AND, IF PREVIOUSLY PAID, SHALL AT SUCH LENDER'S OPTION BE APPLIED TO THE OUTSTANDING AMOUNT OF THE ADVANCES MADE HEREUNDER BY
SUCH LENDER OR BE REFUNDED TO THE BORROWER.




        Section 2.10    Payments and Computations.    



        (a)    Payment Procedures.    The Borrower shall make each payment under this Agreement and under the Subordinated
Notes not later than 12:00 p.m. (New York time) on the day when due in Dollars to the Agent at the location referred to in the Subordinated Notes (or such other location as the Agent shall
designate in writing to the Borrower) in same day funds without deduction, setoff, or counterclaim of any kind. The Agent shall promptly thereafter cause to be distributed like funds relating to the
payment of principal, interest or fees ratably (other than amounts payable solely to the Agent or a specific Lender pursuant to Section 2.13, Section 2.14, Section 9.05 or
Section 10.07, but after taking into account payments effected pursuant to Section 10.04) in accordance with each Lender's Pro Rata Share to the Lenders for the account of their
respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to
be applied in accordance with the terms of this Agreement. 


        (b)    Computations.    All computations of interest based on the Fixed Rate and of fees shall be made by the Agent on
the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Federal Funds Rate shall be made by the Agent, on the basis of a year of
360 days, in each case for the actual number of days (including the first day, but excluding the last day) 


16





 




occurring in the period for which such interest or fees are payable. Each determination by the Agent of an interest rate or fee shall be conclusive and binding for all purposes, absent manifest
error. 


        (c)    Non-Business-Day Payments.    Whenever any payment shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees,
as the case may be. 


        (d)    Agent Reliance.    Unless the Agent shall have received written notice from the Borrower prior to the date on
which any payment is due to the Lenders that the Borrower shall not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such date an amount equal to the amount then due such Lender. If and to the extent the Borrower shall not have so
made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender, together with interest, for each day from the date such amount
is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate for such day. 


        Section 2.11    Sharing of Payments, Etc.    If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set off, or otherwise) on account of the Advances made by it in excess of its Pro Rata Share of payments on account of the Advances obtained by all
the Lenders, such Lender shall notify the Agent and forthwith purchase from the other Lenders such
participations in the Advances made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them;  provided that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be
rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such Lender's ratable share (according to the proportion of (a) the amount of the
participation sold by such Lender to the purchasing Lender as a result of such excess payment to (b) the total amount of such excess payment) of such recovery, together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to the purchasing Lender to (ii) the total amount of all such required
repayments to the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.11 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set off)
with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. 



        Section 2.12    Intentionally Omitted.    


        Section 2.13    Increased Costs.    If any Lender determines in good faith that compliance with any law or
regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law) affects or would affect the amount of capital required or expected
to be maintained by such Lender or any corporation controlling such Lender and that the amount of such capital is increased by or based upon the existence of such Lender's commitment to lend and other
commitments of this type, then, upon 30 days' prior written notice by such Lender (with a copy of any such demand to the Agent), the Borrower shall immediately pay to the Agent for the account
of such Lender from time to time as specified by such Lender additional amounts sufficient to compensate such Lender for the reduced rate of return on that capital of such Lender, in light of such
circumstances, to the extent that such Lender reasonably determines such increase in capital to be allocable to the existence of such Lender's commitment to lend under this Agreement. A certificate as
to such amounts and detailing the calculation of such amounts submitted to the Borrower by such Lender shall be conclusive and binding for all purposes, absent manifest error. 


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        Section 2.14    Taxes.    


        (a)    No Deduction for Certain Taxes.    Any and all payments by the Borrower shall be made, in accordance with
Section 2.10, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes imposed on its net income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender or the Agent (as the
case may be) is organized or any political subdivision of the jurisdiction (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes") and, in the case of each Lender, Taxes by the jurisdiction of such Lender's Applicable Lending Office or any
political subdivision of such jurisdiction. If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable to any Lender or the Agent, (i) the sum payable shall be increased as may be necessary so that, after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14), such Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions
been made; provided that if the Borrower's obligation to deduct or withhold Taxes is caused solely by such Lender's or the Agent's failure to provide
the forms described in Section 2.14(d) and such Lender or the Agent could have provided such forms, no such increase shall be required; (ii) the Borrower shall make such deductions; and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. 



        (b)    Other Taxes.    In addition, the Borrower agrees to pay any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any payment made or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, the
Subordinated Notes, or the other Subordinated Loan Documents (hereinafter referred to as "Other Taxes"). 


        (c)    Indemnification.    THE BORROWER INDEMNIFIES EACH LENDER AND THE AGENT FOR THE FULL
AMOUNT OF TAXES OR OTHER TAXES (INCLUDING, WITHOUT LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS PAYABLE UNDER THIS SECTION 2.14) PAID BY SUCH LENDER OR THE AGENT
(AS THE CASE MAY BE) AND ANY LIABILITY (INCLUDING INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS
THE PAYMENT OF SUCH TAXES OR OTHER TAXES WERE NOT CORRECTLY OR LEGAL ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. EACH
PAYMENT REQUIRED TO BE MADE BY THE BORROWER IN RESPECT OF THIS INDEMNIFICATION SHALL BE MADE TO THE AGENT FOR THE BENEFIT OF ANY PARTY CLAIMING SUCH INDEMNIFICATION WITHIN 30 DAYS FROM THE DATE
THE BORROWER RECEIVES WRITTEN DEMAND THEREFOR FROM THE AGENT ON BEHALF OF ITSELF AS AGENT OR ANY SUCH LENDER. IF ANY LENDER, THE AGENT RECEIVES A REFUND IN RESPECT OF ANY TAXES PAID BY THE BORROWER
UNDER THIS PARAGRAPH (C), SUCH LENDER OR THE AGENT, AS THE CASE MAY BE, SHALL PROMPTLY PAY TO THE BORROWER THE BORROWER'S SHARE OF SUCH REFUND.


18









  





        (d)    Foreign Lender Withholding Exemption.    Each Lender that is not incorporated under the laws of the United
States of America or a state thereof agrees that upon the request of the Borrower it shall deliver to the Borrower and the Agent (i) two duly completed copies of United States Internal Revenue
Service Form W8-ECI, W8-IMY or W8-BEN or successor applicable form, as the case may be, certifying in each case that such Lender is entitled to receive payments
under this Agreement and the Subordinated Notes payable to it, without deduction or withholding of any United States federal income taxes, (ii) if applicable, an Internal Revenue Service
Form W 9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax, and (iii) any other governmental forms which are necessary
or required under an applicable tax treaty or otherwise by law to reduce or eliminate any withholding tax, which have been reasonably requested by the Borrower. If an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the date on which any delivery required by the preceding sentence would otherwise be required which renders all such forms
inapplicable or which would prevent any Lender from duly completing and delivering any such form with respect to it and such Lender advises the Borrower and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-9 establishing an exemption from United States backup
withholding tax, such Lender shall not be required to deliver such form. The Borrower shall withhold tax at the rate and in the manner required by the laws of the United States with respect to
payments made to a Lender failing to timely provide the requisite Internal Revenue Service forms. For any period with respect to which a Lender has failed to provide the Borrower and the Agent with
the appropriate form pursuant to this Section 2.14(d) (unless such failure is due to a change in treaty or Legal Requirement occurring subsequent to the date on which a form originally was
required to be provided), such Lender, as applicable, shall not be entitled to indemnification under Section 2.14(c) with respect to Taxes imposed by the United States which taxes would not
have been imposed but for such failure to provide such forms; provided that should a Lender, which is otherwise exempt from or subject to a reduced rate
of withholding tax becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonable request to assist such
Lender to recover such Taxes. 


 
 

ARTICLE III    
    
    CONDITIONS OF LENDING    
  


        Section 3.01    Conditions Precedent to Closing Date.    The Closing Date shall occur upon the satisfaction of
the following conditions precedent that: 



        (a)    Documentation.    The Agent shall have received the following duly executed by all the parties thereto, in form
and substance satisfactory to the Agent and the Lenders, and, where applicable, in sufficient copies for each Lender: 



          (i)  this
Agreement; 


        (ii)  a
Subordinated Note payable to the order of each Lender in the amount of its Commitment 


        (iii)  a
Second Security Agreement executed by the Borrower and each of its Subsidiaries; 


        (iv)  a
Second Pledge Agreement executed by Brigham Exploration and the General Partner; 


        (v)  the
Second Mortgage Amendments and any additional Second Mortgages that may be required pursuant to Section 5.11; 



        (vi)  copies
of the Borrower's insurance policies that name the Senior Agent as loss payee or additional insured, as applicable, and the Agent as additional insured,
certified by the 




19





 






Borrower's insurance broker as true and correct copies thereof, and which are otherwise satisfactory to the Agent; 


      (vii)  a
favorable opinion dated as of the Closing Date of Thompson & Knight L.L.P., counsel to the Credit Parties, in form and substance satisfactory to the Agent
covering such matters as any Lender through the Agent may reasonably request; 


      (viii)  a
favorable opinion dated as of the date of the Closing Date of Mahaffey & Gore, P.C., Oklahoma counsel to the Credit Parties, in form and substance reasonably
satisfactory to the Agent; 


        (ix)  copies,
certified as of the date of this Agreement by a Responsible Officer or the secretary or an assistant secretary of the General Partner (on behalf of the
Borrower) of (A) the resolutions of the applicable governing body of the Borrower approving the Subordinated Loan Documents to which the Borrower is a party, (B) the organizational
documents of the Borrower, and (C) all other documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Subordinated Notes,
the Subordinated Security Instruments and the other Subordinated Loan Documents to which the Borrower is a party; 


        (x)  certificates
of a Responsible Officer or the secretary or an assistant secretary of the General Partner certifying the names and true signatures of the officers of the
General Partner authorized to sign on behalf of the Borrower this Agreement, the Subordinated Notes, the Subordinated Security Instruments and the other Subordinated Loan Documents to which the
Borrower is a party; 


        (xi)  copies,
certified as of the date of this Agreement by a Responsible Officer or the secretary or an assistant secretary of each Guarantor (A) the resolutions of
the applicable governing body of such Guarantor approving the Subordinated Loan Documents to which it is a party, (B) the organizational documents of such Guarantor, and (C) all other
documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Subordinated Security Instruments, and the other Subordinated Loan
Documents to which such Guarantor is a party; 


      (xii)  a
certificate of the secretary or an assistant secretary of each Guarantor certifying the names and true signatures of officers of such Guarantor authorized to sign
this Agreement, the Subordinated Security Instruments and the other Subordinated Loan Documents to which such Guarantor is a party; 


      (xiii)  certificates
from the appropriate Governmental Authority certifying as to the good standing, existence and authority of each of the Credit Parties in all
jurisdictions where required by the Agent; 


      (xiv)  a
certificate dated as of the date of this Agreement from the Responsible Officer of the General Partner stating that (A) all representations and warranties of
the Borrower set forth in this Agreement are true and correct in all material respects; (B) no Default has occurred and is continuing; and (C) the conditions in this Section 3.01
have been met; 


      (xv)  the
Intercreditor and Subordination Agreement; 


      (xvi)  results
of lien, tax and judgment searches of the UCC Records of the Secretary of State and applicable counties of the States of Delaware, Oklahoma and Texas from a
source acceptable to the Agent and reflecting no Liens against any of the Collateral as to which perfection of a Lien is accomplished by the filing of a financing statement other than in favor of the
Agent, other than Permitted Liens; 




20





 





    (xvii)  appropriate
UCC-1 Financing Statements covering the Collateral for filing with the appropriate authorities and any other documents, agreements or
instruments necessary to create an Acceptable Security Interest in such Collateral; 



    (xviii)  the
Side Letter Agreement; and 


      (xix)  such
other documents, governmental certificates, agreements and lien searches as the Agent or any Lender may reasonably request. 




        (b)    Due Diligence.    The Agent and the Lenders shall have completed satisfactory due diligence review of the
assets, liabilities, business, operations and condition (financial or otherwise) of the Borrower and its Subsidiaries, including, but not limited, to a review of their Oil and Gas Properties,
Subordinated Debt, and all legal, financial, accounting, governmental, environmental, tax and regulatory matters, and fiduciary aspects of the proposed financing. 



        (c)    Payment of Fees.    On the date of this Agreement, the Borrower shall have paid all costs and expenses that
have been invoiced and are payable pursuant to Section 10.04. 


        (d)    Delivery of Financial Statements.    The Agent and the Lenders shall have received true and correct copies of
(i) the Financial Statements, and (ii) such other financial information as the Agent or any Lender may reasonably request. 



        (e)    No Default.    No Default shall have occurred and be continuing. 


        (f)    Representations and Warranties.    The representations and warranties contained in Article IV and in
each other Subordinated Loan Document shall be true and correct in all respects. 


        (g)    Material Adverse Change.    No event or circumstance that could cause a Material Adverse Change shall have
occurred. 


        (h)    No Proceeding or Litigation; No Injunctive Relief.    Except as described in  Schedule 4.07, no action, suit,
investigation or other proceeding (including, without limitation, the enactment or promulgation of a statute or
rule) by or before any arbitrator or any Governmental Authority shall be threatened or pending and no preliminary or permanent injunction or order by a state or federal court shall have been entered
against the Borrower or any of its Subsidiaries. 


        (i)    Consents, Licenses, Approvals, etc.    The Agent shall have received true copies (certified to be such by a
Responsible Officer the Borrower or other appropriate Credit Party) of all consents, licenses and approvals required in accordance with applicable Legal Requirements, or in accordance with any
document, agreement, instrument or arrangement to which any Credit Party is a party, in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the
other Subordinated Loan Documents. In addition, the Credit Parties shall have all such material consents, licenses and approvals required in connection with the continued operation of the Credit
Parties, and such approvals shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on this Agreement and the actions contemplated hereby. 



        (j)    Senior Credit Agreement.    The conditions precedent set forth in Section 3.01 of the Senior Credit
Agreement shall have been contemporaneously herewith satisfied or waived as of the Closing Date. The Borrower shall have delivered copies of the Senior Loan Documents on or before the Closing Date. 


        (k)    Subordinated Security Instruments.    The Agent shall have received all appropriate evidence required by the
Agent and the Lenders in their sole discretion necessary to determine that arrangements have been made for the Agent (for its benefit and the benefit of the Lenders) 



21





 





to have an Acceptable Security Interest in the Collateral and that all actions or filings necessary to protect, preserve and validly perfect such Liens have been made, taken or obtained (or will be
upon the filing and recording of the appropriate Subordinated Security Instruments), as the case may be, and are in full force and effect. 



        (l)    Title.    The Agent shall be satisfied in its sole discretion with the title to the Oil and Gas Properties
included in the Borrowing Base and that such Oil and Gas Properties constitute a percentage of such Collateral reasonably satisfactory to the Agent. 




        Section 3.02    Conditions Precedent to All Borrowings.    The obligation of each Lender to make an Advance on
the occasion of each Borrowing shall be subject to the further conditions precedent that on the date of such Borrowing: 



        (a)  the
following statements shall be true (and each of the giving of the applicable Notice of Borrowing or notice of payment in kind and the acceptance by the Borrower of
the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing such statements are true): 



          (i)  the
representations and warranties contained in Article IV of this Agreement and the representations and warranties contained in the Subordinated Security
Instruments, the Guaranties, and each of the other Subordinated Loan Documents are true and correct in all material respects on and as of the date of such Borrowing, before and after giving effect to
such Borrowing and to the application of the proceeds from such Borrowing, as though made on and as of such date (unless such representations and warranties are stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and correct in all material respect as of such earlier date); 


        (ii)  no
Default has occurred and is continuing or would result from such Borrowing or from the application of the proceeds therefrom; and 




        (b)  the
Agent shall have received such other approvals, opinions, or documents reasonably deemed necessary or desirable by any Lender as a result of circumstances occurring
after the date of this Agreement, as any Lender through the Agent may reasonably request. 



 
 

ARTICLE IV    
    
    REPRESENTATIONS AND WARRANTIES    
  


        Each Credit Party jointly and severally represents and warrants as follows: 


        Section 4.01    Corporate Existence; Subsidiaries.    Each of the Credit Parties is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its formation and in good standing and qualified to do business in each jurisdiction where its ownership or lease of Property or
conduct of its business requires such qualification and where the failure to so qualify could reasonably be expected to cause a Material Adverse Change. As of the Closing Date, the Credit Parties have
no Subsidiaries other than those listed on Schedule 4.01. 


        Section 4.02    Corporate Power.    The execution, delivery, and performance by each Credit Party of this
Agreement, the Subordinated Notes, and the other Subordinated Loan Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby (a) are within such
Credit Party's powers, (b) have been duly authorized by all necessary governing action, (c) do not contravene (i) such Credit Party's governance documents or (ii) any Legal
Requirement or any material
contractual restriction binding on or affecting such Credit Party, and (d) will not result in or require the creation or imposition of any Lien upon any of the material Property of any Credit
Party prohibited by this Agreement. At the time of each Advance, such Advance and the use of the proceeds of such Advance will (A) be within the Borrower's limited partnership powers,
(B) have been duly authorized 


22





 




by all necessary partnership action, (C) not contravene (i) the Borrower's limited partnership agreement or other organizational documents or (ii) any Legal Requirement or any
material contractual restriction of any material agreement binding on or affecting the Borrower and (D) not result in or require the creation or imposition of any Lien upon any of the material
Property of any Credit Party prohibited by this Agreement. 


        Section 4.03    Authorization and Approvals.    No consent, order, authorization, or approval or other action
by, and no notice to or filing with, any Governmental Authority or any other Person is required for the due execution, delivery, and performance by any Credit Party of this Agreement, the Subordinated
Notes, or the other Subordinated Loan Documents to which such Credit Party is a party or the consummation of the transactions contemplated hereby or thereby. At the time of each Borrowing, no
authorization or approval or other action by, and no notice to or filing with, any Governmental Authority will be required for such Borrowing or the use of the proceeds of such Borrowing. 


        Section 4.04    Enforceable Obligations.    This Agreement, the Subordinated Notes, and the other Subordinated
Loan Documents to which each Credit Party is a party have been duly executed and delivered by such Credit Party. Each Subordinated Loan Document to which each Credit Party is a party is the legal,
valid, and binding obligation of such Credit Party enforceable against such Credit Party in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium, or similar law affecting creditors' rights generally and by general principles of equity. 


        Section 4.05    Financial Statements.    


        (a)  The
Borrower has delivered to the Agent and the Lenders the Financial Statements, and the Financial Statements are correct and complete in all material respects and
present fairly the consolidated financial condition of the Credit Parties as of their respective dates and for their respective periods in accordance with GAAP, applied on a consistent basis. As of
the date of the Financial Statements, there were no material Debt, trade payables, contingent obligations, liabilities for taxes, unusual forward or long term commitments, or unrealized or anticipated
losses of any Credit Party, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP. 


        (b)  Since
December 31, 2002, no event or circumstance that could reasonably be expected to cause a Material Adverse Change has occurred. 


        (c)  Each
of the Credit Parties is Solvent. 


        Section 4.06    True and Complete Disclosure.    All written information (whether delivered before or after the
Closing Date) furnished by or on behalf of any Credit Party to any Lender or the Agent for purposes of or in connection with this Agreement, any other Subordinated Loan Document or any transaction
contemplated hereby or thereby, when taken as a whole, is true and accurate in all material respects on the date as of which such information is dated or certified (or, if not dated and certified, as
of the date as of which such information is provided) and does not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein
not materially misleading at such time. All projections, estimates and pro-forma financial information furnished by the Borrower were prepared on the basis of assumptions, data,
information, tests, or conditions believed to be reasonable at the time such projections, estimates and pro-forma financial information were furnished, but the Credit Parties do not
represent and warrant that such projections, estimates or pro forma information is (or will ultimately prove to have been) accurate. 


        Section 4.07    Litigation.    There is no pending or, to the knowledge of any Responsible Officer of any
Credit Party, threatened action or proceeding affecting any of the Credit Parties before any court, Governmental Authority or arbitrator which (a) both (i) involves the possibility of
any judgment or 


23





 




liability against any Credit Party not fully covered by insurance (except for normal deductibles and (ii) could reasonably be expected to be cause a Material Adverse Change or
(b) purports to affect the legality, validity, binding effect or enforceability of this Agreement, any Subordinated Note, or any other Subordinated Loan Document. Additionally, there is no
pending or, to the knowledge of any Responsible Officer of any Credit Party, threatened action or proceeding instituted against any Credit Party which seeks to adjudicate such Credit Party as bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its Property. 


        Section 4.08    Taxes.    


        (a)    Reports and Payments.    All Returns (as defined below in Section 4.08(c)) required to be filed by or on
behalf of any Credit Party or any member of the Controlled Group (hereafter collectively called the "Tax Group") have been duly filed on a timely basis
or appropriate extensions have been obtained and such Returns are and will be true, complete and correct in all material respects; and all Taxes shown to be payable on the Returns or on subsequent
assessments with respect thereto will have been paid in full on a timely basis, and no other Taxes will be payable by the Tax Group with respect to items or periods covered by such Returns, except
where any obligation is being contested in good faith and by appropriate proceedings and after adequate reserves for such items have been made in accordance with GAAP. The reserves for accrued Taxes
reflected in the financial statements delivered to the Lenders under this Agreement are adequate in the aggregate for the payment of all unpaid Taxes, whether or not disputed, for the period ended as
of the date thereof and for any period prior thereto, and for
which the Tax Group may be liable in its own right, as withholding agent or as a transferee of the assets of, or successor to, any Person. 


        (b)    Taxes Definition.    "Taxes" in this Section 4.08 shall
mean all taxes, charges, fees, levies, or other assessments imposed by any federal, state, local, or foreign taxing authority, including without limitation, income, gross receipts, excise, real or
personal property, sales, occupation, use, service, leasing, environmental, value added, transfer, payroll, and franchise taxes (and including any interest, penalties, or additions to tax attributable
to or imposed on with respect to any such assessment). 


        (c)    Returns Definition.    "Returns" in this Section 4.08
shall mean any federal, state, local, or foreign report, estimate, declaration of estimated Tax, information statement or return relating to, or required to be filed in connection with, any Taxes,
including any information return or report with respect to backup withholding or other payments of third parties. 



        Section 4.09    Pension Plans.    All Plans are in compliance in all material respects with all applicable
provisions of ERISA. No Termination Event has occurred with respect to any Plan, and each Plan has complied with and been administered in all material respects in accordance with applicable provisions
of ERISA and the Code. No "accumulated funding deficiency" (as defined in Section 302 of ERISA) has occurred and there has been no excise tax imposed under Section 4971 of the Code. No
Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with and been administered in all material respects with applicable provisions of ERISA
and the Code. The present value of all benefits vested under each Plan (based on the assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the
value of the assets of such Plan allocable to such vested benefits. None of the Credit Parties or any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer
Plan for which there is any withdrawal liability. As of the most recent valuation date applicable thereto, none of the Credit Parties or any member of the Controlled Group would become subject to any
liability under ERISA if any Credit Party or any member of the Controlled Group received notice that any Multiemployer Plan is insolvent or in reorganization. Based upon GAAP existing as of the date
of this 


24





 




Agreement and current factual circumstances, no Credit Party has reason to believe that the annual cost during the term of this Agreement to any Credit Party or any other member of the Controlled
Group for post-retirement benefits to be provided to the current and former employees of the Borrower or any member of the Controlled Group under welfare benefit plans (as defined in
Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Change. 



        Section 4.10    Condition of Property; Casualties.    


        (a)  Subject
to the matters set forth in Schedule 4.10, each of the Borrower and its Subsidiaries has good and
indefeasible title to all of its Oil and Gas Properties evaluated in any Engineering Report, free and clear of all Liens except for Permitted Liens. Brigham Exploration has good and defensible title
to all of the Equity Interests in the General Partner and, directly and indirectly, all of the ownership interests
in the Limited Partners, except for Permitted Liens. Each of the General Partner and the Limited Partners has good and defensible title to all of the Equity Interests in the Borrower, except for
Permitted Liens. 


        (b)  The
quantum and nature of the interest of the Borrower and its Subsidiaries in and to its Hydrocarbon Interests as set forth in each Engineering Report includes the
entire interest of the Borrower and its Subsidiaries in such Hydrocarbon Interests as of the date of such Engineering Report and are complete and accurate in all material respects as of the date of
such Engineering Report; and there are no "back-in" or "reversionary" interests held by third parties which could materially reduce the interest of the Borrower and its Subsidiaries in
such Hydrocarbon Interests except as taken into account in such Engineering Report. The ownership of the Hydrocarbon Interests held by the Borrower and its Subsidiaries shall not in any material
respect obligate any such Person to bear the costs and expenses relating to the maintenance, development or operations of such Hydrocarbon Interests in an amount in excess of the working interest of
such Person in each such Hydrocarbon Interest set forth in the most recent Engineering Report. 


        (c)  All
leases and agreements comprising the Borrower's and its Subsidiaries' Oil and Gas Properties necessary for the conduct of business of the Borrower and its
Subsidiaries are valid and subsisting, in full force and effect and there exists no default or event of default or circumstance which with the giving of notice or lapse of time or both would give rise
to a default under any such leases, instruments or agreements which would affect in any material respect the conduct of the business of the Borrower and its Subsidiaries. Neither the Borrower or any
of its Subsidiaries nor, to the knowledge of the Borrower, any other party to any leases, instruments or agreements comprising its Oil and Gas Properties evaluated in any Engineering Report, has given
or threatened to give notice of any default under or inquiry into any possible default under, or action to alter, terminate, rescind or procure a judicial reformation of, any such lease, instrument or
agreement. Except as set forth on Schedule 4.10 or as otherwise disclosed in writing to the Agent, neither the Borrower nor any of its
Subsidiaries is subject to any obligation to drill additional wells, finance the drilling of additional wells, or conduct additional operations in order to earn or continue to own any Significant PUD
Location or any other proved developed producing reserves or proved developed nonproducing reserves evaluated in any Engineering Report. 


        (d)  The
Properties presently owned, leased or licensed by the Borrower and its Subsidiaries, including, without limitation, all leases, easements, rights of way, and
contractual rights, include all Properties necessary to permit the Borrower and its Subsidiaries to conduct their business in all material respects in the same manner as its business has been
conducted prior to the Closing Date. 


        (e)  All
of the Properties of the Borrower and its Subsidiaries that are reasonably necessary for the operation of their business are in good repair, working order and
condition in all material respects and are maintained in accordance with prudent business standards. Since the date of the most recent financial statements delivered pursuant to
Section 5.06(a), neither the business nor the Properties of 


25





 




the Credit Parties, taken as a whole, has been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo,
requisition or taking of Property or cancellation of contracts, Permits, or concessions by a Governmental Authority, riot, activities of armed forces, or acts of God or of any public enemy. 



        (f)    Except
as set forth on Schedule 4.10 or as otherwise disclosed in writing to the Administrative Agent: 



          (i)  In
each case only with respect to any of the Borrower's and its Subsidiaries' Oil and Gas Properties that have been assigned a discounted present value equal to or in
excess of $2,000,000 in any Engineering Report, (A) all rentals, royalties, overriding royalties, shut-in royalties and other payments due under or with respect to any such
Hydrocarbon Interests evaluated in any Engineering Report have been properly and timely paid in the ordinary course of business and (B) all material expenses payable under the terms of the
contracts and agreements comprising such Oil and Gas Properties (other than those described above in clause (A)) have been properly and timely paid in the ordinary course of business except in
each case (1) where such payments are being contested in good faith by appropriate proceedings and for which adequate reserves complying with GAAP have been made or (2) for payments the
late payment of which could not reasonably be expected to cause a termination or forfeiture of any of the Borrower's or its Subsidiaries' rights under any such leases, instruments or agreements
comprising any such Oil and Gas Properties or otherwise, individually or in the aggregate, cause a Material Adverse Change; 


        (ii)  All
of the proceeds from the sale of Hydrocarbons produced from the Borrower's and its Subsidiaries' Hydrocarbon Interests are being properly and timely paid to the
Borrower without suspense, other than any such proceeds the late payment or non-payment of which could not reasonably be expected to cause a Material Adverse Change or materially adversely
affect the value of the Collateral taken as a whole; and 


        (iii)  No
material amount of proceeds that has been received by any Credit Party from the sale of Hydrocarbons produced from the Oil and Gas Properties evaluated in any
Engineering Report is subject to any claim for any refund or refund obligation, except as permitted under Section 4.14 or Section 6.13. 




        Section 4.11    Security Instruments.    



        (a)  The
provisions of each of the Second Pledge Agreements delivered to the Agent are effective to create in favor of the Agent, for the ratable benefit of the Lenders, a
legal, valid and enforceable security interest in the Pledged Collateral (as defined therein) and proceeds thereof and upon the filing of UCC-1 Financing Statements with the secretary of
state of each jurisdiction of formation for each of the grantors party thereto, the Second Pledge Agreements shall constitute an Acceptable Security Interest in all right, title and interest of the
applicable Credit Party in such Pledged Collateral and the proceeds thereof. 


        (b)  On
the Closing Date, the Equity Interests listed on Schedule I to each of the Second Pledge Agreements will constitute all the issued and outstanding Equity
Interests in the Borrower, the General Partner, the Limited Partners, and the direct and indirect Subsidiaries of the Borrower; all such Equity Interests have been duly and validly issued and are
fully paid and nonassessable; and the relevant pledgor of said shares is the record and beneficial owner of said shares. 


        (c)  The
provisions of each Second Mortgage will be effective to grant to the Agent, for the ratable benefit of the Lenders, legal, valid and enforceable mortgage liens on
all of the right, title and interest of the Borrower and its Subsidiaries in the mortgaged property described therein. Once each such Second Mortgage has been recorded in the appropriate recording
office, such Second Mortgage will constitute an Acceptable Security Interest in such mortgaged property. 


26





 



        (d)  The
provisions of each Second Security Agreement delivered to the Agent are effective to create in favor of the Agent, for the ratable benefit of the Lenders, a legal,
valid and enforceable security interest in the collateral described therein and proceeds thereof and, upon the filing of UCC-1 Financing Statements with the secretary of state of each
jurisdiction of formation for each of the grantors party thereto, each Second Security Agreement shall constitute an Acceptable Security Interest in all right, title and interest of the applicable
Credit Party in such collateral and the proceeds thereof. 


        (e)  On
the Closing Date all governmental actions and all other filings, recordings, registrations, third party consents and other actions which are necessary to create and
perfect the Liens provided for in the Subordinated Security Instruments will have been made, obtained and taken in all relevant jurisdictions (or are the subject of arrangements, satisfactory to the
Agent, to be made, obtained or taken on or promptly after the Closing Date). No other filings or recordings are required in order to perfect the security interests created under any Subordinated
Security Instruments. 


        Section 4.12    No Burdensome Restrictions; No Defaults.    


        (a)  Neither
the Borrower nor any of its Subsidiaries is a party to any indenture, loan, or credit agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction or provision of applicable law or governmental regulation that could reasonably be expected to cause a Material Adverse Change. Neither the Borrower nor any of its
Subsidiaries is in default nor has any event or circumstance occurred which, but the expiration of any grace period or the giving of notice, or both, would constitute a default under (i) the
Senior Credit Agreement or (ii) any other material contract, agreement, lease, or other instrument to which such Credit Party is a party which default could reasonably be expected to cause a
Material Adverse Change. None of the Credit Parties has received any notice of default under any material contract, agreement, lease, or other instrument to which such Credit Party is a party. 


        (b)  No
Default has occurred and is continuing. 


        Section 4.13    Environmental Condition.    Other than exceptions to any of the following that would not
reasonably be expected to cause a Material Adverse Change or materially adversely affect the value of the Collateral taken as a whole: 



        (a)    Permits, Etc.    With respect to its Oil and Gas Properties for which such Credit Party is the operator and
with respect to its Oil and Gas Properties that are operated by operators other than the Borrower or a Subsidiary, to the best of its knowledge, in all material respects, each of the Credit Parties
(i) has obtained all Environmental Permits necessary for the ownership and operation of any and all of their respective Properties and the conduct of their respective businesses;
(ii) have at all times been and are in compliance with all terms and conditions of such Permits and with all other requirements of applicable Environmental Laws and other Legal Requirements;
(iii) have not received notice of any violation or alleged violation of any Environmental Law or any such Permit; and (iv) are not subject to any actual or contingent Environmental Claim
with respect to such Properties. 


        (b)    Certain Liabilities.    None of the present or, to the best knowledge of any Credit Party, previously owned or
operated Property of any of the Credit Parties, wherever located, (i) has been placed on or proposed to be placed on the National Priorities List, the Comprehensive Environmental Response
Compensation Liability Information System list, or their state or local analogs, or have been otherwise investigated, designated, listed, or identified as a potential site for removal, remediation,
cleanup, closure, restoration, reclamation, or other response activity under any Environmental Laws; (ii) is subject to a Lien, other than a Permitted Lien, arising under or in connection with
any Environmental Laws, that attaches to any revenues or to any Property owned or operated by the Borrower or any of its Subsidiaries, wherever located; or (iii) has been the site of any
Release of Hazardous Substances or Hazardous Wastes from present or past operations that has caused at the site or at any third party site any condition that has resulted in or could reasonably be
expected to result in the need for Response. 



27







  




        (c)    Certain Actions.    Without limiting the foregoing, (i) all necessary notices have been properly filed,
and no further action is required under current Environmental Law as to each Response or other restoration or remedial project undertaken by the Borrower or its Subsidiaries or any of their former
Subsidiaries on any of their presently or formerly owned or operated Property and (ii) there is no present and, to the Borrower's knowledge, future liability, if any, of the Borrower and its
Subsidiaries which could reasonably be expected to arise in connection with requirements under Environmental Laws. 




        Section 4.14    Gas Contracts.    Except as set forth in the most recent Engineering Report or in  Schedule 4.14, on a net basis there
are no material gas imbalances, material take-or-pay or other prepayments with
respect to the Oil and Gas Properties of the Borrower and its Subsidiaries (or, in the case of Oil and Gas Properties operated by operators other than the Borrower or its Subsidiaries, to the
Borrower's knowledge after reasonable investigation) that would require the Borrower and its Subsidiaries to deliver 2.5% or more of the aggregate calendar quarter production from the Borrower's and
its Subsidiaries' Hydrocarbons produced on a calendar quarter basis from their Hydrocarbon Interests at some future time without then or thereafter receiving full payment therefor. 


        Section 4.15    Compliance with Laws.    Except for any failure to comply with any of the foregoing which would
not reasonably be expected to cause a Material Adverse Change, each of the Credit Parties has (a) complied with all applicable Legal Requirements of any Governmental Authority having
jurisdiction over the conduct of their respective businesses or the ownership of their respective Property and (b) obtained all Permits that are necessary for the ownership of any of its
Properties or the conduct of their business. Other than immaterial exceptions to any of the following: (i) the prices being received by the Borrower and its Subsidiaries for the production of
Hydrocarbons do not violate any material provision of any contract or agreement comprising the Oil and Gas Properties of the Borrower and its Subsidiaries or any Legal Requirement, (ii) where
applicable, all of the wells located on the Borrower's and its Subsidiaries' Hydrocarbon Interests and production of Hydrocarbons therefrom have been properly classified under appropriate governmental
regulations, (iii) all necessary regulatory filings have been properly made in connection with the drilling, completion and operation of the wells on or attributable to the Borrower's and its
Subsidiaries' Hydrocarbon Interests and all other operations related thereto and (iv) all production and sales of the Borrower's and its Subsidiaries' Hydrocarbons produced or sold from the
Borrower's and its Subsidiaries' Hydrocarbon Interests have been made in accordance with any applicable allowables (plus permitted tolerances) imposed by any Governmental Authorities. 


        Section 4.16    Hedging Agreements.    Schedule 4.16
sets forth, as of the Closing Date, a true and complete list of all Interest Hedge Agreements and Hydrocarbon Hedge Agreements of the Borrower and each of its
Subsidiaries, setting forth the type, term, effective date, termination date and notional amounts or volumes, and the counterparty to each such agreement. 


        Section 4.17    Material Agreements.    Schedule 4.17
sets forth a complete and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, joint venture agreements, and other
instruments in effect or to be in effect as of the Closing Date (other than the agreements set forth in Schedule 4.16) providing for, evidencing,
securing or otherwise relating to any material Debt of the Borrower or any of its Subsidiaries, and all obligations of the Borrower or any of its Subsidiaries to issuers of surety or appeal bonds
(other than operator's bonds, plugging and abandonment bonds, and similar surety obligations obtained in the ordinary course of business) issued for the account of the Borrower or any of its
Subsidiaries, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt or lease obligations outstanding or to be outstanding and the
Property subject to any Lien securing such Debt or lease obligation. 


28





 



        Section 4.18    Organizational Documents.    The Partnership Agreement has not been terminated, is in full
force and effect as of the Closing Date and no default has occurred and is continuing thereunder that could reasonably be expected to cause a Material Adverse Change. 



        Section 4.19    Guarantors.    All of the Borrower's Subsidiaries are Guarantors under Article VIII. 


        Section 4.20    Insurance.    Each of the Borrower and its Subsidiaries carry insurance required under
Section 5.02. 


        Section 4.21    Use of Proceeds.    The proceeds of the Advances will be used by the Borrower for the purposes
described in Section 5.10. The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U). No
proceeds of any Advance will be used to purchase or carry any margin stock in violation of Regulation T, U or X. 


        Section 4.22    Investment Company Act.    Neither Brigham Exploration nor any of its Subsidiaries is an
"investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 



        Section 4.23    Public Utility Holding Company Act.    Neither Brigham Exploration nor any of its Subsidiaries
is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 


        Section 4.24    Transmitting Utility.    Neither Brigham Exploration nor any of its Subsidiaries is a
"transmitting utility" or an "interstate gas pipeline company" or a "public service corporation" within the meaning of the laws currently in effect for the States of Texas and/or Oklahoma. 


 
 

ARTICLE V    
    
    AFFIRMATIVE COVENANTS    
  


        So long as any Subordinated Note or any amount under any Subordinated Loan Document shall remain unpaid or any Lender shall have any Commitment hereunder, each of
the Credit Parties agrees to comply with the following covenants. 



        Section 5.01    Compliance with Laws, Etc.    The Borrower shall comply, and cause each of its Subsidiaries to
comply, in all material respects with all Legal Requirements; provided that this Section 5.01 shall not prevent the Borrower or any of its
Subsidiaries from, in good faith and with reasonable diligence, contesting the validity or application of any such laws or regulations by appropriate legal proceedings. Without limitation of the
foregoing, the Borrower shall use commercially reasonable efforts to obtain, and shall cause each of its Subsidiaries to use commercially reasonable efforts to obtain, as soon as practicable, all
consents or approvals required from any states of the United States (or other Governmental Authorities) necessary to grant the Agent an Acceptable Security Interest in the Borrower's and its
Subsidiaries' Oil and Gas Properties. 


        Section 5.02    Maintenance of Insurance.    


        (a)  The
Borrower shall, and shall cause each of its Subsidiaries to, maintain with financially sound and reputable insurance companies insurance of such types, in such
amounts and against such risks as is customary to be maintained by companies engaged in the same or a similar business in the same general area; and furnish to the Agent, upon written request, full
information as to the insurance carried. In addition, the Borrower shall, and shall cause each of its Subsidiaries to, comply with all requirements regarding insurance contained in the Subordinated
Security Instruments. 


        (b)  All
certified copies of policies or certificates thereof, and endorsements and renewals thereof shall be delivered to and retained by the Agent. All policies of
insurance shall name the Agent as an 


29





 




additional insured. All policies or certificates of insurance shall set forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage. In
addition, all policies of insurance required under the terms hereof shall contain an endorsement or agreement by the insurer that any loss shall be payable in accordance with the terms of such policy
notwithstanding any act of negligence of the Borrower, or a Subsidiary or any party holding under the Borrower or a Subsidiary which might otherwise result in a forfeiture of the insurance and the
further agreement of the insurer waiving all rights of setoff, counterclaim or deductions against the Borrower and its Subsidiaries. All such policies shall contain a provision that notwithstanding
any contrary agreements between the Borrower, its Subsidiaries, and the applicable insurance company, such policies will not be canceled, allowed to lapse without renewal, surrendered or amended
(which provision shall include any reduction in the scope or limits of coverage) without at least 10 days' prior written notice to the Agent in the event of the Borrower's failure to pay any
premiums and in all other cases, 30 days' prior written notice to the Agent. 


        Section 5.03    Preservation of Corporate Existence, Etc.    Each of the Credit Parties shall preserve and
maintain its corporate, limited partnership or limited liability company, as applicable, existence, and all of its material rights, franchises, and privileges in the jurisdiction of its formation, and
qualify and remain qualified as a foreign entity in each jurisdiction in which qualification is necessary or desirable in view of its business and operations or the ownership of its Properties to the
extent the failure to qualify could reasonably be expected to cause a Material Adverse Change. 


        Section 5.04    Payment of Taxes, Etc.    The Borrower shall, and shall cause each of its Subsidiaries to, pay
and discharge, before the same shall become delinquent, (a) all taxes, assessments, and governmental charges or levies imposed upon it or upon its income or profits or Property prior to the
date on which penalties attach thereto and (b) all lawful claims that are material in amount which, if unpaid, could by law become a Lien upon its Property;  provided that neither the Borrower nor
any such Subsidiary shall be required to pay or discharge any such tax, assessment, charge, levy, or claim which
is being contested in good faith and by appropriate proceedings, and with respect to which reserves in conformity with GAAP have been provided. 


        Section 5.05    Inspection; Books and Records.    Upon reasonable notice, each Credit Party shall permit the
Agent and any Lender or any of their respective agents or representatives thereof, during normal business hours, to (a) examine and make copies of and abstracts from the records and books of
account of, and visit and inspect at their reasonable discretion the Properties of, such Credit Party, and (b) discuss the affairs, finances and accounts of such Credit Party with any of their
respective officers or directors, all to the extent reasonably requested by the Agent or such Lender, as the case may be. Each Credit Party shall keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all Legal Requirements shall be made of all dealings and transactions in relation to its business and activities. 


        Section 5.06    Reporting Requirements.    The Borrower shall furnish, or shall cause the applicable Credit
Party to furnish, to the Agent and each Lender: 



        (a)    Annual Financials of Brigham Exploration.    As soon as available, but in any event within 90 days after
the end of each fiscal year of Brigham Exploration or sooner if required by the SEC, the audited consolidated statements of income, stockholders' equity, changes in financial position and cash flow of
Brigham Exploration and its consolidated Subsidiaries for such fiscal year, and the related consolidated and unaudited consolidating balance sheets of Brigham Exploration and its consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, together with a certification by its Chief
Executive Officer and its Chief Financial Officer in accordance with the Sarbanes-Oxley Act of 2002 and accompanied by the related opinion of independent public accountants of recognized national
standing reasonably acceptable to the Agent which opinion 



30





 


shall state that such financial statements fairly present the consolidated financial position and results of operations of Brigham Exploration and its consolidated Subsidiaries as at the end of, and
for, such fiscal year and that such financial statements have been prepared in accordance with GAAP except for such changes in such principles with which the independent public accountants shall have
concurred and such opinion shall not contain a "going concern" or like qualification or exception; 


        (b)    Quarterly Financials of Brigham Exploration.    As soon as available, but in any event not later than
45 days after the end of each of the first three quarterly fiscal periods of each fiscal year of Brigham Exploration and its consolidated Subsidiaries (or sooner if required by the SEC),
consolidated statements of income, stockholders' equity, changes in financial position and cash flow of Brigham Exploration and its consolidated Subsidiaries for such period and for the period from
the beginning of the respective fiscal year to the end of such period, and the related consolidated and consolidating balance sheets of Brigham Exploration and its consolidated Subsidiaries as at the
end of such period, and setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, together with a certification by its Chief
Executive Officer and its Chief Financial Officer in accordance with the Sarbanes-Oxley Act of 2002 and accompanied by the certificate of a Responsible Officer of Brigham Exploration, which
certificate shall state that such financial statements fairly present the consolidated financial position and results of operations of Brigham Exploration and its consolidated Subsidiaries in
accordance with GAAP, as at the end of, and for such period (subject to normal year-end audit adjustments); 



        (c)    Compliance Certificates.    Concurrently with the delivery of each of the financial statements referred to in
Section 5.06(a) and Section 5.06(b), a Compliance Certificated executed by a Responsible Officer of Brigham Exploration; 


        (d)    Insurance Certificates.    Concurrently with the delivery of each of the financial statements referred to in
Section 5.06(a), insurance certificates naming the Agent additional insured and evidencing insurance which meets the requirements of this Agreement and the Subordinated Security Instruments; 



        (e)    Notice of Defaults.    As soon as possible after the occurrence of a Default known to any Responsible Officer
of any Credit Party which is continuing on the date of such statement, a statement of a Responsible Officer setting forth the details of such Default and the actions which the Credit Parties have
taken and propose to take with respect thereto; 


        (f)    Material Changes.    Prompt written notice of any condition or event of which any Responsible Officer of any
Credit Party has knowledge, which condition or event has resulted or could reasonably be expected to cause a Material Adverse Change; 



        (g)    Annual Budget.    As soon as available and in any event prior to January 31, a one- year
financial projection for Brigham Exploration and its Subsidiaries in form and substance acceptable to the Agent, which projection shall include revenues, expenses and capital expenditures (detailing
the projected capital expenditures with respect to drilling (both development and exploration), leasehold, geological and geophysical, capitalized general and administrative expenses, and capitalized
interest) for the following fiscal year; 


        (h)    Hedging Agreements.    Concurrently with the delivery of each of the financial statements referred to in
Section 5.06(a) and Section 5.06(b), a true and complete list of all Interest Hedge Agreements and Hydrocarbon Hedge Agreements of the Borrower and each of its Subsidiaries, setting
forth the type, term, effective date, termination date and notional amounts or volumes and the counterparty to each such agreement; 


        (i)    Litigation.    Prompt written notice of (i) any claims, legal or arbitration proceedings, proceedings
before any Governmental Authority, or disputes, or to the knowledge of the Borrower 



31





 





threatened, or affecting any Credit Party which, if adversely determined, could reasonably be expected to cause a Material Adverse Change, (ii) any material litigation or proceeding against
the Borrower or any of its Subsidiaries in which the amount involved is not covered in full by insurance (subject to normal and customary deductibles), or in which injunctive or similar relief is
sought or (iii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of the Borrower or any of its Subsidiaries if the value of such claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed $1,000,000 (excluding liabilities to the extent covered by insurance if the insurer has confirmed that such insurance covers
such liabilities); 


        (j)    Environmental.    Prompt written notice of any threatened action, investigation or inquiry by any Governmental
Authority of which any Responsible Officer of any Credit Party has knowledge in connection with any Environmental Laws with respect to the Property of the Borrower or any of its Subsidiaries,
excluding routine testing, compliance and corrective action; 


        (k)    Other Accounting Reports.    Promptly upon receipt thereof, a copy of each other report or letter (excluding
routine correspondence) submitted to any Credit Party by independent accountants in connection with any annual, interim or special audit made by them of the books of any Credit Party, and a copy of
any response by any Credit Party to such letter or report; 


        (l)    Securities Law Filings and other Public Information.    Promptly, upon its becoming available, each financial
statement, notice, proxy material, reports and other information which any Credit Party sends to the holders of its respective public securities generally, files with or received from the SEC
(excluding correspondence and other information received from the SEC concerning draft registration statements), or otherwise makes available to the public or the financial community generally; 



        (m)    Notices Under Other Loan Agreements.    Promptly after the furnishing thereof, copies of any statement, report
or notice furnished to any Person pursuant to the terms of any 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 5.06; 


        (n)    ERISA Information and Compliance.    Promptly furnish, and will cause any ERISA Affiliate to promptly furnish,
(i) if requested by the Agent promptly after the filing thereof with the United States Secretary of Labor, the Interest Revenue Service or the PBGC, copies of each annual and other report with
respect to each Plan or any trust created thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA Event or 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 a Responsible Officer of the General Partner
or such ERISA Affiliate specifying the nature thereof, what action the borrower 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, the Department of Labor or the PBGC with respect thereto, and (iii) immediately upon receipt thereof, copies of any notice of the PBGC's intention to terminate
or to have a trustee appointed to administer any Plan; and 


        (o)    Acquisition Information.    Concurrently with the delivery of each of the financial statements referred to in
Section 5.06(a) and Section 5.06(b), a list of any Oil and Gas Properties purchased by the Borrower or any of its Subsidiaries during the previous twelve consecutive calendar months for
a price equal to or greater than $1,000,000 for any single transaction or group of related transactions or $5,000,000 in the aggregate, together with such other information regarding such Oil and Gas
Properties as Agent or any Lender may reasonably request; and 


        (p)    Other Information.    Subject to any applicable restrictions on disclosure, such other information respecting
the business or Properties, or the condition or operations, financial or 



32





 





otherwise, of the Credit Parties (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA), as any Lender through the Agent
may from time to time reasonably request. The Agent agrees to provide the Lenders with copies of any
material notices and information delivered solely to the Agent pursuant to the terms of this Agreement. 




        Section 5.07    Maintenance of Property.    The Borrower shall, and shall cause each of its Subsidiaries to,
(a) develop and operate its Oil and Gas Properties in a good and workmanlike manner as is customary in the oil and gas industry, and observe and comply in all material respects with all of the
terms and provisions, express or implied, of all oil and gas leases relating to such Properties so long as the oil and gas leases are capable of producing Hydrocarbons in quantities and at prices
providing for continued efficient and profitable operation of business; (b) comply in all material respects with all contracts and agreements applicable to or relating to its Oil and Gas
Properties or the production and sale of Hydrocarbons and accompanying elements therefrom; (c) maintain, preserve, and keep all operating equipment used with respect to its Oil and Gas
Properties in proper repair, working order and condition, and make all necessary or appropriate repairs, renewals, replacements, additions and improvements thereto so that the efficiency of the
operating equipment shall at all times be properly preserved and maintained, provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if the Borrower or its Subsidiaries shall in good faith determine that the action is not necessary or desirable for such Person's continued efficient and profitable
operation of business, and (d) with respect to its Oil and Gas Properties that are operated by operators other than the Borrower or a Subsidiary, (i) seek to enforce the operators'
contractual obligations to maintain, develop, and operate such Properties subject to the applicable operating agreements and (ii) cause or make reasonable and customary efforts to cause such
Oil and Gas Properties to be operated in a good and workmanlike manner as is customary in the oil and gas industry. 


        Section 5.08    Environmental Laws.    To the extent that a reasonably prudent owner or operator would do so
under the same or similar circumstances, the Borrower shall, and shall cause each of its Subsidiaries to establish and implement such procedures as may be reasonably necessary to periodically
determine and assure that any failure of the following does not cause a Material Adverse Change: (i) all Property of the Borrower and its Subsidiaries and the operations conducted thereon and
other activities of the Borrower and the Subsidiaries are in compliance with and do not violate the requirements of any Environmental Laws; (ii) no Hazardous Substances or Hazardous Wastes are
disposed of or otherwise releases on or to any Property owned by any such party except in compliance with Environmental Laws, (iii) no Hazardous Substance will be released on or to any such
Property in a quantity equal to or exceeding that quantity that requires reporting under CERCLA, and (iv) no Hazardous Substances or Hazardous Wastes is released on or to any such Property so
as to pose an imminent and substantial endangerment to public health or welfare or the environment. 


        Section 5.09    Payment of Trade Payables.    Each of the Credit Parties shall pay, and shall cause each of its
Subsidiaries to pay, all of their customary trade payables incurred in the ordinary course of business now or hereafter incurred within 90 days of the date the invoice is received by such
Credit Party, unless subject to legal offset or unless being contested in good faith by appropriate proceedings and reserves adequate under GAAP shall have been established therefor. 



        Section 5.10    Use of Proceeds.    The Borrower shall use the proceeds of the Advances and Letters of Credit
to refinance Debt under the Existing Subordinated Credit Agreement. 


        Section 5.11    Additional Collateral.    The Borrower will grant, and will cause each of its Subsidiaries to
grant, to the Agent an Acceptable Security Interest in such Oil and Gas Properties of the Borrower and its Subsidiaries, constituting at least 90% of the discounted net present value of the Proven
Reserves of the Borrower and its Subsidiaries as determined by the Agent. 


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        Section 5.12    New Subsidiaries.    Within 10 days after (a) the date of the creation of any new
Subsidiary of Brigham Exploration or the Borrower, or (b) the purchase by Brigham Exploration, the Borrower, or any of its other Subsidiaries of the Equity Interests of any Person, which
purchase results in such Person becoming a Subsidiary of Brigham Exploration or of the Borrower permitted by this Agreement, Brigham Exploration or the Borrower, as applicable, shall, in each case,
cause (i) such Person to execute and deliver to the Agent (with sufficient originals for each applicable Lender) a joinder agreement to this Agreement in form and substance acceptable to the
Agent, a Second Pledge Agreement (if such new Subsidiary owns one or more Subsidiaries), one or more Second Mortgages (if such new Subsidiary owns Oil and Gas Properties), a Second Security Agreement,
and such other Subordinated Security Instruments as the Agent or any Lender may reasonably request, in each case to secure the Subordinated Obligations together with evidence of corporate authority to
enter into and such legal opinions in relation to such joinder agreement, Second Pledge Agreement, Second Mortgages, Second Security Agreement and other Subordinated Security Instruments as the Agent
may reasonably request, and (ii) the stockholder of such new Subsidiary to execute a Second Pledge Agreement pledging its interests in the Equity Interests of such new Subsidiary to secure the
Subordinated Obligations and such evidence of corporate authority to enter into and such legal opinions in relation to such Second Pledge Agreement as the Agent may reasonably request, along with
share certificates, if any, pledged thereby and appropriately executed stock powers in blank. 


        Section 5.13    Title.    As of the Closing Date, the Agent shall have received title opinions reflecting that
the Borrower has title reasonably satisfactory to the Agent in such Oil and Gas Properties of the Borrower and its Subsidiaries constituting at least 50% of the Borrower's and its Subsidiaries'
proved, developed, producing Hydrocarbon reserves and proved, developed, nonproducing Hydrocarbon reserves (each as determined in conformity with the guidelines in effect from time to time as
promulgated by the Society of Petroleum Engineers or its successor association) as determined by the Agent. In addition, the Borrower shall from time to time upon the reasonably request of the Agent
or the Majority Lenders, provide evidence of title reasonably satisfactory to the Agent constituting an additional 30% of the Borrower's and its Subsidiaries' proved, developed, producing Hydrocarbon
reserves and proved, developed, nonproducing Hydrocarbon reserves as determined by the Agent with respect to the Oil and Gas Properties of the Borrower and its Subsidiaries as of the Closing Date.
Thereafter, with respect to Oil and Gas Properties acquired after the Closing Date or not previously included in the Borrowing Base, the Borrower shall from time to time upon the reasonable request of
the Agent, take such actions and execute and deliver such documents and instruments as the Agent shall require to ensure that the Agent shall, at all times, have received satisfactory title opinions
(including, if requested, supplemental or new title opinions addressed to it), which title opinions shall be in form and substance acceptable to the Agent in its sole discretion and shall include
opinions regarding the before payout and after payout ownership interests held by the Borrower and its Subsidiaries, for all wells located on the Oil and Gas Properties covered thereby as to the
ownership of Oil and Gas Properties of the Borrower and its Subsidiaries, and reflecting that the Agent has an Acceptable Security Interest in such Oil and Gas Properties of the Borrower and its
Subsidiaries. 


        Section 5.14    Further Assurances.    The Borrower shall, and shall cause each of its Subsidiaries to, cure
promptly any defects in the execution and delivery of the Subordinated Loan Documents, including, without limitation, the Subordinated Security Instruments and this Agreement. The Borrower hereby
authorizes the Agent to file any financing statements without the signature of the Borrower to the extent permitted by applicable law in order to perfect or maintain the perfection of any security
interest granted under any of the Subordinated Loan Documents. The Borrower at its expense will, and will cause each of its Subsidiaries to, promptly execute and deliver to the Agent upon request all
such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary of the Borrower, as the case may be, in the Subordinated
Security Instruments and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Subordinated Notes, or to correct any omissions in the 


34





 




Subordinated Loan Documents, or to state more fully the security obligations set out herein or in any of the Subordinated Loan Documents, or to perfect, protect or preserve any Liens created pursuant
to any of the Subordinated Loan Documents, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Agent
to exercise and enforce its rights and remedies with respect to any Collateral. 


 
 

ARTICLE VI    
    
    NEGATIVE COVENANTS    
  


        So long as any Subordinated Note or any amount under any Subordinated Loan Document shall remain unpaid or any Lender shall have any Commitment, each of the
Credit Parties agrees to comply with the following covenants. 


        Section 6.01    Liens, Etc.    None of the Credit Parties shall create, assume, incur, or suffer to exist, or
permit any of their Subsidiaries to create, assume, incur, or suffer to exist, any Lien on or in respect of any of its Property whether now owned or hereafter acquired, or assign any right to receive
income, except that the Credit Parties may create, incur, assume, or suffer to exist the following (collectively, the "Permitted Liens"): 



        (a)  Liens
securing the Subordinated Obligations; 


        (b)  Liens
securing the Senior Obligations; 


        (c)  Excepted
Liens; 


        (d)  Liens
securing leases allowed under Section 6.02(f) but only on the Property under lease; 


        (e)  Liens
disclosed on Schedule 6.01; and 


        (f)    any
encumbrances permitted under the terms of any Second Mortgage. 




        Section 6.02    Debts, Guaranties, and Other Obligations.    None of the Credit Parties shall, and none of the
Credit Parties shall permit any of their Subsidiaries to, create, assume, suffer to exist, or in any manner become or be liable in respect of, any Debt except: 



        (a)  the
Senior Obligations; 


        (b)  the
Subordinated Obligations; 



        (c)  Debt
existing on the Closing Date that is reflected in the Financial Statements or is disclosed on Schedule 6.02,
and any renewals or extensions (but not increases) thereof; 


        (d)  Accounts
payable for the deferred purchase price of Property or services (other than customary trade payables incurred in the ordinary course of business) from time to
time incurred in the ordinary course of business which, if greater than 90 days past the date the invoice is received by such Credit Party, are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been established; 



        (e)  Debt
owing by a Credit Party to any other Credit Party which is subordinated to the Subordinated Obligations pursuant to subordination provision in form and substance
acceptable to the Agent; 


        (f)    Debt
of the Borrower under Capital Leases not to exceed $2,000,000 at any one time outstanding; 


        (g)  Debt
of the Borrower under Hydrocarbon Hedge Agreements or Interest Hedge Agreements that is made (i) with a Person that is, at the time such Hydrocarbon Hedge
Agreement or Interest Hedge Agreement is made, either a Lender, a Senior Lender or an Affiliate 



35





 





of a Lender or a Senior Lender, or (ii) with another counterparty rated at least A- or better by S&P or A3 or better by Moody's,  provided that the aggregate notional amounts under all such
Hydrocarbon Hedge Agreements (other than Hydrocarbon Hedge Agreement that are floors) do not
exceed 75% of the Borrower's proved, developed, producing Hydrocarbon reserves (as determined in conformity with the guidelines in effect from time to time as promulgated by the Society of Petroleum
Engineers or its successor association) to be produced during the term of such Hydrocarbon Hedge Agreements and that such Hydrocarbon Hedge Agreements are entered into as a part of its normal business
operations as risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower's and its Subsidiaries' operations; 


        (h)  Debt
of the Borrower and its Subsidiaries (i) associated with bonds or surety obligations required by Legal Requirements in connection with the operation of the
Oil and Gas Properties and (ii) associated with the financing of insurance premiums; 


        (i)    Debt
of the Borrower described in Schedule 6.02(i) and such other Debt of the Borrower related to the acquisition
of software and licensing rights related thereto that does not exceed $100,000 at any one time outstanding; and 


        (j)    Debt
that is not described in subsections (a) through (i) above and that together with all Debt of the Borrower allowed under subsection (i) above
does not exceed $1,000,000 at any one time outstanding. 




        Section 6.03    Agreements Restricting Liens and Distributions.    None of the Credit Parties shall, nor shall
any of the Credit Parties permit any of their Subsidiaries to, create, incur, assume or permit to exist any contract, agreement or understanding (other than the Senior Loan Documents and the
Subordinated Loan Documents) that in any way prohibits or restricts (a) the granting, conveying, creation or imposition of any Lien on any of its Property, whether now owned or hereafter
acquired, to secure the Subordinated Obligations, except for customary limitations and restrictions contained in, and limited to, specific leases, licenses, conveyances, partnership agreements and
co-owners' agreements, and similar conveyances and agreements or (b) any Subsidiary from paying dividends or making any other distribution to the Borrower, or otherwise transferring
assets, or which requires the consent of or notice to other Persons in connection therewith. 



        Section 6.04    Merger or Consolidation.    None of the Credit Parties shall, nor shall any of the Credit
Parties permit any of their Subsidiaries to (a) merge or consolidate with or into any other Person, or (b) sell, 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, except that (i) if either Brigham Exploration or the Borrower is a party to such merger or consolidation, then
Brigham Exploration or the Borrower, as the case may be, shall be the continuing Person, (ii) a Subsidiary of the Borrower may merge with or into
the Borrower or a wholly owned Subsidiary of the Borrower (provided that if either of such Subsidiaries is a Guarantor, the surviving entity shall be a
Guarantor), (iii) a Subsidiary of the Borrower may transfer all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another wholly owned
Subsidiary of the Borrower (provided that if the transferor in such a transaction is a Guarantor, then the transferee must either be the Borrower or a
Guarantor), and (iv) a Subsidiary of Brigham Exploration (other than the Borrower and its Subsidiaries) may merge with or into Brigham Exploration or a wholly owned Subsidiary of Brigham
Exploration (provided that if either of such Subsidiaries is a Guarantor, the surviving entity shall be a Guarantor),  provided in each case that
(A) no Event of Default exists or no Default would be caused thereby, and (B) if any Collateral is transferred
pursuant to this Section 6.04, the Borrower shall provide the Agent with ten Business Days' written notice prior to such transfer, and the Borrower or such Guarantor, as the case may be, owning
the Collateral after such transfer shall ratify and confirm the Lien on such Collateral and shall take all action reasonably requested by the Agent in respect of the continued priority and perfection
of the Lien over such Collateral. 


36









  





        Section 6.05    Sales of Assets.    None of the Credit Parties shall, nor shall any of the Credit Parties
permit any of its Subsidiaries to, discount or sell (with or without recourse) any of their notes receivable or accounts receivable. The Borrower shall not, nor shall it permit any of its Subsidiaries
to sell, assign, farm-out, convey or otherwise transfer any Hydrocarbon Interests except for (a) the sale of Hydrocarbons in the ordinary course of business, (b) the sale or
transfer of equipment that is no longer necessary for the business of such Person or contemporaneously replaced by equipment of at least comparable value and use, or (c) sales of Oil and Gas
Properties made in arm's length transactions for fair market value, not exceeding $3,000,000 in any period of twelve consecutive calendar months in the aggregate,  provided that no Default or Event of
Default has occurred and is continuing or would result from such sale. 



        Section 6.06    Restricted Payments.    Neither Brigham Exploration nor the Borrower shall make any Restricted
Payments except (a) as permitted under Section 6.07(a)(iii) or (b) any Preferred Shareholder Transaction. 


        Section 6.07    Investments and Acquisitions.    


        (a)  None
of the Credit Parties shall, nor shall any of the Credit Parties permit any of their Subsidiaries to, make or permit to exist any Investment, except: 



          (i)  Investments,
loans or advances reflected in the Financial Statements or that are disclosed to the Lenders in  Schedule 6.07; 


        (ii)  Investments
in Cash Equivalents; and 


        (iii)  Investments
by any Credit Party in the Borrower or a Person that is or will become within 10 Business Days after the making of such Investment a Guarantor in
accordance with Section 5.12 or that will, within ten (10) Business Days after the making of any such Investment merge or consolidate into such Credit Party,  provided that the Borrower may
only make Investments to Brigham Exploration or any Partner to pay federal or state taxes owing by any of them, payroll
and payroll related taxes and other reasonable general and administrative expenses, or consisting of forgiveness of indebtedness; 




        (b)  None
of the Credit Parties shall, nor shall any of the Credit Parties permit any of their Subsidiaries to, purchase any Hydrocarbon Interests not evaluated in any
Engineering Report or any pipelines, gas gathering systems gas plants, and similar assets related thereto in an aggregate amount in excess of $5,000,000 in any period of twelve consecutive calendar
months. 


        Section 6.08    Affiliate Transactions.    None of the Credit Parties shall, nor shall any of the Credit
Parties permit any of their Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of transactions (including, but not limited to, the purchase, sale, lease
or exchange of Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates (other than any
transaction between the Borrower, any Credit Party, or any Subsidiary of the Borrower) unless such transaction or series of transactions is not in violation of this Agreement and upon fair and
reasonable terms no less favorable to it than it would obtain in a comparable arm's length transaction with a Person that is not such an Affiliate. 



        Section 6.09    Compliance with ERISA.    None of the Credit Parties shall, nor shall any of the Credit Parties
permit any of their Subsidiaries to, directly or indirectly, (a) engage in, or permit any ERISA Affiliate to engage in, any transaction in connection with which any Credit Party or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to Section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code in excess
of $500,000; (b) terminate, or permit any ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result reasonably be expected to
result in any liability to any Credit 


37





 




Party or any ERISA Affiliate to the PBGC in excess of $500,000; (c) 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, any Credit Party or any ERISA Affiliate is required to pay as contributions thereto; (d) permit to exist, or allow any
ERISA Affiliate to permit to exist, any accumulated funding deficiency in excess of $500,000 within the meaning of Section 302 of ERISA or Section 412 of the Code, whether or not waived,
with respect to any Plan; (e) permit, or allow any ERISA Affiliate to permit, the actuarial present value of the benefit liabilities (as "actuarial present value of the benefit liabilities"
shall have the meaning specified in Section 4041 of ERISA) under any Plan maintained by any Credit Party or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current
value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities by an amount in excess of $500,000;
(f) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan; (g) acquire,
or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to any Credit Party or any ERISA Affiliate if such Person
sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (i) any Multiemployer Plan, or
(ii) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on
a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) incur, or permit any ERISA Affiliate to incur, a liability to or on
account of a Plan under Sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA which in the aggregate for all such liabilities exceeds $500,000; (i) contribute to or assume an obligation to
contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, 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 (j) amend or permit any ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that any Credit Party or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the Code. 


        Section 6.10    Sales and Leasebacks.    None of the Credit Parties shall, nor shall any of the Credit Parties
permit any of their Subsidiaries to, enter into any arrangement, directly or indirectly, with any Person whereby such Credit Party shall sell or transfer any of its Property, whether now owned or
hereafter acquired, and whereby such Credit Party shall then or thereafter rent or lease as lessee such Property or any part thereof or other Property which such Credit Party intends to use for
substantially the same purpose or purposes as the Property sold or transferred. 


        Section 6.11    Change of Business.    None of the Credit Parties shall, nor shall any of the Credit Parties
permit any of their Subsidiaries to, allow any material change to be made in the character of its business as an independent oil and gas exploration and production company 



        Section 6.12    Use of Proceeds.    The Borrower will not permit the proceeds of any Advance or Letters of
Credit to be used for any purpose other than those permitted by Section 5.09. Neither the Borrower nor any Person acting on behalf of the Borrower has taken or shall take, any action which
might cause any of the Subordinated Loan Documents to violate Regulation T, U or X or any other regulation of the Board of Governors of the Federal Reserve System 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. 



        Section 6.13    Gas Imbalances, Take-or-Pay or Other Prepayments.    Except as set
forth in Schedule 4.14, the Borrower shall not allow gas imbalances, take-or-pay or other prepayments with respect to the
Oil and Gas Properties of the Borrower and its Subsidiaries that would require the Borrower and its Subsidiaries to deliver 2.5% or more of the aggregate calendar quarter production 


38





 




from the Borrower's and its Subsidiaries' Hydrocarbons produced on a calendar quarter basis from such Hydrocarbon Interests at some future time without then or thereafter receiving full payment
therefor. 


        Section 6.14    Additional Subsidiaries.    Except as otherwise permitted by Section 6.07, none of the
Credit Parties shall, nor shall any of the Credit Parties permit any of their Subsidiaries to, create any additional Subsidiaries or make any additional Investment in a Subsidiary unless such Credit
Party has complied with Section 5.12. All Subsidiaries of the Borrower together at no time shall own or hold Oil and Gas Properties having Proven Reserves with a net discounted present value
calculated in the same manner as in the most recent Engineering Report in excess of 10% of the total net discounted present value of Proven Reserves of the Borrower and its Subsidiaries as reflected
in such Engineering Report (plus such Subsidiaries' Proven Reserved not included in such Engineering Report). Except as
otherwise permitted by Section 6.07(a)(iii), no assets may be transferred to a Subsidiary that is not a Guarantor. 


        Section 6.15    Limitation on Leases.    None of the Credit Parties shall, nor shall any of the Credit Parties
permit any of their Subsidiaries 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 including Capital
Leases but excluding leases of Hydrocarbon Interests and the equipment used thereon), under leases or lease agreements that would cause the aggregate amount of all payments made by the Credit Parties
and their Subsidiaries pursuant to all such leases or lease agreements to exceed $1,500,000 in any period of twelve consecutive calendar months during the life of such leases. 


        Section 6.16    Environmental Matters.    None of the Credit Parties shall, nor shall any of the Credit Parties
permit any of their Subsidiaries to, cause or permit any of its Property to be in violation of, or do anything to permit anything to be done that will subject any such Property to any remedial
obligations 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 or remedial obligations would cause a Material Adverse Change. 


        Section 6.17    Borrower as Operator.    Except for any Oil and Gas Properties sold in accordance with
Section 6.05, the Borrower shall not, and shall not permit any of its Subsidiaries to, during any calendar year, voluntarily resign as the operator of Oil and Gas Properties constituting more
than twenty-five percent (25%) of the value of the proved developed producing reserves evaluated in the Engineering Report applicable to such calendar year unless the Majority Lenders
deliver prior written approval of such resignations to the Borrower. 


        Section 6.18    Equity Interests of Partners.    Brigham Exploration will not permit any of Equity Interests of
any of the Partners to be owned or controlled by any Person other than Brigham Exploration or another Partner. 


        Section 6.19    Speculative Trading.    The Borrower shall not, nor shall it permit any of its Subsidiaries to,
purchase, assume, or hold a speculative position in any commodities market or futures market or enter into any Hydrocarbon Hedge Agreement, Interest Hedge Agreement or similar hedge arrangements for
speculative purposes; provided that any hedge arrangements which cover anticipated production volumes attributable to Proven Reserves of the Borrower
and its Subsidiaries within the limits set forth in Section 6.02(g) shall not be considered "speculative". 


        Section 6.20    Change of Name; Fiscal Year; Accounting Method.    None of the Credit Parties shall, nor shall
any of the Credit Parties permit any of their Subsidiaries to, change its name, fiscal year or method of accounting except as required by GAAP; provided
that any Credit Party may change its name if such Credit Party has given the Agent at least 30 days' (unless otherwise consented to by the Agent) prior written notice of such name change and
taken such action as the Agent deems reasonably necessary to continue the perfection of the Liens securing payment of the Subordinated Obligations. 


39





 



        Section 6.21    Current Ratio.    Brigham Exploration shall not permit the ratio of (a) its consolidated
current assets (including the Unused Commitment Amount, as such term is defined in the Senior Credit Agreement) of Brigham Exploration and its consolidated Subsidiaries to (b) their
consolidated current liabilities to be less than 1.00 to 1.00 at any time. 


        Section 6.22    Interest Coverage Ratio.    Brigham Exploration shall not permit the Interest Coverage Ratio as
of the end of any fiscal quarter (calculated quarterly at the end of each fiscal quarter) to be less than 2.75 to 1.0 for the twelve month period ending March 31, 2003; and thereafter, not less
than 3.25 to 1.0 for the twelve-month period ending June 30, 2003, and each twelve-month period ending at the end of each fiscal quarter. 



        Section 6.23    Restrictions on Limited Partners.    Brigham Exploration shall not permit either of the Limited
Partners to hold any Properties other than the limited partner interests in the Borrower. 


        Section 6.24    Advance Payment Contracts.    None of the Credit Parties will enter into or be a party to any
Advance Payment Contract with respect to any Oil and Gas Properties that are Collateral. 


 
 

ARTICLE VII    
    
    EVENTS OF DEFAULT; REMEDIES    
  


        Section 7.01    Events of Default.    The occurrence of any of the following events shall constitute an "Event
of Default" under any Subordinated Loan Document: 



        (a)    Payment.    The Borrower shall fail to (i) pay any principal of any Advance when the same becomes due
and payable, or (ii) pay any interest on any Subordinated Note, any fees, reimbursements, indemnifications, or other amounts payable in connection with the Subordinated Obligations, this
Agreement or any of the other Subordinated Loan Documents within three Business Days after the same becomes due and payable; 


        (b)    Representation and Warranties.    Any representation or warranty made or deemed to be made (i) by any
Credit Party in this Agreement or in any other Subordinated Loan Document, or (ii) by any Credit Party in connection with this Agreement or any other Subordinated Loan Document, shall prove to
have been incorrect in any material and adverse respect when made or deemed to be made; 



        (c)    Covenant Breaches.    Any Credit Party shall fail to perform or observe (i) any covenant contained in
Section 2.05(b), Section 5.02(a), Section 5.06(e), Section 5.12 or Article VI or (ii) any other term or covenant set forth in this Agreement or in any other
Subordinated Loan Document which is not covered by clause (i) above or any other provision of this Section 7.01 if such failure shall remain unremedied for 30 days after notice of
such breach or failure has been given to the Borrower by the Agent or any of the Lenders (through the Agent); 



        (d)    Cross Defaults.    (i) Any Credit Party shall fail to pay any principal of or premium or interest on its
Debt which is outstanding in a principal amount of at least $1,000,000 individually or when aggregated with all such Debt of the Credit Parties so in default (but excluding Debt evidenced by the
Subordinated Notes) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to such Debt; (ii) any other event shall occur or condition shall exist under any agreement or instrument (including,
without limitation, the Senior Credit Agreement) relating to Debt which is outstanding in a principal amount of at least $1,000,000 individually or when aggregated with all such Debt of the Credit
Parties so in default, and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit
the acceleration of, the maturity of such Debt; or (iii) any such Debt shall 



40





 





be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or optional prepayment), prior to the stated maturity thereof; 



        (e)    Insolvency.    Any Credit Party shall generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against any Credit Party seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding instituted against any Credit Party either such proceeding shall remain undismissed for a period of 60 days or any of
the actions sought in such proceeding shall occur; or any Credit Party shall take any corporate action to authorize any of the actions set forth above in this Section 7.01(e); 


        (f)    Judgments.    Any judgment or order for the payment of money in excess of $1,000,000 (excluding liabilities to
the extent covered by insurance if the insurer has confirmed that such insurance covers
such liabilities) shall be rendered against any Credit Party and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; 


        (g)    Subordinated Loan Documents.    Any provision of any Subordinated Loan Document shall for any reason cease to
be in full force and effect and valid, binding and enforceable in all material respects in accordance with their terms or cease in any material respect 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 otherwise permitted by this Agreement, or any Credit Party shall so state in writing; 



        (h)    Brigham Exploration.    Any Change of Control shall occur; or 


        (i)    Operator.    The Borrower ceases to be the primary operating entity for Brigham Exploration and its
Subsidiaries and the Borrower and its Subsidiaries cease to be the only Brigham Exploration entities owning Oil and Gas Properties. 




        Section 7.02    Optional Acceleration of Maturity.    If any Event of Default (other than an Event of Default
pursuant to Section 7.01(e)) shall have occurred and be continuing, then, and in any such event: 



        (a)  the
Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Commitments and the obligation of
each Lender to make extensions of credit hereunder, including making Advances, to be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Majority Lenders, by notice to the Borrower, declare all principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the
Subordinated Notes, and the other Subordinated Loan Documents to be forthwith due and payable, whereupon all such amounts shall become and be forthwith due and payable in full, without notice of
intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other
notices, all of which are hereby expressly waived by the Borrower; and 


        (b)  the
Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Subordinated Security
Instruments, this Agreement, and any other Subordinated Loan Document for the ratable benefit of the Lenders by appropriate proceedings. 



41





 





        Section 7.03    Automatic Acceleration of Maturity.    If any Event of Default pursuant to
Section 7.01(e) shall occur: 



        (a)  (i) the
Commitments and the obligation of each Lender to make extensions of credit hereunder, including making Advances, shall terminate, and (ii) all
principal, interest, fees, reimbursements, indemnifications, and all other amounts payable under this Agreement, the Subordinated Notes, and the other Subordinated Loan Documents shall become and be
forthwith due and payable in full, without notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to
accelerate, notice of acceleration, and all other notices, all of which are hereby expressly waived by the Borrower; and 



        (b)  the
Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Subordinated Security
Instruments, this Agreement, and any other Subordinated Loan Document for the ratable benefit of the Lenders by appropriate proceedings. 




        Section 7.04    Right of Set off.    Upon the occurrence and during the continuance of any Event of Default,
the Agent and each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing by the Agent or such Lender to or for the credit or the account of the Borrower against any and all of the obligations
of the Borrower now or hereafter existing under this Agreement, the Subordinated Notes held by the Agent or such Lender, and the other Subordinated Loan Documents, irrespective of whether or not the
Agent or such Lender shall have made any demand under this Agreement, such Subordinated Notes, or such other Subordinated Loan Documents, and although such obligations may be unmatured. The Agent and
each Lender agrees to promptly notify the Borrower after any such set off and application made by the Agent or such Lender, provided that the failure to
give such notice shall not affect the validity of such set off and application. The rights of the Agent and each Lender under this Section 7.04 are in addition to any other rights and remedies
(including, without limitation, other rights of set off) that the Agent or such Lender may have. 


        Section 7.05    Non-exclusivity of Remedies.    No remedy conferred upon the Agent and the Lenders
is intended to be exclusive of any other remedy, and each remedy shall be cumulative of all other remedies existing by contract, at law, in equity, by statute or otherwise. 



        Section 7.06    Application of Proceeds.    From and during the continuance of any Event of Default, any monies
or property actually received by the Agent pursuant to this Agreement or any other Subordinated Loan Document, the exercise of any rights or remedies under any Subordinated Security Instrument or any
other agreement with the Borrower, any Guarantor or any of the Borrower's Subsidiaries which secures any of the Subordinated Obligations, shall be applied in the following order: 



        (a)  First,
to the payment of all amounts, including without limitation costs and expenses incurred in connection with the collection of such proceeds and the payment of any
part of the Subordinated
Obligations, due to the Agent under any of the expense reimbursement or indemnity provisions of this Agreement or any other Subordinated Loan Document, any Subordinated Security Instrument or other
collateral documents, and any applicable law; 


        (b)  Second,
to the ratable payment of accrued but unpaid commitment fees under this Agreement and the Subordinated Notes; 


        (c)  Third,
to the ratable payment of accrued but unpaid interest on the Advances owing under this Agreement and the Subordinated Notes; 



42





 




        (d)  Fourth,
ratably, according to the then unpaid amounts thereof, without preference or priority of any kind among them, to the ratable payment of all other Subordinated
Obligations then due and payable which relate to Advances and which are owing to the Agent and the Lenders; and 


        (e)  Fifth,
the remainder, if any, to the Borrower or its Subsidiaries, or its respective successors or assigns, or such other Person as may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct. 



 
 

ARTICLE VIII    
    
    THE GUARANTY    
  


        Section 8.01    Liabilities Guaranteed.    Each Guarantor hereby, joint and severally, irrevocably and
unconditionally guarantees the prompt payment at maturity of the Subordinated Obligations. 



        Section 8.02    Nature of Guaranty.    This guaranty is an absolute, irrevocable, completed and continuing
guaranty of payment and not a guaranty of collection, and no notice of the Subordinated Obligations or any extension of credit already or hereafter contracted by or extended to the Borrower need be
given to any Guarantor. This guaranty may not be revoked by any Guarantor and shall continue to be effective with respect to the Subordinated Obligations arising or created after any attempted
revocation by such Guarantor and shall remain in full force and effect until the Subordinated Obligations are paid
in full and the Commitments are terminated, notwithstanding that from time to time prior thereto no Subordinated Obligations may be outstanding. The Borrower and the Lenders may modify, alter,
rearrange, extend for any period and/or renew from time to time, the Subordinated Obligations, and the Lenders may waive any Default or Events of Default without notice to any Guarantor and in such
event each Guarantor will remain fully bound hereunder on the Subordinated Obligations. This guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of
the Subordinated Obligations is rescinded or must otherwise be returned by any of the Lenders upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though such payment
had not been made. This guaranty may be enforced by the Agent and any subsequent holder of any of the Subordinated Obligations and shall not be discharged by the assignment or negotiation of all or
part of the Subordinated Obligations. Each Guarantor hereby expressly waives presentment, demand, notice of non-payment, protest and notice of protest and dishonor, notice of Default or
Event of Default, and also notice of acceptance of this guaranty, acceptance on the part of the Lenders being conclusively presumed by the Lenders' request for this guaranty and the Guarantors' being
party to this Agreement. 


        Section 8.03    Agent's Rights.    Each Guarantor authorizes the Agent, without notice or demand and without
affecting any Guarantor's liability hereunder, to take and hold security for the payment of its obligations under this Article VIII or the Subordinated Obligations, and exchange, enforce, waive
and release any such security; and to apply such security and direct the order or manner of sale thereof as the Agent in its discretion may determine, and to obtain a guaranty of the Subordinated
Obligations from any one or more Persons and at any time or times to enforce, waive, rearrange, modify, limit or release any of such other Persons from their obligations under such guaranties. 


        Section 8.04    Guarantor's Waivers.    


        (a)    General.    Each Guarantor waives any right to require any of the Lenders to (i) proceed against the
Borrower or any other person liable on the Subordinated Obligations, (ii) enforce any of their rights against any other guarantor of the Subordinated Obligations, (iii) proceed or
enforce any of their rights against or exhaust any security given to secure the Subordinated Obligations, (iv) have the Borrower joined with any Guarantor in any suit arising out of this
Article VIII or the Subordinated Obligations, or (v) pursue any other remedy in the Lenders' powers whatsoever. The Lenders shall not 


43





 




be required to mitigate damages or take any action to reduce, collect or enforce the Subordinated Obligations. Guarantor waives any defense arising by reason of any disability, lack of corporate
authority or power, or other defense of the Borrower or any other guarantor of the Subordinated Obligations, and shall remain liable hereon regardless of whether the Borrower or any other guarantor be
found not liable thereon for any reason. Whether and when to exercise any of the remedies of the Lenders under any of the Subordinated Loan Documents shall be in the sole and absolute discretion of
the Agent, and no delay by the Agent in enforcing any remedy, including delay in conducting a foreclosure sale, shall be a defense to any Guarantor's liability under this Article VIII. 


        (b)    Subrogation.    Until the Subordinated Obligations have been paid in full, each Guarantor waives all rights of
subrogation or reimbursement against the Borrower, whether arising by contract or operation
of law (including, without limitation, any such right arising under any federal or state bankruptcy or insolvency laws) and waives any right to enforce any remedy which the Lenders now have or may
hereafter have against the Borrower, and waives any benefit or any right to participate in any security now or hereafter held by the Agent or any Lender. 


        Section 8.05    Maturity of Obligations, Payment.    Each Guarantor agrees that if the maturity of any of the
Subordinated Obligations is accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Article VIII without demand or notice to any
Guarantor. Each Guarantor will, forthwith upon notice from the Agent, jointly and severally pay to the Agent the amount due and unpaid by the Borrower and guaranteed hereby. The failure of the Agent
to give this notice shall not in any way release any Guarantor hereunder. 



        Section 8.06    Agent's Expenses.    If any Guarantor fails to pay the Subordinated Obligations after notice
from the Agent of the Borrower's failure to pay any Subordinated Obligations at maturity, and if the Agent obtains the services of an attorney for collection of amounts owing by any Guarantor
hereunder, or obtaining advice of counsel in respect of any of their rights under this Article VIII, or if suit is filed to enforce this Article VIII, or if proceedings are had in any
bankruptcy, probate, receivership or other judicial proceedings for the establishment or collection of any amount owing by any Guarantor hereunder, or if any amount owing by any Guarantor hereunder is
collected through such proceedings, each Guarantor jointly and severally agrees to pay to the Agent the Agent's reasonable attorneys' fees. 


        Section 8.07    Liability.    It is expressly agreed that the liability of each Guarantor for the payment of
the Subordinated Obligations guaranteed hereby shall be primary and not secondary. 


        Section 8.08    Events and Circumstances Not Reducing or Discharging any Guarantor's Obligations.    Each
Guarantor hereby consents and agrees to each of the following to the fullest extent permitted by law, and agrees that each Guarantor's obligations under this Article VIII shall not be released,
diminished, impaired, reduced or adversely affected by any of the following, and waives any rights (including without limitation rights to notice) which each Guarantor might otherwise have as a result
of or in connection with any of the following: 



        (a)    Modifications, etc.    Any renewal, extension, modification, increase, decrease, alteration or rearrangement of
all or any part of the Subordinated Obligations, or of the Subordinated Notes, or this Agreement or any instrument executed in connection therewith, or any contract or understanding between the
Borrower and any of the Lenders, or any other Person, pertaining to the Subordinated Obligations; 



        (b)    Adjustment, etc.    Any adjustment, indulgence, forbearance or compromise that might be granted or given by any
of the Lenders to the Borrower or any Guarantor or any Person liable on the Subordinated Obligations; 


        (c)    Condition of the Borrower or any Guarantor.    The insolvency, bankruptcy arrangement, adjustment, composition,
liquidation, disability, dissolution, death or lack of power of the Borrower 



44





 


or any Guarantor or any other Person at any time liable for the payment of all or part of the Subordinated Obligations; or any dissolution of the Borrower or any Guarantor, or any sale, lease or
transfer of any or all of the assets of the Borrower or any Guarantor, or any changes in the shareholders, partners, or members of the Borrower or any Guarantor; or any reorganization of the Borrower
or any Guarantor; 


        (d)    Invalidity of Obligations.    The invalidity, illegality or unenforceability of all or any part of the
Subordinated Obligations, or any document or agreement executed in connection with the Subordinated Obligations, for any reason whatsoever, including without limitation the fact that the Subordinated
Obligations, or any part thereof, exceed the amount permitted by law, the act of creating the Subordinated Obligations or any part thereof is ultra vires, the officers or representatives executing the
documents or otherwise creating the Subordinated Obligations acted in excess of their authority, the Subordinated Obligations violate applicable usury laws, the Borrower has valid defenses, claims or
offsets (whether at law, in equity or by agreement) which render the Subordinated Obligations wholly or partially uncollectible from the Borrower, the creation, performance or repayment of the
Subordinated Obligations (or the execution, delivery and performance of any document or instrument representing part of the Subordinated Obligations or executed in connection with the Subordinated
Obligations, or given to secure the repayment of the Subordinated Obligations) is illegal, uncollectible, legally impossible or unenforceable, or this Agreement or other documents or instruments
pertaining to the Subordinated Obligations have been forged or otherwise are irregular or not genuine or authentic; 


        (e)    Release of Obligors.    Any full or partial release of the liability of the Borrower on the Subordinated
Obligations or any part thereof, of any co-guarantors, or any other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay,
perform, guarantee or assure the payment of the Subordinated Obligations or any part thereof, it being recognized, acknowledged and agreed by any Guarantor that such Guarantor may be required to pay
the Subordinated Obligations in full without assistance or support of any other Person, and no Guarantor has been induced to enter into this Article VIII on the basis of a contemplation,
belief, understanding or agreement that other parties other than the Borrower will be liable to perform the Subordinated Obligations, or the Lenders will look to other parties to perform the
Subordinated Obligations. 


        (f)    Other Security.    The taking or accepting of any other security, collateral or guaranty, or other assurance of
payment, for all or any part of the Subordinated Obligations; 



        (g)    Release of Collateral etc.    Any release, surrender, exchange, subordination, deterioration, waste, loss or
impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or
securing payment of, all or any part of the Subordinated Obligations; 


        (h)    Care and Diligence.    The failure of the Lenders or any other Person to exercise diligence or reasonable care
in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security; 



45







  




        (i)    Status of Liens.    The fact that any collateral, security, security interest or lien contemplated or intended
to be given, created or granted as security for the repayment of the Subordinated Obligations shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other
security interest or lien, it being recognized and agreed by each Guarantor that no Guarantor is entering into this Article VIII in reliance on, or in contemplation of the benefits of, the
validity, enforceability, collectibility or value of any of the collateral for the Subordinated Obligations; 


        (j)    Payments Rescinded.    Any payment by the Borrower to the Lenders is held to constitute a preference under the
bankruptcy laws, or for any reason the Lenders are required to refund such payment or pay such amount to the Borrower or someone else; or 



        (k)    Other Actions Taken or Omitted.    Any other action taken or omitted to be taken with respect to this
Agreement, the Subordinated Obligations, or the security and collateral therefor, whether or not such action or omission prejudices any Guarantor or increases the likelihood that any Guarantor will be
required to pay the Subordinated Obligations pursuant to the terms hereof, it being the unambiguous and unequivocal intention of each Guarantor that each Guarantor shall be obligated to joint and
severally pay the Subordinated Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not
otherwise or particularly described herein, except for the full and final payment and satisfaction of the Subordinated Obligations. 




        Section 8.09    Subordination of All Guarantor Claims.    As used herein, the term "Guarantor Claims" shall
mean all debts and liabilities of the Borrower or any Subsidiary of the Borrower to any Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the
obligation of the Borrower or such Subsidiary thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be
evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be
created, or the manner in which they have been or may hereafter be acquired by any Guarantor. The Guarantor Claims shall include without limitation all rights and claims of any Guarantor against the
Borrower or any Subsidiary of the Borrower arising as a result of subrogation or otherwise as a result of such Guarantor's payment of all or a portion of the Subordinated Obligations. Until the
Subordinated Obligations shall be paid and satisfied in full and each Guarantor shall have performed all of its obligations hereunder, no Guarantor shall receive or collect, directly or indirectly,
from the Borrower or any Subsidiary of the Borrower or any other party any amount upon the Guarantor Claims during the occurrence and the continuance of an Event of Default. 



        Section 8.10    Claims in Bankruptcy.    In the event of receivership, bankruptcy, reorganization, arrangement,
debtor's relief, or other insolvency proceedings involving the Borrower or any Subsidiary of the Borrower, as debtor, the Lenders shall have the right to prove their claim in any proceeding, so as to
establish their rights hereunder and receive directly from the receiver, trustee or other court custodian, dividends and payments which would otherwise be payable upon Guarantor Claims. Each Guarantor
hereby assigns such dividends and payments to the Lenders, subject to the prior rights of the Senior Agent and the Senior Lenders. Should the Agent or any Lender receive, for application upon the
Subordinated Obligations, any such dividend or payment which is otherwise payable to any Guarantor, and which, as between the Borrower or any Subsidiary of the Borrower and any Guarantor, shall
constitute a credit upon the Guarantor Claims, then upon payment in full of the Subordinated Obligations, such Guarantor shall become subrogated to the rights of the Lenders to the extent that such
payments to the Lenders on the Guarantor Claims have contributed toward the liquidation of the Subordinated Obligations, and such subrogation shall be with respect to that proportion of the
Subordinated Obligations which would have been unpaid if the Agent or a Lender had not received dividends or payments upon the Guarantor Claims. 


46





 

        Section 8.11    Payments Held in Trust.    In the event that notwithstanding Section 8.09 and
Section 8.10, any Guarantor should receive any funds, payments, claims or distributions which is prohibited by such Sections, such Guarantor agrees to hold in trust for the Lenders an amount
equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions
except to pay them promptly to the Agent or the Senior Agent, and each Guarantor covenants promptly to pay the same to the Agent or the Senior Agent. 


        Section 8.12    Liens Subordinate.    Each Guarantor agrees that any liens, security interests, judgment liens,
charges or other encumbrances upon the Borrower's or any Subsidiary of the Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens,
security interests, judgment liens, charges or other encumbrances upon the Borrower's or any Subsidiary of the Borrower's assets securing payment of the Subordinated Obligations, regardless of whether
such encumbrances in favor of any Guarantor, the Agent or the Lenders presently exist or are hereafter created or attach. 



        Section 8.13    Guarantor's Enforcement Rights.    Without the prior written consent of the Lenders, no
Guarantor shall (a) exercise or enforce any creditor's right it may have against the Borrower or any Subsidiary of the Borrower, or (b) foreclose, repossess, sequester or otherwise take
steps or institute any action or proceeding (judicial or otherwise, including without limitation the commencement of or joinder in any liquidation, bankruptcy, rearrangement, debtor's relief or
insolvency proceeding) to enforce any lien, mortgages, deeds of trust, security interest, collateral rights, judgments or other encumbrances on assets of the Borrower or any Subsidiary of the Borrower
held by Guarantor. 


 
 

ARTICLE IX    
    
    THE AGENT    
  


        Section 9.01    Authorization and Action.    Each Lender hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof and of the other Subordinated Loan Documents, together with such powers
as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement or any other Subordinated Loan Document (including, without limitation, enforcement or collection
of the Subordinated Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Subordinated Notes;  provided that the Agent
shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement,
any other Subordinated Loan Document, or applicable law. 


        Section 9.02    Agent's Reliance, Etc.    Neither the Agent nor any of its directors, officers, agents, or
employees shall be liable for any action taken or omitted to be taken (INCLUDING THE AGENT'S OWN NEGLIGENCE) by it or them under or in connection with
this Agreement or the other Subordinated Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent:
(a) may treat the payee of any Subordinated Note as the holder thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (b) may consult with legal counsel (including counsel for any Credit Party), independent public accountants, and other experts selected by it and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants, or experts; (c) makes no warranty or representation to any Lender and
shall not be responsible to any Lender for any statements, warranties, or representations made in or in connection with this Agreement or the other Subordinated Loan Documents; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance 


47





 




of any of the terms, covenants or conditions of this Agreement or any other Subordinated Loan Document on the part of any Credit Party or to inspect the property (including the books and records) of
any Credit Party; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency, or value of this Agreement or any other
Subordinated Loan Document; and (f) shall incur no liability under or in respect of this Agreement or any other Subordinated Loan Document by acting upon any notice, consent, certificate, or
other instrument or writing (which may be by telecopier or telex) believed by it to be genuine and signed or sent by the proper party or parties. 



        Section 9.03    The Agent and Its Affiliates.    With respect to its Commitments, the Advances made by it and
the Subordinated Notes issued to it, the Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent. The term
"Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Agent in its individual capacity. The Agent and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with, any Credit Party, and any Person who may do business with or own securities of any Credit Party, all as if the Agent were not an
agent hereunder and without any duty to account therefor to the Lenders. 



        Section 9.04    Lender Credit Decision.    Each Lender acknowledges that it has, independently and without
reliance upon the Agent or any other Lender and based on the Financial Statements and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement. Each Lender also acknowledges that it shall, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement. 



        Section 9.05    Indemnification.    THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE AGENT
AND EACH AFFILIATE THEREOF AND ITS DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE CREDIT PARTIES), ACCORDING TO THEIR RESPECTIVE PRO RATA SHARES FROM AND AGAINST ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT UNDER THIS AGREEMENT OR ANY OTHER SUBORDINATED LOAN DOCUMENT (INCLUDING
THE AGENT'S OWN NEGLIGENCE), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF
SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT
LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES)
INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE)
OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER SUBORDINATED LOAN DOCUMENT, TO THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH BY THE CREDIT
PARTIES, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY THE AGENT AS A RESULT OF THE AGENT'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.


48





 



        Section 9.06    Successor Agent.    The Agent may resign at any time by giving written notice thereof to the
Lenders and the Borrower and may be removed at any time with or without cause by the Majority Lenders upon receipt of written notice from the Majority Lenders to such effect. Upon receipt of notice of
any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent with, if any Event of Default has not occurred and is not continuing, the consent of the
Borrower, which consent shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Majority Lenders with the consent of the Borrower, and shall have accepted such
appointment, within 30 days after the resigning Agent's giving of notice of resignation or the Majority Lenders' removal of the resigning Agent, then the resigning Agent may, on behalf of the
Lenders and the Borrower, appoint a successor Agent, which shall be, in the case of a successor agent, a commercial bank having a combined capital and surplus of at least $500,000,000.00. Upon the
acceptance of any appointment as Agent by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges, and duties of the resigning
Agent, and the resigning Agent shall be discharged from its duties and obligations under this Agreement and the other Subordinated Loan Documents. After any resigning Agent's resignation or removal
hereunder as Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other
Subordinated Loan Documents. 


        Section 9.07    Collateral Matters.    


        (a)  The
Agent is authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time, to take any actions with
respect to any Collateral or Subordinated Security Instruments which may be necessary to perfect and maintain Acceptable Security Interests in and Liens upon the Collateral granted pursuant to the
Subordinated Security Instruments. The Agent is further authorized on behalf of the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time, to take any
action in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Lenders under the Subordinated Loan Documents or applicable Legal Requirements. 


        (b)  Each
of the Lenders irrevocably authorizes the Agent to release any Lien granted to or held by the Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all outstanding Advances and all other Obligations payable under this Agreement and under any other Subordinated Loan Document; (ii) constituting property
sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement or the other Subordinated Loan Documents; (iii) constituting property in which
any Credit Party owned no interest at the time the Lien was granted or at any time thereafter; (iv) constituting Oil and Gas Properties to which no Proven Reserves are attributed that currently
encumbered under the Mortgage Amendments; (v) if approved, authorized or ratified in writing by the Majority Lenders or all the Lenders, as the case may be, as required by Section 10.01
or (vi) as otherwise permitted by this Agreement. Upon the request of the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular types or items of
Collateral pursuant to this Section 9.07. The Agent hereby agrees, from time to time upon the prior written request of the Borrower, to execute and deliver such releases and/or termination
documents as may be necessary to effectively release any and all of the Liens granted to or held by the Agent upon any Collateral described in this Section 9.07(b). 


        (c)  The
powers conferred on the Agent under this Agreement and the other Subordinated Security Instruments are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the reasonable care of any Collateral in its possession and the accounting for monies or other property actually received by it
hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The
Agent shall be deemed to have exercised reasonable care as to the custody and preservation of the Collateral in its possession if the Collateral is 


49





 




accorded treatment substantially equal to that which the Agent accords its own property, provided that the Agent shall have no responsibility for
taking any necessary steps to preserve rights against any parties with respect to any Collateral. 


 
 

ARTICLE X    
    
    MISCELLANEOUS    
  


        Section 10.01    Amendments, Etc.    No amendment or waiver of any provision of this Agreement, the
Subordinated Notes, or any other Subordinated Loan Document, nor consent to any departure by any Credit Party therefrom, shall in any event be effective unless the same shall be in writing and signed
by the Majority Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given;  provided that: 



        (a)  no
amendment, waiver, or consent shall, unless in writing and signed by all of the Lenders and the Borrower, do any of the following: 



          (i)  waive
any of the conditions specified in Section 3.01 or Section 3.02; 


        (ii)  increase
the Commitments of the Lenders; 


        (iii)  change
the percentage of Lenders which shall be required for the Lenders or any of them to take any action hereunder or under any other Subordinated Loan Document; 


        (iv)  amend
Section 2.11 or this Section 10.01; 


        (v)  amend
the definition of "Majority Lenders"; 


        (vi)  release
any Guarantor from its obligations under Article VIII; 


      (vii)  permit
any Credit Party to enter into any merger or consolidation with or into any other Person, except as permitted by Section 6.04, or amend
Section 6.04; 


      (viii)  release
any Collateral, except for releases of Collateral in connection with dispositions permitted by this Agreement; 


        (ix)  reduce
the principal of, or interest on, the Subordinated Notes or any fees or other amounts payable hereunder or under any other Subordinated Loan Document to or for
the benefit of the Lenders; 


        (x)  postpone
any date fixed for any payment of principal of, or interest on, the Subordinated Notes or any fees or other amounts payable hereunder or extend the Maturity
Date; or 


        (xi)  amend
or waive any provision of, nor consent to any departure by any party thereto from, the Intercreditor and Subordination Agreement; 




        (b)  no
amendment, waiver or consent shall, unless in writing and signed by the Agent in addition to the Lenders required above to take such action, affect the rights or
duties of the Agent, as the case may be, under this Agreement or any other Subordinated Loan Document. 




        Notwithstanding
any of the foregoing provisions of this Section 10.01, the Agent may release Collateral relating to sales or transfers of property permitted under this Agreement
or any other Subordinated Loan Document; provided that in no event shall Agent release all or substantially all of the Collateral without the prior
written consent of each of the Lenders. 


        Section 10.02    Notices, Etc.    All notices and other communications shall be in writing (including, without
limitation, telecopy or telex) and mailed by certified mail, return receipt requested, telecopied, telexed, hand delivered, or delivered by a nationally recognized overnight courier, at the address
for the 


50





 




appropriate party specified in Schedule 1 or at such other address as shall be designated by such party in a written notice to the other
parties. All such notices and communications shall, when so mailed, telecopied, telexed, or hand delivered or delivered by a nationally recognized overnight courier, be effective when received if
mailed, when telecopy transmission is completed, when confirmed by telex answer-back, or when delivered by such messenger or courier, respectively, except that notices and communications
to the Agent pursuant to Article II, Article IX or Article X shall not be effective until received by the Agent. 


        Section 10.03    No Waiver; Remedies.    No failure on the part of any Lender or the Agent to exercise, and no
delay in exercising, any right hereunder or under any Subordinated Note shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. 


        Section 10.04    Costs and Expenses.    The Borrower agrees to pay on demand (a) all reasonable
out-of-pocket costs and expenses of the Agent in connection with the preparation, execution, delivery, administration, modification, and amendment of this Agreement, the
Subordinated Notes, and the other Subordinated Loan Documents including, without limitation, the reasonable fees and out of pocket expenses of counsel for the Agent with respect to advising the Agent
as to its rights and responsibilities under this Agreement, and (b) all out of pocket costs and expenses, if any, of the Agent and each Lender (including, without limitation, reasonable counsel
fees and expenses of the Agent and each Lender) in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of this Agreement, the Subordinated Notes, and the
other Subordinated Loan Documents. 


        Section 10.05    Binding Effect.    This Agreement shall become effective when it shall have been executed by
each of the Credit Parties and the Agent, and when the Agent shall have, as to each Lender, either received a counterpart hereof executed by such Lender or been notified by such Lender that such
Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Credit Parties, the Agent and each Lender and their respective successors and assigns, except that the
Borrower shall not have the right to assign its rights or delegate its duties under this Agreement or any interest in this Agreement without the prior written consent of each Lender. 


        Section 10.06    Lender Assignments and Participations.    


        (a)    Assignments.    Any Lender may assign to one or more banks or other entities all or any portion of its rights
and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Subordinated Notes held by it);  provided that (i) the
amount of the Commitments and Advances of such Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall be, if to an entity other than a Lender, not less than $5,000,000.00, (ii) each such assignment shall be to an
Eligible Assignee, (iii) the parties to each such assignment shall execute and
deliver to the Agent, for its acceptance and recording in the Register, an Assignment and Acceptance, together with the Subordinated Notes subject to such assignment, and (iv) each Eligible
Assignee (other than an Eligible Assignee that is a Lender or an Affiliate of a Lender) shall pay to the Agent a $3,500 administrative fee. Any such assignment need not be ratable as among the
Facilities. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least three
Business Days after the execution thereof unless otherwise waived by the Agent in its sole discretion, (A) the assignee thereunder shall be a party hereto for all purposes and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) such Lender thereunder
shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this
Agreement (and, in the case of an Assignment 


51






 




and Acceptance covering all or the remaining portion of such Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). 


        (b)    Term of Assignments.    By executing and delivering an Assignment and Acceptance, the Lender thereunder and the
assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, such Lender makes no
representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency of value of this Agreement or any other instrument or document furnished pursuant hereto; (ii) such Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any Credit Party or the performance or observance by the Borrower or its Subsidiaries of any of their obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recently
delivered financial statements pursuant to Section 5.06 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Lender or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. 


        (c)    The Register.    The Agent shall maintain at its address referred to in Section 10.02 a copy of each
Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Advances
owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest
error, and each of the Credit Parties, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. 



        (d)    Procedures.    Upon its receipt of an Assignment and Acceptance executed by a Lender and an Eligible Assignee,
together with the Subordinated Notes subject to such assignment, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of the attached  Exhibit A,
(i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register, and
(iii) give prompt notice thereof to the Borrower. Within five Business Days after its receipt of such notice, the Borrower shall execute and deliver to the Agent in exchange for the surrendered
Subordinated Notes (A) if such Eligible Assignee has acquired a Commitment, a new Subordinated Note to the order of such Eligible Assignee in an amount equal to such Commitment assumed by it
pursuant to such Assignment and Acceptance and (B) if such Lender has retained any Commitment hereunder, a new Subordinated Note to the order of such Lender in an amount equal to the Commitment
retained by it hereunder. Such new Subordinated Note shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the attached  Exhibit E.



        (e)    Participations.    Each Lender may sell participations to one or more banks or other entities in or to all or a
portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitments, the Advances owing to it and the Subordinated Notes held by it);  provided
that (i) such Lender's obligations under this Agreement (including, without limitation, its Commitments to the Borrower hereunder) shall
remain unchanged, (ii) such Lender shall remain solely 


52





 




responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Subordinated Notes for all purposes of this Agreement,
(iv) the Credit Parties, the Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this
Agreement, and (v) such Lender shall not require the participant's consent to any matter under this Agreement, except for change in the principal amount of the Subordinated Notes, reductions in
fees or interest, releasing all or substantially all of any Collateral or Brigham Exploration or the General Partner as a Guarantor, permitting any Credit Party to enter into any merger or
consolidation with or into any other (except as permitted hereby), postponement of any date fixed for any payment of principal of, or interest on, the Subordinated Notes or any fees or other amounts
payable hereunder, or extensions of the Maturity Date. The Borrower hereby agrees that participants shall have the same rights under Section 2.13, Section 2.14 and Section 10.07
as a Lender to the extent of their respective participations. 


        Section 10.07    INDEMNIFICATION.    THE BORROWER SHALL INDEMNIFY THE AGENT, THE LENDERS AND EACH AFFILIATE
THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS FROM, AND DISCHARGE, RELEASE, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, OR DAMAGES WHICH
MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THEM IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THIS AGREEMENT OR ANY OTHER SUBORDINATED
LOAN DOCUMENT (INCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES, OR EXPENSE INCURRED BY REASON OF THE PERSON BEING INDEMNIFIED'S OWN NEGLIGENCE OR STRICT LIABILITY) AND INCLUDING WITHOUT
LIMITATION ENVIRONMENTAL LIABILITIES, BUT EXCLUDING ANY SUCH LOSSES, LIABILITIES, CLAIMS, DAMAGES, OR EXPENSES INCURRED BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PERSON TO BE
INDEMNIFIED. 


        Section 10.08    Execution in Counterparts.    This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 



        Section 10.09    Survival of Representations, Etc.    All representations and warranties contained in this
Agreement or made in writing by or on behalf of the Borrower in connection herewith shall survive the execution and delivery of this Agreement and the Subordinated Loan Documents, the making of the
Advances and any investigation made by or on behalf of the Lenders, none of which investigations shall diminish any Lender's right to rely on such representations and warranties. All obligations of
the Borrower provided for in Section 2.13, Section 2.14(c), Section 10.04 and Section 10.07 and all of the obligations of the Lenders in Section 10.05 shall survive
any termination of this Agreement and repayment in full of the Subordinated Obligations. 



        Section 10.10    Severability.    In case one or more provisions of this Agreement or the other Subordinated
Loan Documents shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality, and enforceability of the remaining provisions contained herein or therein
shall not be affected or impaired thereby. 


        Section 10.11    GOVERNING LAW.    EXCEPT AS OTHERWISE EXPRESSLY STATED IN ANY SUBORDINATED SECURITY
INSTRUMENT, THIS AGREEMENT, THE SUBORDINATED NOTES AND THE OTHER SUBORDINATED LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 


53





 



        Section 10.12    SUBMISSION TO JURISDICTION; WAIVERS.    THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: 



        (a)  SUBMITS
FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER SUBORDINATED LOAN DOCUMENTS TO WHICH IT IS A PARTY, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF; 


        (b)  CONSENTS
THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME; 



        (c)  AGREES
THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 10.02 OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO; 


        (d)  AGREES
THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION; AND 



        (e)  WAIVES,
TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS
SECTION 10.12(E) ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 




        Section 10.13    WAIVER OF JURY TRIAL.    EACH OF THE CREDIT PARTIES, THE LENDERS AND THE AGENT HEREBY
ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY AND HAS CONSULTED WITH COUNSEL OF ITS CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER SUBORDINATED LOAN DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 


        Section 10.14    ORAL AGREEMENTS.    THIS AGREEMENT AND THE SUBORDINATED LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO. 


54









   
        Section 10.15    Dissemination of Information.    The Agent and each Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information may be disclosed (a) to 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 Governmental Authority in connection with banking regulations or supervision; (c) to the extent required by applicable Legal
Requirements or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) to the extent required, in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (f) subject to an agreement for the benefit of the Credit Parties containing provisions
substantially the same as those of this Section 10.15 or any other confidentiality obligation referred to herein, to (i) any participant or Eligible Assignee or any other Person
acquiring an interest in the Subordinated Loan Documents (each a "Transferee") and any prospective Transferee or (ii) any direct or indirect contractual counterparty or prospective counterparty
(or such contractual counterparty's or prospective counterparty's professional advisor) to any credit derivative transaction relating to obligations of Credit Parties; (g) with the prior
written 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 or (ii) becomes available
to the Agent or any Lender on a nonconfidential basis from a source other than any Credit Party. In addition, the Agent or any Lender may disclose the existence of this Agreement and information about
this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agent and the Lenders in connection with the administration and management of
this Agreement, the other Subordinated Loan Documents, and the Advances. For the purposes of this Section 10.15, "Information" means all information received from, or on behalf of, any Credit
Parties relating to any Credit Party or their business, other than any such information that is available to any Agent or any Lender on a nonconfidential basis prior to disclosure by any Credit Party;  provided that, in the case of information received from any Credit Party after the date hereof, such information is clearly identified in writing at the
time of delivery as confidential; and provided, further, that notwithstanding the foregoing, each
Engineering Report shall be deemed to be confidential regardless of whether such Engineering Report is identified in writing at the time of delivery as confidential. Any Person required to maintain
the confidentiality of Information as provided in this Section 10.15 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. 


        Section 10.16    Production Proceeds.    Notwithstanding that, by the terms of the various Subordinated
Security Instruments, the Credit Parties are and will be assigning to the Agent and the Lenders all of the "Production Proceeds" (as defined therein) accruing to the Property covered thereby, so long
as no Event of Default has occurred the Credit Parties may continue to receive from the purchasers of production all such Production Proceeds, subject, however, to the Liens created under the
Subordinated Security Instruments, which Liens are hereby affirmed and ratified. Upon the occurrence of an Event of Default, the Agent and the Lenders may exercise all rights and remedies granted
under the Subordinated Security Instruments, including the right to obtain possession of all Production Proceeds
then held by the Credit Parties or to receive directly from the purchasers of production all other Production Proceeds. In no case shall any failure, whether intentional or inadvertent, by the Agent
or the Lenders to collect directly any such Production Proceeds constitute in any way a waiver, remission or release of any of their rights under the Subordinated Security Instruments, nor shall any
release of any Production Proceeds by the Agent or the Lenders to the Credit Parties constitute a waiver, remission, or release of any other Production Proceeds or of any rights of the Agent or the
Lenders to collect other Production Proceeds thereafter. 


        Section 10.17    Amendment and Restatement.    The Borrower, the Agent and the Lenders have agreed that this
Agreement is an amendment and restatement of the Existing Subordinated Credit Agreement in its entirety and the terms and provisions hereof supersede the terms and provisions thereof, and this
Agreement is not a new or substitute credit agreement or novation of the Existing Subordinated Credit Agreement. 


55







   
        EXECUTED as of the date first above written. 



	 	 	BORROWER:
	

 	
 	

BRIGHAM OIL & GAS, L.P.
	

 	
 	

By:	
 	

Brigham, Inc., its General Partner
	

 	
 	

By:	
 	

/s/ WARREN J. LUDLOW
 Name: Warren J. Ludlow

Title: Secretary
	

 	
 	
GUARANTORS:
	

 	
 	

BRIGHAM EXPLORATION COMPANY
	

 	
 	

By:	
 	

/s/ WARREN J. LUDLOW
 Name: Warren J. Ludlow

Title: Secretary
	

 	
 	

BRIGHAM, INC.
	

 	
 	

By:	
 	

/s/ WARREN J. LUDLOW
 Name: Warren J. Ludlow

Title: Secretary
	

 	
 	
AGENT:
	

 	
 	

THE ROYAL BANK OF SCOTLAND plc,

as Agent
	

 	
 	

By:	
 	

/s/ PHILLIP BALLARD
 Name: Phillip Ballard

Title: Senior Vice President
	

 	
 	
LENDERS:
	

 	
 	

THE ROYAL BANK OF SCOTLAND plc
	

 	
 	

By:	
 	

/s/ PHILLIP BALLARD
 Name: Phillip Ballard

Title: Senior Vice President




56






  



 
 

EXHIBIT A    
    
    FORM OF ASSIGNMENT AND ACCEPTANCE    
  


Dated                        ,
             


        Reference is made to the Amended and Restated Subordinated Credit Agreement dated as of March [    ], 2003 (as the same may be
amended or modified from time-to-time, the "Subordinated Credit Agreement") among Brigham Oil & Gas, L.P., a Delaware limited partnership (the "Borrower"), Brigham
Exploration Company, a Delaware corporation, Brigham, Inc., a Nevada corporation, the lenders party thereto (the "Lenders"), and The Royal Bank of Scotland plc, as agent (the "Agent") for the
Lenders. Capitalized terms not otherwise defined in this Assignment and Acceptance shall have the meanings assigned to them in the Subordinated Credit Agreement. 


        Pursuant
to the terms of the Subordinated Credit Agreement,                        wishes to assign and delegate    %(1)
 of its rights and obligations under the Subordinated Credit
Agreement. Therefore,                        ("Assignor"), ("Assignee"), and the Agent agree as follows: 




	(1)
	Specify
percentage in no more than 5 decimal points. 



        1.    The
Assignor hereby sells and assigns and delegates to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, without recourse to the Assignor and
without representation or warranty except for the representations and warranties specifically set forth in clauses (i) and (ii) of Section 2, a    % interest in and to
all of the Assignor's rights and obligations under the Subordinated Credit Agreement as of the Effective Date (as defined below), including, without limitation, such
percentage interest in the Assignor's Advances owing to the Assignor, and the Subordinated Note held by the Assignor. 



        2.    The
Assignor (i) represents and warrants that, prior to executing this Assignment and Acceptance, the aggregate outstanding principal amount of Advances owed to it
by the Borrower is
$                                         
 ; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest
is free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties, or representations made in, or in
connection with, the Subordinated Credit Agreement or any other Subordinated Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency, or value of the Subordinated
Credit Agreement or any other Subordinated Loan Document or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any Credit Party or the performance or observance by any Credit Party of any of its respective obligations under the Subordinated Credit Agreement or any
other Subordinated Loan Document or any other instrument or document furnished pursuant thereto; and (v) attaches the Subordinated Note referred to in paragraph 1 above and requests that
the Agent exchange such Subordinated Note for a new Subordinated Note dated                        ,
            in the principal amount of
$                                         
 payable to the order of the
Assignee, and [a new Subordinated Note dated                        ,
            in the principal amount of
$                        payable to the order of the Assignor.] 


        3.    The
Assignee (i) confirms that it has received a copy of the Subordinated Credit Agreement, together with copies of the most recent financial statements referred
to in Section 5.06 thereof 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 Acceptance;
(ii) agrees that it will, independently and without reliance upon the 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 Subordinated Credit Agreement or any other Subordinated Loan 


A-1





 




Document; (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Subordinated Credit Agreement and any other Subordinated Loan
Document as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all
of the obligations which by the terms of the Subordinated Credit Agreement or any other Subordinated Loan Document are required to be performed by it as a Lender; (v) specifies as its Lending
Office (and address for notices) the office set forth beneath its name on the signature pages hereof; (vi) attaches the forms prescribed by the Internal Revenue Service of the United States
certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Subordinated Credit
Agreement and the Subordinated Notes or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty;(2) and
(vii) represents that it is an Eligible Assignee. 




	(2)
	If
the Assignee is organized under the laws of a jurisdiction outside the United States. 





        4.    The
Assignee confirms that it has received a copy of the Intercreditor and Subordination Agreement and expressly agrees that it will be bound, in its capacity as a
Subordinated Lender, by the terms thereof. The Assignee shall execute such other agreements, documents and instruments as the Senior Agent may reasonably request to effect the purpose of this
paragraph 4. 


        5.    The
effective date for this Assignment and Acceptance shall be dated                        ,
            (the "Effective Date")(3) and following the execution of this
Assignment and Acceptance, the Agent will record it. 




	(3)
	See
Section 11.06 of the Subordinated Credit Agreement. Such date shall be at least three Business Days after the date of this Assignment and Acceptance, unless otherwise
waived by the Agent in its sole discretion. 



        6.    Upon
such recording, and as of the Effective Date, (i) the Assignee shall be a party to the Subordinated Credit Agreement for all purposes, and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Subordinated Credit Agreement. 



        7.    Upon
such recording, from and after the Effective Date, the Agent shall make all payments under the Subordinated Credit Agreement and the Subordinated Note in respect of
the interest assigned hereby (including, without limitation, all payments of principal, interest, letter of credit fees and commitment fees) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Subordinated Credit Agreement and the Subordinated Note for periods prior to the Effective Date directly between themselves. 


        8.    This
Assignment and Acceptance shall be governed by, and construed and enforced in accordance with, the laws of the State of New York. 


A-2





 

        The
parties hereto have caused this Assignment and Acceptance to be duly executed as of the date first above written. 



	 	 	[ASSIGNOR]
	

 	
 	

 	
 	

 
	 	 	By:	 	    

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	

 	
 	

 
	 	 	Address:	 	    

	 	 	 	 	    

	 	 	 	 	    

	 	 	Attention:	 	    

	 	 	Telecopy No: (XXX) XXX-XXXX
	

 	
 	

 	
 	

 
	 	 	[ASSIGNEE]
	

 	
 	

 	
 	

 
	 	 	By:	 	    

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	

 	
 	

 
	 	 	Lending Office
	

 	
 	

 	
 	

 
	 	 	Address:	 	    

	 	 	 	 	    

	 	 	 	 	    

	 	 	Attention:	 	    

	 	 	Telecopy No: (XXX) XXX-XXXX




A-3






  



 
 

EXHIBIT B    
    
    Form of Compliance Certificate    
  


FOR THE PERIOD FROM            , 200    TO            , 200  


        This certificate dated as of            , 200    is prepared pursuant to Amended and Restated Subordinated
Credit Agreement dated as of March
[    ], 2003 (as the same may be amended or modified from time-to-time, the "Subordinated Credit
Agreement") among Brigham Oil & Gas, L.P., a Delaware limited partnership (the "Borrower"), Brigham Exploration Company,
a Delaware corporation, Brigham, Inc., a Nevada corporation, the lenders party thereto (the "Lenders"), and The Royal Bank of Scotland plc, as
agent (the "Agent") for the Lenders. Unless otherwise defined in this certificate, capitalized terms that are defined in the Subordinated Credit Agreement shall have the meanings assigned to them by
the Subordinated Credit Agreement. 


        Brigham
Exploration hereby certifies (a) that no Default or Event of Default has occurred or is continuing, (b) that all of the representations and warranties made by each
of the Credit Parties in the Subordinated Credit Agreement and the other Loan Documents are true and correct in all material respects as if made on this date (unless such representations and
warranties are stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respect as of such earlier date), and
(c) that as of the date hereof, the following amounts and calculations were true and correct: 



	1.	 	Section 6.22 Current Ratio.	 	 	 	 
	

 	
 	

(a)	
 	

consolidated current assets of Brigham Exploration and its consolidated Subsidiaries (including the Unused Revolving Commitment Amount as of the date of calculation)	
 	

$	
 	

 
	

 	
 	

(b)	
 	

consolidated current liabilities of Brigham Exploration and its consolidated Subsidiaries	
 	

$	
 	

 
	

 	
 	

Current Ratio = (a) divided by (b)	
 	

 	
 	

 
	

 	
 	

Minimum Current Ratio	
 	

1.00 to 1.00
	

 	
 	

Compliance	
 	

Yes	
 	

No
	

2.	
 	

Section 6.23 Interest Coverage Ratio.	
 	

 	
 	

 
	

 	
 	

(a)	
 	

Consolidated Net Income	
 	

$	
 	

 
	

 	
 	

(b)	
 	

Interest Expense	
 	

$	
 	

 
	

 	
 	

(c)	
 	

taxes, depreciation, amortization, depletion, and other non-cash charges	
 	

$	
 	

 
	

 	
 	

(d)	
 	

all non-cash income	
 	

$	
 	

 
	

 	
 	

(e)	
 	

EBITDA = (a) + (b) + (c) - (d)	
 	

$	
 	

 
	

 	
 	

Interest Coverage Ratio = (e) divided by (b)	
 	

 	
 	

 
	

 	
 	

Minimum Current Ratio for twelve-month period ending March 31, 2003	
 	

2.75 to 1.00
	

 	
 	

For twelve-month period ending June 30, 2003 and each twelve-month period ending at the end of each fiscal quarter thereafter	
 	

3.25 to 1.00
	

 	
 	

Compliance	
 	

Yes	
 	

No





        IN
WITNESS THEREOF, I have hereto signed my name to this Compliance Certificate as an officer of Brigham Exploration and not in my individual capacity as of            ,
200  . 


B-1






  



 
 

EXHIBIT C    
  


[RESERVED]  


C-1








  



 
 

EXHIBIT D    
  


[RESERVED]  


D-1









  




 
 




 EXHIBIT E  


 

FORM OF SUBORDINATED NOTE  


 

THIS INSTRUMENT IS SUBORDINATED TO THE EXTENT AND IN THE MANNER PROVIDED IN THE INTERCREDITOR AND SUBORDINATION AGREEMENT REFERRED TO BELOW.  


 

SUBORDINATED NOTE  



	$23,000,000.00	 	March [21], 2003





        For value received, the undersigned BRIGHAM OIL & GAS, L.P., a Delaware limited partnership (the
"Borrower"), hereby promises to pay to the order of            (the "Payee") the principal
amount
of            No/100 Dollars ($            ) or, if less, the aggregate outstanding principal amount of the Advances (as defined
in the Subordinated Credit Agreement referred to below) made
by the Payee to the Borrower, together with interest on the unpaid principal amount of the Advances from the date of such Advances until such principal amount is paid in full, at such interest rates,
and at such times, as are specified in the Subordinated Credit Agreement. The Borrower may make prepayments on this Subordinated Note in accordance with the terms of the Subordinated Credit Agreement. 


        This
Subordinated Note is one of the Subordinated Notes referred to in, and is entitled to the benefits of, and is subject to the terms of, the Amended and Restated Subordinated Credit
Agreement dated as of March [21], 2003, (as the same may be amended or modified from time to time, the "Subordinated Credit Agreement"), among the Borrower, Brigham Exploration
Company, a Delaware corporation, Brigham, Inc., a Nevada corporation, the lenders party thereto (the "Lenders"), and The Royal Bank of Scotland
plc, as agent (the "Agent") for the Lenders. Capitalized terms used in this Subordinated Note that are defined in the Subordinated Credit Agreement and
not otherwise defined in this Subordinated Note have the meanings assigned to such terms in the Subordinated Credit Agreement. The Subordinated Credit Agreement, among other things,
(a) provides for the making of the Advances by the Payee to the Borrower in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness
of the Borrower resulting from each such Advance being evidenced by this Subordinated Note, and (b) contains provisions for acceleration of the maturity of this Subordinated Note upon the
happening of certain events stated in the Subordinated Credit Agreement and for prepayments of principal prior to the maturity of this Subordinated Note upon the terms and conditions specified in the
Subordinated Credit Agreement. 


        In
connection with the execution and delivery of the Subordinated Credit Agreement, the Agent, the Borrower, Brigham Exploration Company, Brigham, Inc., and
Société Générale, as administrative agent (the "Senior Agent") under that certain Second
Amended and Restated Credit Agreement dated as of March [21], 2003, (as the same may be amended or modified from time to time, the "Senior Credit Agreement"), among the
Borrower, Brigham Exploration Company, Brigham, Inc., the lenders party thereto, have entered into that certain Amended and Restated Intercreditor and Subordination Agreement dated as of March
[21], 2003 (as the same may be amended or supplemented from time to time, the "Intercreditor and Subordination Agreement").
Payments of principal and interest on this Subordinated Note are subordinated to the extent provided in the Intercreditor and Subordination Agreement. 


        Both
principal and interest are payable in lawful money of the United States of America to the Agent at 101 Park Avenue, 12th Floor, New York, New York 10178 or such other
location or address in New York specified by the Agent to the Borrower in same day funds. The Payee shall record payments of principal made under this Subordinated Note, but no failure of the Payee to
make such recordings shall affect the Borrower's repayment obligations under this Subordinated Note. 



        This
Subordinated Note is secured by the Subordinated Security Instruments and guaranteed pursuant to Article VIII of the Subordinated Credit Agreement. 


E-1





 



        Except
as specifically provided in the Subordinated Credit Agreement, the Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration, and
any other notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder of this Subordinated Note shall operate as a waiver of such rights. 


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


        THIS
SUBORDINATED NOTE AND THE OTHER SUBORDINATED LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 


        THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 


[SIGNATURE
OF BRIGHAM OIL & GAS, L.P.] 


E-2








  



 
 

EXHIBIT F    
    
    FORM OF SECOND MORTGAGE AMENDMENT    
  


AMENDED AND RESTATED SECOND MORTGAGE, DEED OF TRUST,

ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT,

FIXTURE FILING, AND FINANCING STATEMENT


FROM



BRIGHAM
OIL & GAS, L.P. 


a
Delaware limited partnership, 


as
grantor and mortgagor, 


TO 


PHILLIP
BALLARD, 


as
Trustee 


FOR
THE BENEFIT OF 


THE
ROYAL BANK OF SCOTLAND plc, 


as
Agent, 


as
beneficiary, 


AND
TO 


THE
ROYAL BANK OF SCOTLAND plc, 


as
Agent, 


as
Mortgagee 


NOTICE TO MORTGAGOR:  


        A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. WITH RESPECT TO PORTIONS OF THE MORTGAGED PROPERTY LOCATED IN THE STATE OF OKLAHOMA,
SUCH POWER OF SALE IS GRANTED PURSUANT TO THE OKLAHOMA MORTGAGE FORECLOSURE ACT (AS DEFINED BELOW). # IN CERTAIN STATES, A POWER OF SALE MAY ALLOW TRUSTEE OR MORTGAGEE, AS APPLICABLE, TO TAKE THE
MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF AN EVENT OF DEFAULT BY MORTGAGOR UNDER THIS INSTRUMENT. THIS INSTRUMENT CONTAINS AFTER-ACQUIRED
PROPERTY PROVISIONS. THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES. THIS INSTRUMENT COVERS ALL PRODUCTS AND PROCEEDS OF THE MORTGAGED PROPERTY.


        THIS INSTRUMENT COVERS THE INTEREST OF MORTGAGOR IN MINERALS OR THE LIKE (INCLUDING OIL AND GAS) BEFORE EXTRACTION AND THE SECURITY INTEREST CREATED BY THIS
INSTRUMENT ATTACHES TO SUCH MINERALS AS EXTRACTED AND TO ACCOUNTS
RESULTING FROM THE SALE THEREOF AT THE WELLHEAD. THIS INSTRUMENT COVERS MORTGAGOR'S INTEREST IN FIXTURES. THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS.


F-1





 
 
 

AMENDED AND RESTATED SECOND MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING, AND FINANCING STATEMENT    
  


        THE OBLIGATIONS UNDER THIS INSTRUMENT ARE EXPRESSLY SUBORDINATED TO THAT CERTAIN AMENDED AND RESTATED MORTGAGE, DEED OF TRUST, ASSIGNMENT
OF PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING, AND FINANCING STATEMENT DATED AS OF THE DATE HEREOF THAT HAS BEEN EXECUTED BY MORTGAGOR (AS HEREINAFTER DEFINED) IN FAVOR OF
SOCIÉTÉ GÉNÉRALE ("SG"), THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE SENIOR LENDERS (AS HEREINAFTER DEFINED), THAT PROVIDES AND IS
INTENDED TO PROVIDE, A FIRST PRIORITY DEED OF TRUST AND MORTGAGE LIEN AND A FIRST PRIORITY SECURITY INTEREST IN THE MORTGAGED PROPERTY (AS HEREINAFTER DEFINED) TO SECURE THE OBLIGATIONS MORE
PARTICULARLY DESCRIBED IN THAT CERTAIN SECOND AMENDED AND RESTATED CREDIT AGREEMENT BY AND AMONG MORTGAGOR, BRIGHAM EXPLORATION COMPANY, BRIGHAM, INC., SG, THE ROYAL BANK OF SCOTLAND PLC
("RBS"), AND EACH OF THE OTHER LENDERS PARTY THERETO FROM TIME TO TIME (COLLECTIVELY, "SENIOR LENDERS"). THIS INSTRUMENT IS SUBJECT TO THE TERMS AND PROVISIONS OF THAT CERTAIN AMENDED AND RESTATED
INTERCREDITOR AGREEMENT DATED MARCH    , 2003 BY AND BETWEEN THE SENIOR LENDERS.


        THIS
AMENDED AND RESTATED SECOND MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING, AND FINANCING STATEMENT (this "Second
Mortgage") is made effective as of March    , 2003 (the "Effective Date") by BRIGHAM
OIL & GAS, L.P., a Delaware limited partnership, whose address for notice is 6300 Bridge Point Parkway, Building 2, Suite 500, Austin, Texas 78730, as grantor and
mortgagor ("Mortgagor") to: 



PHILLIP BALLARD, as Trustee, whose address for notice is 600 Travis Street, Suite 6070, Houston, TX 77002
("Trustee") for the benefit of THE ROYAL BANK OF SCOTLAND plc, as beneficiary, whose address for notice
is 600 Travis Street, Suite 6070, Houston, TX 77002, as Agent (together with any successor agents, "Agent"); and 


Agent,
as mortgagee ("Mortgagee"). 



RECITALS: 


        A.    Mortgagor,
Brigham, Inc., a Nevada Corporation, Brigham Exploration Company, a Delaware corporation, Agent, and certain other lenders are parties to that certain
Amended and Restated Subordinated Credit Agreement dated effective as of March     , 2003, and all supplements thereto and amendments or modifications thereof, and all agreements,
given in substitution therefore or in restatement, renewal or extension thereof, in whole or in part (the "Amended and Restated Subordinated Credit
Agreement"). Agent and the other lenders party, from time to time, to the Amended and Restated Subordinated Credit Agreement may be referred to periodically herein as,
individually, a "Lender" and, collectively, as the "Lenders." 


        B.    Mortgagor,
the lenders party thereto, and Agent entered into that certain Subordinated Credit Agreement dated October 31, 2000 (the
"Existing Subordinated Credit Agreement"). 



        C.    Pursuant
to the Amended and Restated Subordinated Credit Agreement, Mortgagor has agreed to enter into this Second Mortgage. In addition, it is a condition to the
obligation of each Lender to make such Lender's initial Advance as part of the initial Borrowing that this Second Mortgage be executed and delivered to Trustee and to Mortgagee. 


        D.    This
Mortgage constitutes for all purposes an amendment and restatement of the security instruments more particularly described on  Schedule I attached hereto and made a part hereof (collectively, the
"Original Mortgages") and not a new or substitute security instrument. 


F-2





 



        NOW,
THEREFORE, in consideration of the foregoing, in order to comply with the terms, provisions, and conditions of the Amended and Restated Subordinated Credit Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Mortgagor hereby enters into this Second Mortgage on the following terms and conditions: 


ARTICLE I  


 Granting Clause; Description of Indebtedness Secured  


        Section 1.01    Granting Clause.    In order to secure the payment of the Indebtedness (as hereinafter defined
in Section 1.03) and in order to secure the performance of the covenants, obligations, agreements, warranties, and undertakings herein contained, (x) with respect to any portion of the
Mortgaged Property (as hereinafter defined) that is located in or is subject to the laws of the State of Texas or any other state pursuant to the law of which a deed of trust is a lawful security
instrument, Mortgagor does hereby GRANT, BARGAIN, SELL, ASSIGN, PLEDGE, GIVE, MORTGAGE, WARRANT, SET OVER, TRANSFER, HYPOTHECATE, and CONVEY unto Trustee and Trustee's successors and substitutes in
trust hereunder IN TRUST WITH POWER OF SALE, for the use and benefit of Agent and the Lenders, all of Mortgagor's right, title, and interest, whether now owned or hereafter acquired, in the real and
personal property, rights, titles, interests and estates described hereinafter (the "Trust Estate Property") and (y) with respect to any portion of the Mortgaged Property (as hereinafter
defined) that is located in or is subject to the laws of the State of Oklahoma or any state pursuant to the law of which a deed of trust is not a lawful security instrument, Mortgagor does hereby
GRANT, BARGAIN, SELL, ASSIGN, PLEDGE, GIVE, MORTGAGE, WARRANT, SET OVER, TRANSFER, HYPOTHECATE, and CONVEY to Mortgagee for the use and benefit of Agent and the Lenders all of Mortgagor's right,
title, and interest, whether now owned or hereafter acquired, in the real and personal property, rights, titles, interests and estates described hereinafter (the
"Non-Trust Estate Property") (the Trust Estate Property and the Non-Trust Estate Property are herein collectively called the
"Mortgaged Property"): 



        (a)  All
oil and gas and/or oil, gas and mineral leases and leasehold interests, fee mineral interests, term mineral interests, subleases, farmouts, royalties, overriding
royalties, net profits interests, production payments and similar interests or estates described on Exhibit A attached hereto or constituting interests in the lands described on
Exhibit A attached hereto, including, without limitation any reversionary or carried interests relating to any of the foregoing, together with any instrument executed in amendment, correction,
modification, confirmation, renewal or extension of the same (collectively, the "Hydrocarbon Property"), and including specifically, but without
limitation, the undivided interests of Mortgagor which are represented, warranted, and more particularly described on Exhibit A hereto; 


        (b)  All
rights, titles, interests, estates, tenements, hereditaments, and appurtenances now owned or existing or hereafter acquired by Mortgagor in and to: (i) all
production units and drilling and spacing units (and the property covered thereby) which may affect all or any portion of the Hydrocarbon Property including those units now or hereafter pooled or
unitized with the Hydrocarbon Property; (ii) all presently existing or future unitization, communitization, pooling agreements and declarations of pooled units and the units created thereby,
including, but not limited to, pooling orders of the Oklahoma Corporation Commission (together with all other units created under orders, regulations, rules or other official acts of any Governmental
Authority having jurisdiction over any of the Mortgaged Property and any units created solely among working interest owners pursuant to operating agreements or otherwise) which may affect all or any
portion of the Hydrocarbon Property including,
without limitation, those units, if any, which may be described or referred to on attached Exhibit A; (iii) all operating agreements,
production sales or other contracts, farmout agreements, farm-in agreements, area of mutual interest agreements, joint development agreements, joint exploration agreements, equipment
leases and 



F-3





 





other agreements described or referred to in this Second Mortgage or which cover, affect or relate to any of the Hydrocarbon Property or interests in the Hydrocarbon Property described or referred to
herein or on Exhibit A or to the production, sale, purchase, exchange, processing, handling, storage, transporting or marketing of the Hydrocarbons (hereinafter defined) from or attributable to
such Hydrocarbon Property or interests; and (iv) subject to applicable restrictions on disclosure and/or transfer, all geological, geophysical, engineering, accounting, title, legal, and other
technical or business data concerning the Mortgaged Property, the Hydrocarbons in which Mortgagor can otherwise grant a security interest, and all books, files, records, magnetic media, computer
records, and other forms of recording or obtaining access to such data; 


        (c)  All
rights, titles, interests and estates now owned or hereafter acquired by Mortgagor in and to all oil, gas, coal seam gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons produced or to be produced in conjunction therewith from a well bore and all products, by-products, and
other substances derived therefrom or the processing thereof, and all other minerals and substances produced in conjunction with such substances, including, but not limited to, sulfur, geothermal
steam, water, carbon dioxide, helium, and any and all minerals, ores, or substances of value and the products and proceeds therefrom (collectively called the
"Hydrocarbons") in and under and which may be produced and saved from or attributable to the Hydrocarbon Property, the lands pooled or unitized
therewith and Mortgagor's interests therein, including all oil in tanks, gas in storage, and all rents, issues, profits, proceeds, products, revenues and other income from or attributable to the
Hydrocarbon Property, the lands pooled or unitized therewith and Mortgagor's interests therein which are subjected to the liens and security interests of this Second Mortgage; 



        (d)  All
tenements, hereditaments, appurtenances and properties in anywise appertaining, belonging, affixed or incidental to the Hydrocarbon Property or the rights, titles,
interests and estates described or referred to in paragraphs (a) and (b) above, which are now owned or which may hereafter be acquired by Mortgagor, including, without limitation, any
and all property, real or personal, now owned or hereafter acquired and situated upon, used, held for use, or useful in connection with the operating, working or development of any of such Hydrocarbon
Property or the lands pooled or unitized therewith (excluding drilling rigs, trucks, automotive equipment or other personal property which may be taken to the 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, field separators, liquid extraction plants, plant
compressors, pumps, pumping units, pipelines, sales and flow lines, gathering systems, field gathering systems, salt water disposal facilities, 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, servitudes, licenses and other surface and subsurface rights together with all additions, substitutions, replacements, accessions and attachments to
any and all of the foregoing properties; 


        (e)  Any
property that may from time to time hereafter, by delivery or by writing of any kind, be subjected to the lien and security interest hereof by Mortgagor or by anyone
on Mortgagor's behalf; and Trustee is hereby authorized to receive the same at any time as additional security hereunder; 


        (f)    All
of the rights, titles, interests and estates of every nature whatsoever now owned or hereafter acquired by Mortgagor in and to the Hydrocarbon Property, including,
without limitation, all such rights, titles, interests and estates as the same may be enlarged by the discharge of any payments out of production or by the removal of any charges or Permitted
Encumbrances (as hereinafter defined in Section 3.01) to which any of such rights, titles, interests or estates are subject, or otherwise; all rights of Mortgagor to liens and security
interests securing payment of proceeds from the sale of production from the Mortgaged Property, including, but not limited to, 



F-4





 





those liens and security interests provided for in Section 9.343 of the Texas Business and Commerce Code, as amended from time to time; together with any and all renewals and extensions of any
of such liens and security interests; all contracts and agreements supplemental to or amendatory of or in substitution for the contracts and agreements described or mentioned above, including, without
limitation, any such contracts and agreements comprising or giving rise to any portion of the Hydrocarbon Property; and any and all additional interests of any kind hereafter acquired by Mortgagor in
and to such rights, titles, interests or estates; 


        (g)  All
accounts, contract rights, inventory, general intangibles, insurance contracts and insurance proceeds constituting a part of, relating to or arising out of those
portions of the Mortgaged Property which are described in paragraphs (a) through (f) above and all proceeds and products of all such portions of the Mortgaged Property and payments in
lieu of production (such as "take or pay" payments), whether such proceeds or payments are goods, money, documents, instruments, chattel paper, securities, accounts, general intangibles, fixtures,
real property, or other assets; 


        (h)  All
payments received in lieu of production from the Mortgaged Property (regardless of whether such payments accrued, and/or the events which gave rise to such payments
occurred, on, before, or after the Effective Date), including, without limitation, "take or pay" payments and similar payments, payments received in settlement of or pursuant to a judgment rendered
with respect to take or pay or similar obligations or other obligations under a production sales contract, payments received in buyout or buydown or other settlement of a production sales contract,
and payments received under a gas balancing or similar agreement as a result of (or received otherwise in settlement of or pursuant to a judgment rendered with respect to) rights held by Mortgagor as
a result of Mortgagor (and/or its predecessors in title) taking or having taken less Hydrocarbons from lands covered by the Mortgaged Property (or lands pooled or unitized therewith) than their
ownership of the Mortgaged Property would entitle Mortgagor to receive; and 


        (i)    Any
rights or interests of Mortgagor under any present or future hedge or swap agreements, cap, floor, collar, exchange, forward or other hedge or protection agreements
or transactions relating to Hydrocarbons, or any option with respect to such agreement or transaction now existing or hereafter entered into by or on behalf of Mortgagor. 




        TO
HAVE AND TO HOLD the Trust Estate Property unto Trustee for the benefit of Agent and the Lenders, and Trustee's successors in trust and assigns forever, and the Non-Trust
Estate Property unto Mortgagee for the benefit of Agent and the Lenders, and Mortgagee's successors and assigns forever, in each case upon the terms, provisions, and conditions set forth herein.
Mortgagor does hereby bind itself, and its successors and permitted assigns, to warrant and forever defend all and singular the Mortgaged Property unto Trustee and Mortgagee against every Person
whomsoever lawfully claiming or to claim the same, or any part thereof. 


        WITH RESPECT TO ANY MORTGAGED PROPERTY LOCATED IN THE STATE OF OKLAHOMA, MORTGAGOR HEREBY GRANTS TO MORTGAGEE AND TO TRUSTEE THE RIGHT AND POWER TO FORECLOSE THIS
SECOND MORTGAGE PURSUANT TO THE OKLAHOMA POWER OF SALE MORTGAGE # FORECLOSURE ACT, 46 OKLAHOMA STATUTES, §40, ET. SEQ. (THE "OKLAHOMA
MORTGAGE FORECLOSURE ACT") AS PRESENTLY IN FORCE AND AS MAY BE AMENDED FROM TIME TO TIME.


        Section 1.02    Grant of Security Interest.    To further secure the Indebtedness (as hereinafter defined in
Section 1.03), Mortgagor hereby grants to Mortgagee for the benefit of Agent and the Lenders, subject to the reservations and restrictions set forth herein below, a security interest in and to
the Mortgaged Property (whether now or hereafter acquired by operation of law or otherwise) insofar as the Mortgaged Property consists of equipment, accounts, contract rights, general intangibles
(subject in the case of geological and geophysical data (including without limitation raw data and 


F-5





 




interpretations) contract rights and general intangibles to any existing restrictions on disclosure and/or transfer), insurance contracts, insurance proceeds, inventory, Hydrocarbons, fixtures and
any and all other personal property of any kind or character defined in and subject to the provisions of the Uniform Commercial Code presently in effect in the jurisdiction in which the Mortgaged
Property is situated ("Applicable UCC"), including the proceeds and products from any and all of such personal property, whether such proceed or
products are goods, money, documents, instruments, chattel paper, securities, accounts, general intangibles, fixtures, real or immovable property, personal or movable property, or other assets. In
addition to all other rights and remedies afforded to Mortgagee pursuant to this Second Mortgage, upon the happening of any Event of Default, Mortgagee is and shall be entitled to all of the rights,
powers and remedies afforded a secured party by the Applicable UCC with reference to the personal property and fixtures in which Mortgagee has been granted a security interest herein, or Trustee or
Mortgagee may proceed as to both the real and personal property covered hereby in accordance with the rights and remedies granted under this Second Mortgage in respect of the real property covered
hereby. Such rights, powers and remedies shall be cumulative and in addition to those granted to Trustee or Mortgagee under any other provision of this Second Mortgage or under any other Security
Instrument. Written notice mailed to Mortgagor as provided herein at least ten (10) days prior to the date of public sale of any part of the Mortgaged Property which is personal property
subject to the provisions of the Applicable UCC, or prior to the date after which private sale of any such part of the Mortgaged Property will be made, shall constitute reasonable notice. It is
Mortgagor's intention that the security interest granted pursuant to this Mortgage encumber Mortgagor's interest in As-Extracted Collateral (as hereinafter defined). For purposes of this
Mortgage, the term "As-Extracted Collateral" shall have the meaning ascribed to such term in the Applicable UCC. 



        Section 1.03    Indebtedness Secured.    This Second Mortgage is executed and delivered by Mortgagor to secure
and enforce the following (collectively, the "Indebtedness"): 



        (a)  Full
payment and performance of all indebtedness and other obligations now or hereafter incurred or arising pursuant to the provisions of the Amended and Restated
Subordinated Credit Agreement; 


        (b)  Full
payment and performance of all promissory notes, letters of credit, or other evidences of indebtedness issued from time to time pursuant to the Amended and Restated
Subordinated Credit Agreement, including, without limitation, those certain promissory notes having a maturity date
of                        , 2006; 


        (c)  All
indebtedness and other obligations now or hereafter incurred or arising pursuant to the guarantee by the Guarantors in favor of Agent and the Lenders pursuant to the
Amended and Restated Subordinated Credit Agreement, pursuant to which guarantee the Guarantors have guaranteed the prompt payment at maturity of the Subordinated Obligations (as defined in the Amended
and Restated Subordinated Credit Agreement). 


        (d)  Payment
of and performance of any and all present or future obligations of Mortgagor or any Credit Party according to the terms of any present or future interest or
currency rate swap, rate cap, rate floor, rate collar, exchange transaction, forward rate agreement, or other exchange or rate protection agreements or any option with respect to any such transaction
now existing or hereafter entered into between Mortgagor or any Credit Party, on the one hand, and any party that was a Lender (or any Affiliate of a Lender) at the time such transaction was entered
into, on the other; 


        (e)  Payment
of and performance of any and all present or future obligations of Mortgagor or any Credit Party according to the terms of any present or future swap agreements,
cap, floor, collar, exchange transaction, forward agreement, or other exchange or protection agreements relating to Hydrocarbons, or any option with respect to any such transaction now existing or
hereafter entered into between Mortgagor or any Credit Party, on the one hand, and any party 



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that was a Lender (or any Affiliate of a Lender) at the time such transaction was entered into, on the other; and 


        (f)    Without
limiting the generality of the foregoing, all post-petition interest, expenses, and other duties and liabilities with respect to indebtedness or
other obligations described in the foregoing subsections (a) through (f) of this Section 1.03, which would be owed but for the fact that such duties and liabilities are
unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding. 




        Section 1.04    Fixture Filing, Etc.    Without in any manner limiting the generality of any of the other
provisions of this Second Mortgage: (i) some portions of the goods described or to which reference is made herein are or are to become fixtures on the land described or to which reference is
made herein or on attached Exhibit A; (ii) the security interests created hereby under applicable provisions of the Applicable UCC will attach to Hydrocarbons (minerals including oil and
gas) or the accounts resulting from the sale thereof at the wellhead or minehead located on the land described or to which reference is made herein; and (iii) this Second Mortgage is to be
filed of record in the real estate records as a fixture filing with respect to all fixtures comprising any part of the Mortgaged Property and as a financing statement pursuant to the Applicable UCC
with respect to any As-Extracted Collateral and any other personal property comprising any part of the Mortgaged Property. Mortgagor is the record owner of the real estate or interests in
the real estate comprised of the Mortgaged Property. 


        Section 1.05    Defined Terms; Interpretation.    Initially-capitalized terms not otherwise specifically
defined herein shall have the meaning ascribed to such terms in the Amended and Restated Subordinated Credit Agreement. All other rules of interpretation set forth in Section 1.05 of the
Amended and Restated Subordinated Credit Agreement shall apply to this Second Mortgage and are hereby incorporated herein by reference. 


ARTICLE II  


 Assignment of Production  


        Section 2.01    Assignment.    Mortgagor has hereby absolutely and unconditionally assigned, transferred, set
over, and conveyed, and does hereby absolutely and unconditionally assign, transfer, set over, and convey unto Mortgagee, its successors and assigns, all of the Hydrocarbons and all products obtained
or processed therefrom, and the revenues and proceeds now and hereafter attributable to the Hydrocarbons and said products and all payments in lieu of the Hydrocarbons such as "take or pay" payments
or settlements, together with the immediate and continuing right to collect and receive all of the foregoing (the "Production Proceeds"). The
Hydrocarbons and products are to be delivered into pipelines connected with the Mortgaged Property, or to the purchaser thereof, to the credit of Mortgagee, free and clear of all taxes, charges,
costs, and expenses; and all such revenues and proceeds shall be paid directly to Mortgagee, at its banking quarters in [New York, New York] with no duty or obligation of any
party paying the same to inquire into the rights of Mortgagee to receive the same, what application is made thereof, or as to any other matter. Mortgagor agrees to perform all such acts, and to
execute all such further assignments, transfers and division orders, and other instruments as may be required or desired by Mortgagee or any party in order to have said proceeds and revenues so paid
to Mortgagee. Mortgagee is fully authorized to receive and receipt for said revenues and proceeds; to endorse and cash any and all checks and drafts payable to the order of Mortgagor or Mortgagee for
the account of Mortgagor received from or in connection with said revenues or proceeds and to hold the proceeds thereof in a bank account as additional collateral securing the Indebtedness; and to
execute transfer and division orders in the name of Mortgagor, or otherwise, with warranties binding
Mortgagor. All proceeds received by Mortgagee pursuant to this assignment shall be applied as provided in the other Loan Documents. Mortgagee shall not be liable for any delay, neglect, or failure 


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to effect collection of any proceeds or to take any other action in connection therewith or hereunder; but Mortgagee shall have the right, at its election, in the name of Mortgagor or otherwise, to
prosecute and defend any and all actions or legal proceedings deemed advisable by Mortgagee in order to collect such funds and to protect the interests of Mortgagee, and/or Mortgagor, with all costs,
expenses and attorneys' fees incurred in connection therewith being paid by Mortgagor. Mortgagor hereby appoints Mortgagee as its attorney-in-fact to pursue any and all rights
of Mortgagor to liens on and security interests in the Hydrocarbons securing payment of proceeds of runs attributable to the Hydrocarbons. In addition to the rights granted to Trustee and/or Mortgagee
in this Second Mortgage, Mortgagor hereby further transfers and assigns to Mortgagee any and all such liens, security interests, financing statements or similar interests of Mortgagor attributable to
its interest in the Hydrocarbons and proceeds of runs therefrom arising under or created by said statutory provision, judicial decision or otherwise. The power of attorney granted to Mortgagee in this
Section 2.01, being coupled with an interest, shall be irrevocable so long as the Indebtedness or any part thereof remains unpaid. 



        Section 2.02    Rights Under Texas Act.    Mortgagor hereby grants, sells, assigns, sets over and mortgages
unto Mortgagee during the term hereof, all of Mortgagor's rights and interests pursuant to the provisions of Section 9.343 of the Texas Business and Commerce Code, hereby vesting in Mortgagee
all of Mortgagor's rights as an interest owner to the continuing security interest in and lien upon the Mortgaged Property. 


        Section 2.03    No Modification of Payment Obligations.    Nothing herein contained shall modify or otherwise
alter the obligation of Mortgagor to make prompt payment of all principal and interest owing on the Indebtedness when and as the same become due regardless of whether the proceeds of the Hydrocarbons
are sufficient to pay the same and the rights provided in accordance with the foregoing assignment provision shall be cumulative of all other security of any and every character now or hereafter
existing to secure payment of the Indebtedness. 


        Section 2.04    Release from Liability; Indemnification.    Agent and its successors and assigns are hereby
absolutely absolved from all liability for failure to enforce collection of the proceeds from runs attributable to the Hydrocarbons and from all other responsibility in connection therewith, except
the responsibility to account to Mortgagor for funds actually received by Agent. Mortgagor agrees to indemnify and hold harmless Agent, including, for purposes of this paragraph, Agent's directors,
officers, partners, employees, and agents and any persons owned or controlled by any affiliate of Agent, from and against all claims, demands, liabilities, losses, damages (including, without
limitation, consequential, punitive, and special damages), causes of action, judgments, penalties, costs and reasonable out-of-pocket expenses (including, without limitation,
reasonable attorneys' fees and expenses) imposed upon, asserted against, or incurred or paid by Agent by reason of the assertion that Agent has received, either before or after payment in full of the
Indebtedness, funds from the production of Hydrocarbons. The foregoing indemnities shall not terminate upon the expiration, termination, or cancellation of the Amended and Restated Subordinated Credit
Agreement or this Second Mortgage, but shall survive such expiration, termination, or cancellation, as well as any foreclosure of this Second Mortgage or any conveyance in lieu of foreclosure, and the
repayment of the Indebtedness and the discharge and release of this Second Mortgage and any other documents evidencing and/or securing the
Indebtedness. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS THE INTENTION OF MORTGAGOR AND MORTGAGOR HEREBY AGREES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PARTY WITH
RESPECT TO ALL CLAIMS, DEMANDS, LIABILITIES, LOSSES, DAMAGES (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL, PUNITIVE, AND SPECIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, COSTS, AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES AND EXPENSES) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF ANY INDEMNIFIED PARTY. Notwithstanding the foregoing,
however, the indemnities set forth 


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in this Section 2.04 shall not apply to any particular indemnified party (but shall apply to the other indemnified parties) to the extent the subject of the indemnification is caused by or
arises out of the gross negligence or willful misconduct of such particular indemnified party. 



        Section 2.05    Absolute Obligation of Credit Parties.    Nothing herein contained shall detract from or limit
the obligations of any Mortgagor or any other Credit Party to make payment as required pursuant to the terms of the Loan Documents, regardless of whether the assignment of production described in this
Article II is sufficient to pay same, and the rights under this Article II shall be cumulative of all other rights of Agent and any other Lender under the Loan Documents. 


ARTICLE III  


 Representations, Warranties and Covenants  


        In order to induce Agent and the Lenders to enter into the transactions described in the Amended and Restated Subordinated Credit Agreement, Mortgagor hereby
represents, warrants and covenants, to Trustee, Agent, each of the Lenders, and to Mortgagee as follows: 


        Section 3.01    Title.    To the extent of the undivided interests in the wells specified on attached
Exhibit A, Mortgagor is possessed of such interests in the Mortgaged Property, and Mortgagor has, and Mortgagor covenants to maintain, good and indefeasible title to the Mortgaged Property. The
Mortgaged Property is free of any and all Liens (as defined in the Amended and Restated Subordinated Credit Agreement) except Permitted Liens (as defined in the Amended and Restated Subordinated
Credit Agreement) and Liens, if any, described in Exhibit A (collectively, the "Permitted Encumbrances"). 


        Section 3.02    Defend Title.    This Second Mortgage is, and always will be kept, a direct lien and security
interest upon the Mortgaged Property subject only to the Permitted Encumbrances, and, except for Permitted Encumbrances, Mortgagor will not create or suffer to be created or permit to exist any lien,
security interest or charge prior or junior to or on a parity with the lien and security interest of this
Second Mortgage upon the Mortgaged Property or any part thereof or upon the rents, issues, revenues, profits and other income therefrom. Mortgagor hereby warrants and Mortgagor does by these presents
agree to forever defend the Mortgaged Property against the claims and demands of all other persons whomsoever and to maintain and preserve the lien created hereby so long as any of the Indebtedness
secured hereby remains unpaid. Should an adverse claim be made against or a cloud develop upon the title to any part of the Mortgaged Property, Mortgagor agrees it will immediately defend against such
adverse claim or take appropriate action to remove such cloud at Mortgagor's cost and expense, and Mortgagor further agrees that Trustee and/or Mortgagee may take such other action as they deem
advisable to protect and preserve their interests in the Mortgaged Property, and in such event Mortgagor will indemnify Trustee and Mortgagee against any and all cost, attorney's fees and other
expenses which they may incur in defending against any such adverse claim or taking action to remove any such cloud. 


        Section 3.03    Not a Foreign Person.    Mortgagor is not a "foreign person" within the meaning of the Internal
Revenue Code of 1986, as amended (hereinafter called the "Code"), Sections 1445 and 7701 (i.e. Mortgagor is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and any regulations promulgated thereunder). 


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        Section 3.04    Existence; Power to Create Lien and Security; Enforceable Obligations.    


        (a)  Mortgagor
is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and in good standing and qualified to do business
in each jurisdiction where its ownership or lease of any of the Mortgaged Property or conduct of its business requires such qualification and where the failure to so qualify could reasonably be
expected to cause a Material Adverse Change. 


        (b)  The
execution, delivery, and performance by Mortgagor of this Second Mortgage and the consummation of the transactions contemplated hereby and thereby (i) are
within such Mortgagor's powers, (ii) have been duly authorized by all necessary governing action, (iii) do not contravene (A) Mortgagor's governance documents or (B) any
Legal Requirement or any material contractual restriction binding on or affecting Mortgagor, and (iv) will not result in or require the creation or imposition of any Lien upon any of the
material Property of any Credit Party prohibited by the Amended and Restated Subordinated Credit Agreement. 


        (c)  This
Second Mortgage has been duly executed and delivered by Mortgagor. This Second Mortgage is the legal, valid, and binding obligation of Mortgagor enforceable against
Mortgagor in accordance with its terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium, or similar law affecting creditors' rights
generally and by general principles of equity. 


        Section 3.05    Net Revenue and Cost Bearing Interest.    With respect to each well listed on Exhibit A
hereto which comprises a part of the Mortgaged Property, Mortgagor's ownership of such Mortgaged Property does and will, with respect to each such well (whether such well is presently unitized or is
presently producing on a lease basis) (a) entitle Mortgagor to receive (subject to the terms and conditions of this Second Mortgage) a decimal share of the Hydrocarbons produced from, or
allocated to, such well equal to not less than the decimal share set forth on Exhibit A in connection with such well under the column on Exhibit A designated by the words
"Net Revenue Interest", the abbreviation "NRI", or words or abbreviations of similar import, and
(b) cause Mortgagor to be obligated to bear a decimal share of the cost of exploration, development, and operation of such well not greater than the decimal share set forth in Exhibit A
in connection with such well under the column on Exhibit A designated by the words "Operating Interest" or "Working
Interest", the abbreviation "WI", or words or abbreviations of similar import (unless there is a corresponding increase in the
Net Revenue Interest). The shares of production which Mortgagor is entitled to receive and the shares of expenses which Mortgagor is obligated to bear are not, and will not be, subject to change other
than changes which (i) arise pursuant
to non-consent provisions of operating agreements in connection with operations proposed after the effective date of this Second Mortgage, or (ii) are expressly described on
Exhibit A. 


        Section 3.06    Rentals Paid; Leases in Effect.    Mortgagor shall maintain all leases and agreements
comprising or relating to the Mortgaged Property in compliance with the requirements of the Amended and Restated Subordinated Credit Agreement. 



        Section 3.07    Operation of Mortgaged Property.    


        (a)  The
Mortgaged Property (and properties unitized therewith) is, and hereafter will be, maintained, operated, and developed in compliance with the requirements of the
Amended and Restated Subordinated Credit Agreement. 


        (b)  To
the extent any interest owned by Mortgagor in the Mortgaged Property is not a working interest, Mortgagor covenants and agrees to take all reasonable action and to
exercise all reasonable rights and remedies as are available to Mortgagor to cause the owner or owners of the working interest in such properties to comply with the covenants and agreements set forth
in this Second Mortgage. 


        (c)  To
the extent Mortgagor's ownership of any particular well constituting the Mortgaged Property is a working interest but such well is operated by a party other than
Mortgagor, Mortgagor 


F-10





 




agrees to take all such action and to exercise all rights and remedies as are reasonably available to Mortgagor (including, without limitation, all rights under any operating agreement) to cause the
party who is the operator of such well to comply with the covenants and agreements set forth in this Second Mortgage. 


        Section 3.08    Abandonment, Sales.    Mortgagor will not sell, lease, assign, transfer or otherwise dispose of
or abandon any of the Mortgaged Property except in compliance with the requirements of the Amended and Restated Subordinated Credit Agreement. 



        Section 3.09    Insurance.    Mortgagor shall carry and maintain insurance as provided in the Amended and
Restated Subordinated Credit Agreement. In the event of foreclosure of this Second Mortgage, or other transfer of title to the Mortgaged Property in extinguishment in whole or in part of the
Indebtedness, all right, title, and interest of Mortgagor in and to such policies then in force concerning the Mortgaged Property and all proceeds payable thereunder shall thereupon vest in the
purchaser at such foreclosure or Agent or other transferee in the event of such other transfer of title. 



        Section 3.10    Further Assurances.    Mortgagor shall, and shall cause each of its Subsidiaries to, cure
promptly any defects in the execution and delivery of this Second Mortgage or any of the other Loan Documents. Mortgagor hereby authorizes the Agent to file any financing statements without
Mortgagor's signature to the extent permitted by applicable law in order to perfect or maintain the perfection of any security interest granted under any of the Loan Documents. Mortgagor at its
expense will, and will cause each of its Subsidiaries to, promptly execute and deliver to the Agent upon request all such other documents, agreements and instruments to comply with or accomplish the
covenants and agreements of Mortgagor or any other Credit Party in this Second Mortgage or any other Loan Document, or to further evidence and more fully describe the collateral intended as security
for Obligations, or to correct any omissions in the Loan Documents, or to state more fully the security obligations set out in this Second Mortgage or in any of the other Loan Documents, or to
perfect, protect or preserve any Liens created pursuant to any of the Loan Documents, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in
connection therewith or to enable the Agent to exercise and enforce its rights and remedies with respect to the Mortgaged Property. 


        Section 3.11    Taxes.    Mortgagor shall do or cause to be done everything necessary to preserve the lien
hereof without expense to Trustee or Mortgagee, including, without limitation, paying and discharging or causing to be paid and discharged all taxes, charges, filing, registration and recording fees
relating to the recording of this Second Mortgage, including but not limited to any mortgage tax payable in connection herewith. 


        Section 3.12    Failure to Perform.    Mortgagor agrees that if Mortgagor, after receipt from Mortgagee of
written notice and demand, fails to perform any act or to take any action which Mortgagor is required to perform or take hereunder or pay any money which Mortgagor is required to pay hereunder, each
of Mortgagee and Trustee in Mortgagor's name or its or their own name may, but shall not be obligated to, perform or cause to perform such act or take such action or pay such money, and any expenses
so incurred by either of them and any money so paid by either of them shall be a demand obligation owing by Mortgagor to Mortgagee or Trustee, as the case may be, and each of Mortgagee and Trustee,
upon making such payment, shall be subrogated to all of the rights of the Person receiving such payment. Each amount due and owing by Mortgagor to each of Mortgagee and Trustee pursuant to this Second
Mortgage shall bear interest from the date of such expenditure or payment or other occurrence which gives rise to such amount being owed to such Person until paid at post-default interest
rate described in the Amended and Restated Subordinated Credit Agreement, and all such amounts together with such interest thereon shall be a part of the Indebtedness described in Section 1.03
hereof. 


        Section 3.13    Waste.    Mortgagor shall not commit or permit any waste, impairment, or deterioration of the
Mortgaged Property or any part thereof. 


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ARTICLE IV  


 Rights and Remedies  



        Section 4.01    Event of Default.    An "Event of Default"
under the Amended and Restated Subordinated Credit Agreement shall be an Event of Default under this Second Mortgage. 


        Section 4.02    Foreclosure and Sale.    


        (a)  If
an Event of Default shall occur and be continuing, Mortgagee shall have the right and option to proceed with foreclosure by proceeding or by directing Trustee, or his
successors or substitutes in trust, to proceed with foreclosure and to sell, to the extent permitted by law, all or any portion of the Mortgaged Property at one or more sales, as an entirety or in
parcels, at such place or places in otherwise such manner and upon such notice as may be required by law, or, in the absence of any such requirement, as Mortgagee may deem appropriate, and to make
conveyance to the purchaser or purchasers. Where the Mortgaged Property is situated in more than one county, notice as above provided shall be posted and filed in all such counties (if such notices
are required by law), and all such Mortgaged Property may be sold in any such county and any such notice shall designate the county where such Mortgaged Property is to be sold. Nothing contained in
this Section 4.02 shall be construed so as to limit in any way Mortgagee's or Trustee's rights to sell the Mortgaged Property, or any portion thereof, by private sale if, and to the extent
that, such private sale is permitted under the laws of the applicable jurisdiction or by public or private sale after entry of a judgment by any court of competent jurisdiction so ordering. Mortgagor
hereby irrevocably appoints Trustee to be the attorney of Mortgagor and in the name and on behalf of Mortgagor to execute and deliver any deeds, transfers, conveyances, assignments, assurances and
notices which Mortgagor ought to execute and deliver and do and perform any and all such acts and things which Mortgagor ought to do and perform under the covenants herein contained and generally, to
use the name of Mortgagor in the exercise of all or any of the powers hereby conferred on Trustee. At any such sale: (i) whether made under the power herein contained or any other legal
enactment, or by virtue of any judicial proceedings or any other legal right, remedy or recourse, it shall not be necessary for Mortgagee or Trustee to have physically present, or to have constructive
possession of, the Mortgaged Property (Mortgagor hereby covenanting and agreeing to deliver to Mortgagee or Trustee any portion of the Mortgaged Property not actually or constructively possessed by
Mortgagee or Trustee immediately upon demand by Mortgagee or Trustee) and the title to and right of possession of any such property shall pass to the purchaser thereof as completely as if the same had
been actually present and delivered to purchaser at such sale, (ii) each instrument of conveyance executed by Mortgagee or Trustee shall contain a general warranty of title, binding upon
Mortgagor and its successors and assigns, (iii) each and every recital contained in any instrument of conveyance made by Mortgagee or Trustee shall conclusively establish the truth and accuracy
of the matters recited therein, including, without limitation, nonpayment of the Indebtedness, advertisement and conduct of such sale in the manner provided herein and otherwise by law and appointment
of any successor Trustee hereunder, (iv) any and all prerequisites to the validity thereof shall be conclusively presumed to have been performed, (v) the receipt of Mortgagee or Trustee
or of such other party or officer making the sale shall be a sufficient discharge to the purchaser or
purchasers for its purchase money and no such purchaser or purchasers, or its assigns or personal representatives, shall thereafter be obligated to see to the application of such purchase money, or be
in any way answerable for any loss, misapplication or nonapplication thereof, (vi) to the fullest extent permitted by law, Mortgagor shall be completely and irrevocably divested of all of its
right, title, interest, claim and demand whatsoever, either at law or in equity, in and to the property sold and such sale shall be a perpetual bar both at law and in equity against Mortgagor, and
against any and all other persons claiming or to claim the property sold or any part thereof, by, through or under Mortgagor, and (vii) to the extent and under such circumstances as are
permitted by law, Trustee, Mortgagee, or any Lender may be a purchaser at any such sale, and shall have the right, after paying or accounting for all costs of said sale or sales, to credit the amount
of the bid upon the amount of the Indebtedness 


F-12





 




held by such purchaser, if any (in the order of priority set forth in Section 4.13 hereof) in lieu of cash payment. 



        (b)  With
respect to any portion of the Mortgaged Property located in the state of Oklahoma and with respect any foreclosure by Mortgagor pursuant to the power of sale
granted to Mortgagor in this Second Mortgage the following provisions of this Second Mortgage shall apply: 



          (i)  The
notices described in Section 40 and certain following sections of the Oklahoma Mortgage Foreclosure Act, shall be given as and when required therein; 


        (ii)  All
notices which are required to be given to Mortgagor under the Oklahoma Mortgage Foreclosure Act may be given to Mortgagor at the address which is set forth in the
first paragraph of this Second Mortgage, or if such address has been changed in accordance with the express requirements of this Second Mortgage related to such a change of address, to that changed
address; 


        (iii)  Mortgagee
may purchase part or all of the Mortgaged Property at any such sale; 


        (iv)  Mortgagor
stipulates that the total amounts owing under this Second Mortgage benefit, have benefited, and will benefit Mortgagor substantially and are not
unconscionable in amount, and therefore the total amount of the Indebtedness, less the fair market value of the Mortgaged Property sold pursuant to the Oklahoma Mortgage Foreclosure Act, and any prior
indebtedness, shall be available as a deficiency judgment against Mortgagor; 


        (v)  The
purchaser under any sale of the Mortgaged Property conducted pursuant to the Oklahoma Mortgage Foreclosure Act may seek and obtain a writ of assistance by
application to the District Court in the county in Oklahoma in which the portion of the Mortgaged Property to be foreclosed upon is located, or the United States District Court having venue for
actions arising in such county; 


        (vi)  Mortgagee
may, at its option, proceed with foreclosure under judicial proceedings instead of exercising the rights of the power of sale granted by Mortgagor to
Mortgagee in this Second Mortgage; 


      (vii)  All
other terms, conditions, procedures, and requirements of the Oklahoma Mortgage Foreclosure Act shall be followed; 


      (viii)  After
the completion of the sale as contemplated by the Oklahoma Mortgage Foreclosure Act, the purchaser shall have all of Mortgagor's right, title and interest in
and to Mortgaged Property sold pursuant to such sale, free and clear of all rights of Mortgagor, and free and clear of all rights of any person with a priority which is subordinate to the lien of this
Second Mortgage, except any right which may be reserved under the Oklahoma Mortgage Foreclosure Act; 



        (ix)  Any
recitation in any notice, publication thereof, recordation thereof, or deed, of the existence of an Event of Default, giving, publication, service and recordation
of notice, occurrence of the sale at the time and place set forth in such notice or any postponement authorized and effective under the Oklahoma Mortgage Foreclosure Act, circumstances of sale and
bidding, and compliance with the terms of the Oklahoma Mortgage Foreclosure Act, shall be presumed to be statements of fact and no person shall be required to investigate the truthfulness or accuracy
of any such recitation; and 


        (x)  The
proceeds of any such sale shall be applied first to the costs, attorney fees, and expenses of such sale, next to the payment of the Indebtedness; except that if such
application of proceeds conflicts with the requirements of the Oklahoma Mortgage Foreclosure Act, the proceeds of such sale shall be applied as provided under the Oklahoma Mortgage Foreclosure Act,
but in such event, only to the extent of any such conflict. 



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        Section 4.03    Substitute Trustees and Agents.    Trustee or his successor or substitute may appoint or
delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices and the conduct of sale, but in the name and on
behalf of Trustee, his successor or substitute. If Trustee or his successor or substitute shall have given notice of sale hereunder, any successor or substitute trustee thereafter appointed may
complete the sale and the conveyance of the property pursuant thereto as if such notice had been given by the successor or substitute trustee conducting the sale. 


        Section 4.04    Judicial Foreclosure; Receivership.    



        (a)  If
any of the Indebtedness shall become due and payable and shall not be promptly paid, Trustee or Mortgagee shall have the right and power to proceed by a suit or suits
in equity or at law, whether for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for any foreclosure hereunder or for
the sale of the Mortgaged Property under the judgment or decree of any court or courts of competent jurisdiction, or for the appointment of a receiver pending any foreclosure hereunder or the sale of
the Mortgaged Property under the order of a court or courts of competent jurisdiction or under executory or other legal process, or for the enforcement of any other appropriate legal or equitable
remedy. Any money advanced by Trustee and/or Mortgagee in connection with any such receivership shall be a demand obligation (which obligation Mortgagor hereby expressly promises to pay) owing by
Mortgagor to Trustee and/or Mortgagee and shall bear interest from the date of making such advance by Trustee and/or Mortgagee until paid at the interest rate applicable to periods following an Event
of Default in the Amended and Restated Subordinated Credit Agreement. 


        (b)  If
an action is filed to foreclose this Second Mortgage, or if Mortgagee or Trustee seeks to foreclose this Second Mortgage by power of sale under the Oklahoma Power of
Sale Mortgage Foreclosure Act, Mortgagee or Trustee, as applicable, shall be entitled to the immediate appointment of a receiver pursuant to 12 Oklahoma Statutes §1551(2)(c) without the
necessity of further proof. 


        Section 4.05    Foreclosure for Installments.    Mortgagee shall also have the option to proceed with
foreclosure in satisfaction of any installments of the Indebtedness which have not been paid when due either through the courts or by directing Trustee or his successors in trust to proceed with
foreclosure in satisfaction of the matured but unpaid portion of the Indebtedness as if under a full foreclosure, conducting the sale as herein provided and without declaring the entire principal
balance and accrued interest due; such sale may be made subject to the unmatured portion of the Indebtedness, and any such sale shall not in any manner affect the unmatured portion of the
Indebtedness, but as to such unmatured portion of the Indebtedness this Second Mortgage shall remain in full force and effect just as though no sale had been made hereunder. It is further agreed that
several sales may be made hereunder without exhausting the right of sale for any unmatured part of the Indebtedness, it being the purpose hereof to provide for a foreclosure and sale of the security
for any matured portion of the Indebtedness without exhausting the power to foreclose and sell the Mortgaged Property for any subsequently maturing portion of the Indebtedness. 


        Section 4.06    Separate Sales.    The Mortgaged Property may be sold in one or more parcels and in such manner
and order as Mortgagee, in its sole discretion, may elect, it being expressly understood and agreed that the right of sale arising out of any Event of Default shall not be exhausted by any one or more
sales. 


        Section 4.07    Occupancy After Foreclosure.    In the event there is a foreclosure sale hereunder and at the
time of such sale Mortgagor or Mortgagor's heirs, devisees, representatives, successors or assigns or any other person claiming any interest in the Mortgaged Property by, through or under Mortgagor,
are occupying or using the Mortgaged Property or any part thereof, each and all shall immediately become the tenant of the purchaser at such sale, which tenancy shall be a tenancy from day to day,
terminable at the will of either the landlord or tenant, or at a reasonable rental per day based upon the value of the property occupied, such rental to be due daily to the purchaser; to the extent
permitted by 


F-14





 




applicable law, the purchaser at such sale shall, notwithstanding any language herein apparently to the contrary, have the sole option to demand immediate possession following the sale or to permit
the occupants to remain as tenants at will. In the event the tenant fails to surrender possession of said property upon demand, the purchaser shall be entitled to institute and maintain a summary
action for possession of the Mortgaged Property (such as an action for forcible entry and detainer) in any court having jurisdiction. 


        Section 4.08    Remedies Cumulative, Concurrent and Nonexclusive.    Every right, power and remedy herein given
to Trustee or Mortgagee shall be cumulative and in addition to every other right, power and remedy herein specifically given or now or hereafter existing in equity, at law or by statute (including
specifically those granted by the Applicable UCC in effect and applicable to the Mortgaged Property or any portion thereof) each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time and so often and in such order as may be deemed expedient by Trustee or Mortgagee, and the exercise, or the beginning of the exercise, of any such
right, power or remedy shall not be deemed a waiver of the right to exercise, at the same time or thereafter any other right, power or remedy. No delay or omission by Trustee or Mortgagee in the
exercise of any right, power or remedy shall impair any such right, power or remedy or operate as a waiver thereof or of any other right, power or remedy then or thereafter existing. 


        Section 4.09    No Release of Obligations.    Neither Mortgagor, any Guarantor, any other guarantor of the
Indebtedness, nor any other person hereafter obligated for payment of all or any part of the Indebtedness shall be relieved of such obligation by reason of (a) the failure of Trustee or
Mortgagee to comply with any request of Mortgagor, or any guarantor or any other person so obligated to foreclose the lien of this Second Mortgage or to enforce any provision hereunder or under the
Amended and Restated Subordinated Credit Agreement; (b) the release, regardless of consideration, of the Mortgaged Property or any portion thereof or interest therein or the addition of any
other property to the Mortgaged Property; (c) any agreement or stipulation between any subsequent owner of the Mortgaged Property and Mortgagee extending, renewing, rearranging or in any other
way modifying the terms of this Second Mortgage without first having obtained the consent of, given notice to or paid any consideration to Mortgagor, any guarantor or such other person, and in such
event Mortgagor, guarantor and all such other persons shall continue to be liable to make payment according to the terms of any such extension or modification agreement unless expressly released and
discharged in writing by Mortgagee; or (d) by any other act or occurrence save and except the complete payment of the Indebtedness and the complete fulfillment of all obligations hereunder or
under the Amended and Restated Subordinated Credit Agreement. 


        Section 4.10    Release of and Resort to Mortgaged Property.    Mortgagee may release, regardless of
consideration, any part of the Mortgaged Property without, as to the remainder, in any way impairing, affecting, subordinating or releasing the lien or security interest created in or evidenced by
this Second Mortgage or its stature as a first and prior lien and security interest in and to the Mortgaged Property, and without in any way releasing or diminishing the liability of any person or
entity liable for the repayment of the Indebtedness. For payment of the Indebtedness, Mortgagee may resort to any other security therefor held by Mortgagee or Trustee in such order and manner as
Mortgagee may elect. 


        Section 4.11    Waiver of Redemption, Notice and Marshalling of Assets, Etc.    To the fullest extent permitted
by law, Mortgagor hereby irrevocably and unconditionally waives and releases (a) all benefits that might accrue to Mortgagor by virtue of any present or future moratorium law or other law
exempting the Mortgaged Property from attachment, levy or sale on execution or providing for any appraisement, valuation, stay of execution, exemption from civil process, redemption or extension of
time for payment and (b) any right to a marshalling of assets or a sale in inverse order of alienation. If any law referred to in this Second Mortgage and now in force, of which Mortgagor or
its successor or successors might take advantage despite the provisions hereof, shall hereafter be repealed or cease to be in force, such law shall thereafter be deemed not to constitute any part of
the contract herein contained or to preclude the operation or application of the provisions hereof. Provided,  however, that 


F-15





 


if the laws of any state do not permit the redemption period to be waived, the redemption period is specifically reduced to the minimum amount of time allowable by statute. With respect to any
portion of the Mortgaged Property located in the state of Oklahoma, Mortgagee and Trustee hereby waive or do not waive appraisement, such election to be made at or before entry of judgment in any
action to foreclose this Second Mortgage; provided, however, such waiver or non-waiver shall not affect Mortgagor's waiver of such rights,
which shall be absolute. 


        Section 4.12    Discontinuance of Proceedings.    In case Mortgagee shall have proceeded to invoke any right,
remedy or recourse permitted hereunder or under the Amended and Restated Subordinated Credit Agreement and shall thereafter elect to discontinue or abandon same for any reason, Mortgagee shall have
the unqualified right so to do and, in such an event, Mortgagor and Mortgagee shall be restored to their former positions with respect to the Indebtedness, this Second Mortgage, the Amended and
Restated Subordinated Credit Agreement, the Mortgaged Property and otherwise, and the rights, remedies, recourses and powers of Mortgagee shall continue as if same had never been invoked. 



        Section 4.13    Application of Proceeds.    The proceeds of any sale of the Mortgaged Property or any part
thereof and all other monies received by Trustee or Mortgagee in any proceedings for the enforcement hereof or otherwise, whose application has not elsewhere herein been specifically provided for,
shall be applied: 



        (a)  first,
to the payment of all reasonable expenses incurred by Trustee or Mortgagee incident to the enforcement of this Second Mortgage, the Amended and Restated
Subordinated Credit Agreement or any of the Indebtedness (including, without limiting the generality of the foregoing, expenses of any entry or taking of possession, of any sale, of advertisement
thereof, and of conveyances, and court costs, compensation of agents and employees, legal fees and a reasonable commission to Trustee acting), and to the payment of all other charges, reasonable
expenses, liabilities and advances incurred or made by Trustee or Mortgagee under this Second Mortgage or in executing any trust or power hereunder; 


        (b)  second
to payment of the Indebtedness in the order and manner required in the Amended and Restated Subordinated Credit Agreement; and 


        (c)  third,
to Mortgagor or as otherwise required by any Governmental Requirement. 




        Section 4.14    Resignation of Operator.    In addition to all rights and remedies under this Second Mortgage,
at law and in equity, if any Event of Default shall occur and Trustee or Mortgagee shall exercise any possessory remedies under this Second Mortgage with respect to any portion of the Hydrocarbon
Property (or Mortgagor shall transfer any Mortgaged Property "in lieu of" foreclosure), Mortgagee or Trustee shall have the right to request that any operator of any Hydrocarbon Property which is
either Mortgagor or any Affiliate of Mortgagor to resign as operator under the joint operating agreement applicable thereto, and no later than 60 days after receipt by Mortgagor of any such
request, Mortgagor shall resign (or cause such other party to resign) as operator of such Hydrocarbon Property. 



        Section 4.15    Indemnity.    In connection with any action taken by Trustee and/or Mortgagee pursuant to this
Second Mortgage, Trustee and/or Mortgagee and their officers, directors, employees, representatives, agents, attorneys, accountants and experts ("Indemnified
Parties") shall not be liable for any loss sustained by Mortgagor resulting from an assertion that Mortgagee has received funds from the production of Hydrocarbons claimed by
third persons or any act or omission of any Indemnified Party in administering, managing, operating or controlling the Mortgaged Property INCLUDING SUCH LOSS WHICH MAY RESULT
FROM THE NEGLIGENCE OF AN INDEMNIFIED PARTY unless such loss is caused by the gross negligence or willful misconduct of an Indemnified Party, nor shall Trustee and/or Mortgagee
be obligated to perform or discharge any obligation, duty or liability of Mortgagor. Mortgagor shall and does hereby agree to indemnify each Indemnified Party for, and to hold each Indemnified Party
harmless from, any and all liability, loss or damage which may or might be incurred 


F-16





 




by any Indemnified Party by reason of this Second Mortgage or the exercise of rights or remedies hereunder INCLUDING SUCH LIABILITY, LOSS, OR DAMAGE WHICH MAY RESULT FROM THE
NEGLIGENCE OF AN INDEMNIFIED PARTY unless such liability, loss, or damage is caused by the gross negligence or willful misconduct of an Indemnified Party; should Trustee and/or
Mortgagee make any expenditure on account of any such liability, loss or damage, the amount thereof, including costs, expenses and reasonable attorneys' fees, shall be a demand obligation (which
obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to Trustee and/or Mortgagee and shall bear interest from the date expended until paid at the Post-Default Rate,
shall be a part of the Indebtedness and shall be secured by this Second Mortgage and any other Security Instrument. Mortgagor hereby assents to, ratifies and confirms any and all actions of Trustee
and/or Mortgagee with respect to the Mortgaged Property taken under, and in compliance with the terms of, this Second Mortgage. The liabilities of Mortgagor as set forth in this Section 4.15
shall survive the termination of this Second Mortgage. 


ARTICLE V  


 Trustee  


        Section 5.01    Duties, Rights, and Powers of Trustee.    It shall be no part of the duty of Trustee to see to
any recording, filing or registration of this Second Mortgage or any other instrument in addition or supplemental thereto, or to give any notice thereof, or to see to the payment of or be under any
duty in respect of any tax or assessment or other governmental charge which may be levied or assessed on the Mortgaged Property, or any part thereof, or against Mortgagor, or to see to the performance
or observance by Mortgagor of any of the covenants and agreements contained herein. Trustee shall not be responsible for the execution, acknowledgment or validity of this Second Mortgage or of any
instrument in addition or supplemental hereto or for the sufficiency of the security purported to be created hereby, and makes no representation in respect thereof or in respect of the rights of
Mortgagee. Trustee shall have the right to advise with counsel upon any matters arising hereunder and shall be fully protected in relying as to legal matters on the advice of counsel. Trustee shall
not incur any personal liability hereunder except for Trustee's own gross negligence, bad faith and/or willful misconduct; and Trustee shall have the right to rely on any instrument, document or
signature authorizing or supporting any action taken or proposed to be taken by him hereunder, believed by him in good faith to be genuine. 


        Section 5.02    Successor Trustee; Resignation by Trustee.    Trustee may resign by written notice addressed to
Mortgagee or be removed at any time with or without cause by an instrument in writing duly executed on behalf of Mortgagee. In case of the death, resignation or removal of Trustee, a successor trustee
may be appointed by Mortgagee by instrument of substitution complying with any applicable requirements of law, or, in the absence of any such requirement, without other formality than appointment and
designation in writing. Written notice of such appointment and designation shall be given by Mortgagee to Mortgagor, but the validity of any such appointment shall not be impaired or affected by
failure to give such notice or by any defect therein. Such appointment and designation shall be full evidence of the right and authority to make the same and of all the facts therein recited, and,
upon the making of any such appointment and designation, this Second Mortgage shall vest in the successor trustee all the estate and title in and to all of the Mortgaged Property, and the successor
trustee shall thereupon succeed to all of the rights, powers, privileges, immunities and duties hereby conferred upon Trustee named herein, and one such appointment and designation shall not exhaust
the right to appoint and designate a successor trustee hereunder but such right may be exercised repeatedly as long as any Indebtedness remains unpaid hereunder. To facilitate the administration of
the duties hereunder, Mortgagee may appoint multiple trustees to serve in such capacity or in such jurisdictions as Mortgagee may designate. 


        Section 5.03    Retention of Moneys.    All moneys received by Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but need not be 


F-17





 




segregated in any manner from any other moneys (except to the extent required by law), and Trustee shall be under no liability for interest on any moneys received by him hereunder. 


ARTICLE VI  


 Miscellaneous  


        Section 6.01    Instrument Construed as Mortgage, Etc.    With respect to any portions of the Mortgaged
Property located in any state or other jurisdiction the laws of which do not provide for the use or enforcement of a deed of trust or the office, rights and authority of Trustee as herein provided,
the general language of conveyance hereof to Trustee is intended and the same shall be construed as words of mortgage unto and in favor of Mortgagee and the rights and authority granted to Trustee
herein may be enforced and asserted by Mortgagee in accordance with the laws of the jurisdiction in which such portion of the Mortgaged Property is located and the same may be foreclosed at the option
of Mortgagee as to any or all such portions of the Mortgaged Property in any manner permitted by the laws of the jurisdiction in which such portions of the Mortgaged Property is situated. This Second
Mortgage may be construed as a mortgage, deed of trust, chattel mortgage, conveyance, assignment, security agreement, pledge, financing statement, hypothecation or contract, or any one or more of
them, in order fully to effectuate the lien hereof and the purposes and agreements herein set forth. 



        Section 6.02    Release of Mortgage.    If all Indebtedness secured hereby shall be paid and the Amended and
Restated Subordinated Credit Agreement terminated, Mortgagee shall forthwith cause satisfaction and discharge of this Second Mortgage to be entered upon the record at the expense of Mortgagor and
shall execute and deliver or cause to be executed and delivered such instruments of satisfaction and reassignment as Mortgagor may reasonably request. Otherwise, this Second Mortgage shall remain and
continue in full force and effect. 


        Section 6.03    Severability.    If any provision hereof is invalid or unenforceable in any jurisdiction, the
other provisions hereof shall remain in full force and effect in such jurisdiction and the remaining provisions hereof shall be liberally construed in favor of Trustee and Mortgagee in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of any such provision in any other
jurisdiction. 


        Section 6.04    Successors and Assigns of Parties.    The term "Lender" as used herein shall mean and include
any legal owner, holder, assignee or pledgee of any of the Indebtedness secured hereby. The terms used to designate Trustee, Mortgagee and Mortgagor shall be deemed to include the respective heirs,
legal representatives, successors and assigns of such parties. 



        Section 6.05    Satisfaction of Prior Encumbrance.    To the extent that proceeds of the Amended and Restated
Subordinated Credit Agreement are used to pay indebtedness secured by any outstanding lien, security interest, charge or prior encumbrance against the Mortgaged Property, such proceeds have been
advanced by Mortgagee or any of the other Lenders at Mortgagor's request, and Mortgagee shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such
outstanding liens, security interests, charges or encumbrances, and it is expressly understood that, in consideration of the payment of such other indebtedness by Mortgagee or any of the other
Lenders, Mortgagor hereby waives and releases all demands and causes of action against Mortgagee or any of the other Lenders for offsets and payments to, upon and in connection with the said
indebtedness. 


        Section 6.06    Subrogation of Trustee.    This Second Mortgage is made with full substitution and subrogation
of Trustee and his successors in this trust and his and their assigns in and to all covenants and warranties by others heretofore given or made in respect of the Mortgaged Property or any part
thereof. 


F-18









   
        Section 6.07    Nature of Covenants.    The covenants and agreements herein contained shall constitute
covenants running with the land and interests covered or affected hereby and shall be binding upon the heirs, legal representatives, successors and assigns of the parties hereto. 



        Section 6.08    Notices.    All notices and other communications shall be in writing (including, without
limitation, telecopy or telex) and mailed by certified mail, return receipt requested, telecopied, telexed, hand delivered, or delivered by a nationally recognized overnight courier, at the address
for the appropriate party specified in the first paragraph of this Second Mortgage or at such other address as shall be designated by such party in a written notice to the other parties. All such
notices and communications shall, when so mailed, telecopied, telexed, or hand delivered or delivered by a nationally recognized overnight courier, be effective when received if mailed, when telecopy
transmission is completed, when confirmed by telex answer-back, or when delivered by such messenger or courier, respectively. 


        Section 6.09    Counterparts.    This Second Mortgage is being executed in several counterparts, all of which
are identical, except that to facilitate recordation, if the Mortgaged Property is situated in more than one county, descriptions of only those portions of the Mortgaged Property located in the county
in which a particular counterpart is recorded shall be attached as Exhibit A thereto. A complete Exhibit A will be attached to that certain counterpart that is filed in the real property
records of                        County, Texas. Each of such counterparts shall for all purposes be deemed to be an original and
all such counterparts shall together constitute but one and the same
instrument. 


        Section 6.10    Exculpation Provisions.    Each of the parties hereto specifically agrees that it has a duty to
read this Second Mortgage; and agrees that it is charged with notice and knowledge of the terms of this Second Mortgage; that it has in fact read this Second Mortgage and is fully informed and has
full notice and knowledge of the terms, conditions and effects of this Second Mortgage; that it has been represented by independent legal counsel of its choice throughout the negotiations preceding
its execution of this Second Mortgage; and has received the advice of its attorney in entering into this Second Mortgage; and that it recognizes that certain of the terms of this Second Mortgage
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 Second Mortgage on the basis that the party had no notice or knowledge of such provision or that the
provision is not "conspicuous." 


        Section 6.11    Security Agreement.    With respect to any portion of the Mortgaged Property which constitutes
fixtures or other property governed by the Applicable UCC, this Second Mortgage shall constitute a
security agreement between Mortgagor, as the debtor, and Mortgagee, as the secured party. Cumulative of all other rights of Mortgagee hereunder, Mortgagee shall have all of the rights conferred upon
secured parties by the Applicable UCC. 


        Section 6.12    Ratification of Original Mortgages; Effect of Mortgage.    The conveyance and the granting of
liens in the Original Mortgages is hereby ratified, adopted, confirmed, and renewed. In addition, as stated in the Recitals to this Mortgage, this Mortgage constitutes for all purposes an amendment
and restatement of the Original Mortgages and not a new or substitute security instrument. 



        Section 6.13    Time of the Essence.    Time is of the essence in the performance of each and every obligation
under this Second Mortgage. 


        Section 6.14    Authority of Agent.    The Lenders may, by agreement among them, provide for and regulate the
exercise of rights and remedies hereunder, but, unless and until modified to the contrary in a writing signed by all such persons and recorded in the same counties and parishes as this Second Mortgage
is recorded, (i) all persons other than Mortgagor and its affiliates shall be entitled to rely on the releases, waivers, consents, approvals, notifications and other acts (including, without
limitation, appointment of substitute or successor trustee, or trustees, hereunder and the bidding in of all or any 


F-19





 




part of the secured indebtedness held by any one or more Lenders, whether the same be conducted under the provisions hereof or otherwise) of Agent, without inquiry into any such agreements or the
existence of required consent or approval of any Lender and without the joinder of any party other than Agent in such releases, waivers, consents, approvals, notifications or other acts and
(ii) all notices, requests, consents, demands and other communications required or permitted to be given hereunder may be given to Agent. 


        Section 6.15    Waivers.    Subject to the Amended and Restated Subordinated Credit Agreement, Agent may at any
time and from time to time in writing waive compliance by Mortgagor with any covenant herein made by Mortgagor to the extent and in the manner specified in such writing, or consent to Mortgagor's
doing any act which hereunder Mortgagor is prohibited from doing, or to Mortgagor's failing to do any act which hereunder Mortgagor is required to do, to the extent and in the manner specified in such
writing, or release any part of the Mortgaged Property or any interest therein or any Production Proceeds from the lien and security interest of this Second Mortgage, without the joinder of Trustee.
Any party liable, either directly or indirectly, for the secured indebtedness or for any covenant herein or in any other Loan Document may be released from all or any part of such obligations without
impairing or releasing the liability of any other party. No such act shall in any way impair any rights or powers hereunder except to the extent specifically agreed to in such writing. 


        Section 6.16    Compliance With Usury Laws.    It is the intent of Mortgagor, Trustee, Mortgagee and all other
parties to any of the Loan Documents to contract in strict compliance with applicable usury law from time to time in effect. In furtherance thereof, it is stipulated and agreed that none of the terms
and provisions contained herein or in the other Loan Documents shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be collected, charged, taken, reserved, or received by applicable law
from time to time in effect. 


        Section 6.17    GOVERNING LAW.    THIS SECOND MORTGAGE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ITS LAWS RELATING TO CONFLICTS OF LAWS, EXCEPT TO THE EXTENT THAT THE LAWS OF ANY OTHER JURISDICTION MANDATORILY
GOVERN THE CREATION OF, OR THE MANNER OR PROCEDURE FOR ENFORCEMENT OF THE LIEN CREATED BY THIS SECOND MORTGAGE, PROVIDED THAT ANY RIGHTS OR REMEDIES HEREIN PROVIDED THAT SHALL BE VALID UNDER THE LAWS
OF THE JURISDICTION WHERE PROCEEDINGS FOR THE ENFORCEMENT HEREOF SHALL BE TAKEN SHALL NOT BE AFFECTED BY THE INVALIDITY, IF ANY, OF SUCH RIGHTS OR REMEDIES UNDER THE LAWS OF THE STATE OF TEXAS. 


F-20









   NOTICE TO MORTGAGOR:  


        A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. WITH RESPECT TO PORTIONS OF THE MORTGAGED PROPERTY LOCATED IN THE STATE OF OKLAHOMA,
SUCH POWER OF SALE IS GRANTED PURSUANT TO THE OKLAHOMA MORTGAGE FORECLOSURE ACT (AS DEFINED IN SECTION 1.01 OF THIS SECOND MORTGAGE). THIS POWER OF SALE MAY ALLOW TRUSTEE OR MORTGAGEE, AS APPLICABLE,
TO TAKE THE MORTGAGED PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE OF AN EVENT OF DEFAULT BY MORTGAGOR UNDER THIS INSTRUMENT. THIS INSTRUMENT CONTAINS
AFTER-ACQUIRED PROPERTY PROVISIONS, SECURES PAYMENT OF FUTURE ADVANCES, AND COVERS ALL PRODUCTS AND PROCEEDS OF MORTGAGED PROPERTY.


        IN
WITNESS HEREOF, Mortgagor has executed and delivered this Second Mortgage as of the day and year first above written. 


[SIGNATURE
OF MORTGAGOR] 


Prepared
by and after recording return to:

Chadbourne & Parke

c/o Daniel Rogers

1100 Louisiana Street, Suite 3500

Houston, Texas 77002 


F-21







  



	STATE OF TEXAS	 	§
	 	 	§
	COUNTY OF	 	§
	TEXAS	 	 





        This
instrument was acknowledged before me on March            , 2003 by            ,
the            of BRIGHAM, INC., a Nevada corporation, as general partner of
BRIGHAM OIL & GAS, L.P., a Delaware limited partnership, on behalf of such corporation, acting as general partner of the limited partnership, on behalf of the limited partnership. 



	 	 	
 Notary Public in and for the

State of Texas
	

 	
 	

Notarial Seal:







	OKLAHOMA	 	 





        Before
me, a Notary Public in and for said county and state, on this            day of March, 2003, personally
appeared                        , to me known to be the identical person who
subscribed the name of the maker thereof to the foregoing instrument as                        of BRIGHAM, INC., a Nevada
corporation, as general partner of BRIGHAM OIL & GAS, L.P., a Delaware
limited partnership, and acknowledged to me that such
person executed the same as such person's free and voluntary act and deed, and as the free and voluntary act and deed of such corporation for the uses and purposes therein set forth. 



	 	 	
 Notary Public in and for the

State of Texas
	

 	
 	

Notarial Seal:




F-22






  



 
 
 

EXHIBIT A    
  
  TO    
  
  AMENDED AND RESTATED SECOND MORTGAGE, DEED OF TRUST,
  ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT,
  FIXTURE FILING, AND FINANCING STATEMENT    
  



        This Exhibit A describes the Hydrocarbon Property (as defined in the body of this instrument). This Exhibit A also sets forth a list of certain of
the wells located on the Hydrocarbon Property, together with Mortgagor's representation as to the nature and quantum of Working Interest (as defined below) and Net Revenue Interest (as defined below)
owned by Mortgagor with respect to those wells. 


        The
designation "Working Interest" or "WI" when used in this Exhibit A means the
interest of Mortgagor upon which is calculated Mortgagor's proportionate share of the costs, expenses, and liabilities attributable to the oil, gas, and mineral leases described herein. The
designation "Net Revenue Interest" or "NRI" or "NRIO" or
"NRIG" when used in this Exhibit A means the interest in the gross production of oil and gas and
other minerals from other properties subject to the oil, gas, and mineral leases to which Mortgagor is entitled by virtue of its ownership of the Working Interest after deducting all landowner
royalties, overriding royalties, and similar interests attributable to the Working Interest. The designation "Overriding Royalty
Interest" "ORRI" means an interest in production which is free of any obligation for the expense of exploration, development, and production, bearing only its pro rata share of
severance, production, and other similar taxes and, in instances where the document creating the overriding royalty interest so provides, costs associated with compression, dehydration, other treating
or processing, or transportation of production of oil, gas, or other minerals relating to the marketing of such production. The designation "Royalty
Interest" or "RI" means an interest in production which results from an ownership in the mineral fee estate or royalty estate in the relevant land and which is free of any
obligation for the expense of exploration, development, and production, bearing only its pro rata share of severance, production ad valorem, and other similar taxes and, in instances where the
document creating the royalty interest so provides, costs associated with compression, dehydration, other treating or processing or transportation of production of oil, gas, or other minerals relating
to the marketing of such production. Each amount set forth as "Working Interest" or "WI" or
"Net Revenue Interest" or "NRI" or "NRIO" or
"NRIG" is Mortgagor's minimum interest after giving full effect to, among other things, all Permitted Liens (as defined in the Credit Agreement). 


        Any
reference in this Exhibit A to wells or units is for warranty of interest, administrative convenience, and identification and shall not limit or restrict the right, title,
interest, or properties covered by this Deed of Trust. All right, title, and interest of Mortgagor in the properties described herein and in the Mortgaged Property (as defined in the body of this
instrument) is and shall be subject to this Second Mortgage, regardless of the presence thereon of any interests, units, or wells not described herein. 


        Unless
otherwise expressly provided, all recording references in this Exhibit A are references to the official public records of real property in the county or counties (or parish
or parishes) in which the Mortgaged Property is located and in which records documents relating to the Mortgaged Property are recorded, whether Conveyance Records, Deed Records, Mortgage Records, Oil
and Gas Records, Oil and Gas Lease Records, or other records. 


F-23








  



 
 

EXHIBIT G    
    
    FORM OF SECOND PLEDGE AGREEMENT    
  



        THE OBLIGATIONS UNDER THIS INSTRUMENT ARE EXPRESSLY SUBORDINATED TO THE AMENDED AND RESTATED PLEDGE AGREEMENT EXECUTED BY PLEDGOR (AS
HEREINAFTER DEFINED) IN FAVOR OF SOCIÉTÉ GÉNÉRALE ("SG"), THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE SENIOR LENDERS (AS HEREINAFTER
DEFINED), THAT PROVIDES, AND IS INTENDED TO PROVIDE, A FIRST PRIORITY SECURITY INTEREST IN THE PLEDGED COLLATERAL (AS HEREINAFTER DEFINED) TO SECURE THE OBLIGATIONS MORE PARTICULARLY DESCRIBED IN THAT
CERTAIN SECOND AMENDED AND RESTATED CREDIT AGREEMENT BY AND AMONG PLEDGORS, BRIGHAM OIL AND GAS, L.P., SG, THE ROYAL BANK OF SCOTLAND PLC ("RBS"), AND THE OTHER LENDERS PARTY THERETO FROM TIME TO TIME
(COLLECTIVELY "SENIOR LENDERS"). THIS INSTRUMENT IS SUBJECT TO THE TERMS AND PROVISIONS OF THAT CERTAIN AMENDED AND RESTATED INTERCREDITOR AGREEMENT DATED MARCH    , 2003 BY AND BETWEEN THE
SENIOR LENDERS.  


        This Amended and Restated Second Pledge Agreement dated as of March    , 2003 ("Second Pledge
Agreement") is between [Brigham Exploration Company, a Delaware corporation][Brigham, Inc., a Nevada corporation]
("Pledgor"), and The Royal Bank of Scotland plc, as agent for the lenders party to the Subordinated Credit Agreement described below
("Secured Party"). 


INTRODUCTION  


        A.    Brigham
Oil & Gas, L.P., a Delaware limited partnership ("Borrower"), the lenders party thereto, and The Royal Bank
of Scotland plc, as agent for such lenders (the "Agent"), were parties to that certain Subordinated Credit Agreement dated October 31, 2000, as
amended or supplemented on or before the date hereof (the "Existing Credit Agreement"). 



        B.    In
order to secure the full and punctual payment and performance of the obligations under the Existing Credit Agreement and the other loan documents contemplated thereby,
the Pledgor executed and delivered the security instruments described on Schedule 1 attached hereto (the "Existing Security Documents" in favor
of the Agent and has granted a continuing security interest in and to the Pledged Collateral (as hereafter defined). 


        C.    Borrower,
Pledgor, [Brigham Exploration Company, a Delaware corporation], [Brigham, Inc., a Nevada corporation],
the lenders named therein (the "Lenders") and Secured Party, as agent for the Lenders, have entered into the Amended and Restated Subordinated Credit
Agreement dated as of March            , 2003 (as amended, restated or otherwise modified from time-to-time, the "Subordinated Credit
Agreement"), which, among other things, amends and restates the Existing Credit Agreement in its entirety. 


        D.    Pledgor
has guaranteed the Obligations of Borrower under the Subordinated Credit Agreement pursuant to Article VIII thereof (the
"Subordinated Guaranty"). 


        E.    Under
the Subordinated Credit Agreement, it is a condition to the making of Advances by the Lenders that Pledgor shall amend and restate the Existing Security Documents
to secure its obligations under the Subordinated Credit Agreement and the Subordinated Guaranty by entering into this Second Pledge Agreement. 


        F.    Pledgor
and Société Générale, as administrative agent for the lenders party ("Senior
Agent") to that certain Second Amended and Restated Credit Agreement, dated as of the date hereof, have entered into the Amended and Restated Pledge Agreement, dated as of the
date hereof (the "Senior Pledge Agreement"). 


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        Therefore,
Pledgor hereby agrees with Secured Party for its benefit and the ratable benefit of the Lenders as follows: 


        Section 1.    Definitions.    All capitalized terms not otherwise defined in this Second Pledge Agreement that
are defined in the Subordinated Credit Agreement shall have the meaning assigned to such terms by the Subordinated Credit Agreement. Any capitalized terms used in this Second Pledge Agreement that are
defined in Articles 8 or 9 of the Uniform Commercial Code as adopted in the State of New York ("UCC") shall have the meanings assigned to those terms by
the UCC as of the date of this Second Pledge Agreement, whether specified elsewhere in this Second Pledge Agreement or not. All other rules of interpretation set forth in Section 1.05 of the
Subordinated Credit Agreement shall apply to this Second Pledge Agreement and are hereby incorporated herein by reference. 


        Section 2.    Pledge.    



        (a)    Grant of Pledge.    Pledgor hereby pledges to Secured Party, and grants to Secured Party, for its benefit and
the ratable benefit of the Lenders, a continuing lien on and security interest in the Pledged Collateral, as defined in Section 2(b) below. This Second Pledge Agreement shall secure all
Obligations of Pledgor now or hereafter existing under the Subordinated Credit Agreement, the Guaranty and the other Subordinated Loan Documents to which it is a party, including any extensions,
modification, substitutions, amendments, and renewals thereof, whether for principal, interest, fees, expenses, indemnifications or otherwise, in each case, including the payment of amounts which
would become due but for the operation of the automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., as amended. All such
obligations shall be referred to in this Second Pledge Agreement as the "Secured Obligations". 


        (b)    Pledged Collateral.    "Pledged Collateral" shall mean all of
Pledgor's right, title, and interest in the following, whether now owned or hereafter acquired: 



        (i)    all
of the membership interests listed in the attached Schedule II issued to Pledgor (the "Membership Interests"),
all such additional membership interests of any issuer of such interests hereafter acquired by Pledgor, the certificates representing the Membership Interests, if any, and all such additional
membership interests, all of Pledgor's rights, privileges, authority, and powers as a member of the issuer of such Membership Interests under the applicable [Limited Liability Company
Operating Agreement][Limited Liability Company Regulations] of such issuer and all rights to money or Property which Pledgor now has or hereafter acquires in
respect of the Membership Interests, including, without limitation, (A) any Proceeds from a sale by or on behalf of Pledgor of any of the Membership Interests, and (B) any distributions,
dividends, cash, instruments and other Property from time-to-time received or otherwise distributed in respect of the Membership Interests, whether regular, special or made in
connection with the partial or total liquidation of the issuer and whether attributable to profits, the return of any contribution or investment or otherwise attributable to the Membership Interests
or the ownership thereof other than distributions received by Pledgor in compliance with the Loan Documents (collectively, the "Membership Interests
Distributions"); 


        (ii)  all
of the general and limited partnership interests listed in the attached Schedule II issued to Pledgor (the "Partnership
Interests"), all such additional limited or general partnership interests of any issuer of such Partnership Interests hereafter acquired by Pledgor, all of Pledgor's rights,
privileges, authority, and powers as a limited or general partner of the issuer of such Partnership Interests under the applicable [Limited Partnership
Agreement][Partnership Agreement] of such issuer, and all rights to money or Property which Pledgor now has or hereafter acquires in respect of the Partnership
Interests, including, without limitation, (A) any Proceeds from a sale by or on behalf of Pledgor of any of the Partnership Interests, and (B) any distributions, dividends, cash,
instruments and other 




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Property from time-to-time received or otherwise distributed in respect of the Partnership Interests, whether regular, special or made in connection with the partial or total
liquidation of the issuer and
whether attributable to profits, the return of any contribution or investment or otherwise attributable to the Partnership Interests or the ownership thereof other than distributions received by
Pledgor in compliance with the Loan Documents (collectively, the "Partnership Interest Distributions"); and 



        (iii)  all
of the shares of stock listed in the attached Schedule II issued to Pledgor (the "Pledged Shares"), all such
additional shares of stock of any issuer of such Pledged Shares hereafter issued to Pledgor, the certificates representing the Pledged Shares and all such additional shares, all of Pledgor's rights,
privileges, authority, and powers as a shareholder of the issuer of such Pledged Shares under the applicable [Articles][Certificate] of Incorporation
and Bylaws of such issuer and all rights to money or Property which Pledgor now has or hereafter acquires in respect of the Pledged Shares, including, without limitation, (A) any Proceeds from
a sale by or on behalf of Pledgor of any of the Pledged Shares, and (B) any distributions, dividends, cash, instruments and other Property from time-to-time received or
otherwise distributed in respect of the Pledged Shares, whether regular, special or made in connection with the partial or total liquidation of the issuer and whether attributable to profits, the
return of any contribution or investment or otherwise attributable to the Pledged Shares or the ownership thereof other than distributions received by Pledgor in compliance with the Loan Documents
(collectively, the "Pledged Shares Distributions"; together with the Membership Interest Distributions and the Partnership Interest Distributions, the
"Distributions"); and 



        (iv)  all
additions and accessions to, substitutions and replacements of, and all products and proceeds from the Pledged Collateral described in paragraphs (i), (ii), and
(iii) of this Section 2(b). 




        (c)    Delivery of Pledged Collateral.    All certificates or instruments, if any, representing the Pledged Collateral
shall be delivered to Senior Agent pursuant to Section 2(c) of the Senior Pledge Agreement and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Senior Agent and the Secured Party. After the occurrence and during the continuance of an Event
of Default, Senior Agent or Secured Party shall have the right, upon prior written notice to Pledgor, to transfer to or to register in the name of Senior Agent or Secured Party or any of its nominees
any of the Pledged Collateral, subject to the rights specified in Section 2(d) of this Second Pledge Agreement and Section 2(d) of the Senior Pledge Agreement. In addition, after the
occurrence and during the continuance of an Event of Default, Senior Agent or Secured Party shall have the right at any time to exchange the certificates or instruments representing the Pledged
Collateral for certificates or instruments of smaller or larger denominations. 


        (d)    Rights Retained by Pledgor.    Notwithstanding the pledge in Section 2(a), so long as no Event of
Default shall have occurred and remain uncured: 



        (i)    and,
if an Event of Default shall have occurred and remain uncured, until such time thereafter as such voting and other consensual rights have been terminated pursuant
to Section 5 hereof, Pledgor shall be entitled to exercise any voting and other consensual rights pertaining to the Pledged Collateral for any purpose not inconsistent with the terms of this
Second Pledge Agreement or the Subordinated Credit Agreement; provided, however, that Pledgor shall not exercise or shall refrain from exercising any
such right if such action would have a materially adverse effect on the value of the Pledged Collateral; 




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        (ii)  except
as otherwise provided in the Subordinated Credit Agreement, Pledgor shall be entitled to receive and retain any dividends and other distributions paid on or in
respect of the Pledged Collateral and the Proceeds of any sale of the Pledged Collateral and all payments of principal and interest on loans and advances made by Pledgor to the issuer of the Pledged
Collateral; and 


        (iii)  at
and after such time as voting and other consensual rights have been terminated pursuant to Section 5 hereof, Pledgor shall execute and deliver (or cause to
be executed and delivered) to Secured Party all proxies and other instruments as Secured Party may reasonably request to (A) enable Secured Party to exercise the voting and other rights which
Pledgor is entitled to exercise pursuant to subsection (i) of this Section 2(d), and (B) to receive the dividends or other distributions and Proceeds of sale of the Pledged
Collateral and payments of principal and interest which Pledgor is authorized to receive and retain pursuant to paragraph (ii) of this Section 2(d). 





        Section 3.    Pledgor's Representations and Warranties.    Pledgor represents and warrants to Secured Party and
the Lenders as follows: 



        (a)  The
Pledged Collateral listed on the attached Schedule II has been duly authorized and validly issued and is fully paid and nonassessable. 



        (b)  Pledgor
is the legal and beneficial owner of the Pledged Collateral free and clear of any Lien or option, except for (i) the security interest created by this
Pledge Agreement and (ii) other Permitted Liens. 


        (c)  No
authorization, authentication, approval, or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required either
(i) for the pledge by Pledgor of the Pledged Collateral pursuant to this Second Pledge Agreement or for the execution, delivery, or performance of this Second Pledge Agreement by Pledgor
(except to the extent that financing statements are required under the UCC to be filed in order to maintain a perfected security interest) or (ii) for the exercise by Secured Party or any
Lender of the voting or other rights provided for in this Second Pledge Agreement or the remedies in respect of the Pledged Collateral pursuant to this Second Pledge Agreement (except as may be
required in connection with such disposition by laws affecting the offering and sale of securities generally). 


        (d)  Pledgor
has the full right, power and authority to deliver, pledge, assign and transfer the Pledged Collateral to Secured Party. 


        (e)  [The
[Membership Interests][Partnership Interests] listed on the attached Schedule II constitute
[100][1]% of the issued and outstanding [membership][general partnership] interests of the respective
issuer thereof and all [Membership Interests][Partnership Interests] in which Pledgor has any ownership interest.][The Pledged
Shares listed on the attached Schedule II constitute 100% of the issued and outstanding shares of capital stock of the respective issuer thereof and of the Pledged Shares in which Pledgor has
any ownership interests.] 


        (f)    The
name of Pledgor set forth in the first paragraph of this Pledge Agreement is the exact legal name of Pledgor. The legal address of Pledgor and the address of its
principal place of business and chief executive office is [6300 Bridge Point Parkway, Building 2, Suite 500, Austin, Texas 78730]. Pledgor keeps all records and documents
relating to the Pledged Collateral at such address or with Nevada Corporate Management, Inc., 3773 Howard Hughes Parkway, Suite 300, North Las Vegas, Nevada 89109. 



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        Section 4.    Pledgor's Covenants.    During the term of this Second Pledge Agreement and until all of the
Secured Obligations have been fully and finally paid and discharged in full, Pledgor covenants and agrees with Secured Party that: 



        (a)    Protect Collateral; Further Assurances.    Pledgor will warrant and defend the rights and title herein granted
unto Secured Party in and to the Pledged Collateral (and all right, title, and interest represented by the Pledged Collateral) against the claims and demands of all Persons whomsoever, except Senior
Agent. Pledgor agrees that, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary
and that Secured Party or any Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party or any Lender to
exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. 



        (b)    Transfer, Other Liens, and Additional Shares.    Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option with respect to, any of the Pledged Collateral or (ii) create or permit to exist any Lien upon or with respect to any of the Pledged Collateral, except for
(A) the Liens and security interest under this Pledge Agreement and (B) other Permitted Liens. Pledgor agrees that it will (1) cause each issuer of the Pledged Collateral not to
issue any other membership interests, partnership interests, capital stock or other securities in addition to or in substitution for the Pledged Collateral issued by such issuer, except to Pledgor and
(2) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any additional membership interests, partnership interests, capital stock or other securities of an
issuer of the Pledged Collateral. Pledgor shall not approve any amendment or modification of any of the Pledged Collateral unless it shall have given at least ten Business Days' prior written notice
(or such lesser period as may be agreed by Secured Party in writing) to, and such amendment or modification would not be materially adverse to the interests of the Lenders. 


        (c)    Jurisdiction of Formation; Name Change.    Pledgor shall not (i) amend, supplement, modify or restate
its articles or certificate of incorporation, bylaws, limited liability company agreements, or other equivalent organizational documents if such amendment, supplement, modification or restatement
would be materially adverse to the interests of the Lenders, or (ii) unless the Pledgor shall have given Secured Party at least ten (10) Business Days' prior written notice (or such
lesser period as may be agreed by Secured Party in writing), amend its name or change its jurisdiction of incorporation, organization or formation. Promptly upon the request of Secured Party, Pledgor
shall take all such action as Secured Party shall reasonably request to maintain the lien and security interest of Secured Party granted hereby at all time fully perfected and in full force and
effect. 




        Section 5.    Remedies upon Default.    If any Event of Default shall have occurred and be continuing: 



        (a)    UCC Remedies.    To the extent permitted by law, Secured Party may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for in this Second Pledge Agreement or otherwise available to it, all the rights and remedies of a secured party under the UCC (whether or
not the UCC applies to the affected Pledged Collateral). This Second Pledge Agreement shall not be construed to authorize the Secured Party to take any action prohibited by the UCC or to constitute a
waiver by the Pledgor of any right that the UCC does not permit the Pledgor to waive. 


        (b)    Dividends and Other Rights.    



        (i)    All
rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 2(d)(i) may
be exercised by 




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Secured Party if Secured Party so elects and gives written notice of such election to Pledgor and all rights of Pledgor to receive the dividends and other distributions on or in respect of the
Pledged Collateral and the proceeds of sale of the Pledged Collateral which it would otherwise be authorized to receive and retain pursuant to Section 2(d)(ii) shall cease at such time
as such written notice is deemed effective pursuant to the provisions of the Subordinated Credit Agreement related to effectiveness of notices. 



        (ii)  All
dividends and other distributions on or in respect of the Pledged Collateral and the proceeds of sale of the Pledged Collateral that are thereafter received by
Pledgor shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of Pledgor, and shall be promptly paid over to Senior Agent or Secured Party as Pledged
Collateral in the same form as so received (with any necessary indorsement). 




        (c)    Sale of Pledged Collateral.    Secured Party may sell all or part of the Pledged Collateral at public or
private sale, at any of Secured Party's offices or elsewhere, for cash, on credit, or for future delivery, and upon such other terms as Secured Party may deem commercially reasonable in accordance
with applicable laws. Pledgor agrees that to the extent permitted by law such sales may be made without notice. If notice is required by law, Pledgor hereby deems ten (10) days' advance notice
of the time and place of any public sale or the time after which any private sale is to be made reasonable notification, recognizing that if the Pledged Collateral threatens to decline speedily in
value or is of a type customarily sold on a recognized market shorter notice may be reasonable. Secured Party shall not be obligated to make any sale of the Pledged Collateral regardless of notice of
sale having been given. Secured Party may adjourn any public or private sale from time-to-time by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. Pledgor shall cooperate fully with Secured Party in all respects in selling or realizing upon all or any part of the Pledged
Collateral. In addition, Pledgor shall fully comply with the securities laws of the United States, the State of [Delaware][Nevada], and other states and
take such actions as may be necessary to permit Secured Party to sell or otherwise dispose of any securities representing the Pledged Collateral in compliance with such laws. 


        (d)    Exempt Sale.    If, in the opinion of Secured Party, there is any question that a public or semipublic sale or
distribution of any Pledged Collateral will violate any state or federal securities law, Secured Party in its discretion (i) may offer and sell securities privately to purchasers who will agree
to take them for investment purposes and not with a view to distribution and who will agree to imposition of restrictive legends on the certificates representing the security, or (ii) may sell
such securities in an intrastate offering under Section 3(a)(11) of the Securities Act of 1933, as amended, and no sale so made in good faith by Secured Party shall be deemed to be not
"commercially reasonable" solely because so made. Pledgor shall cooperate fully with Secured Party in all reasonable respects in selling or realizing upon all or any part of the Pledged Collateral. 



        (e)    Application of Collateral.    The proceeds of any sale, or other realization upon all or any part of the
Collateral pledged by Pledgor shall be applied by Secured Party as set forth in Section 7.06 of the Subordinated Credit Agreement. 


        (f)    Cumulative Remedies.    Each right, power and remedy herein specifically granted to Secured Party or otherwise
available to it shall be cumulative, and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity, or otherwise, and each
such right, power and remedy, whether specifically granted herein or otherwise existing, may be exercised at any time and from time-to-time as often and in such order as may be
deemed expedient by Secured Party in its sole discretion. No failure on the part of Secured Party to exercise, and no delay in exercising, and no course of dealing with respect to, any 



G-6





 





such right, power or remedy, shall operate as a waiver thereof, nor shall any single or partial exercise of any such rights, power or remedy preclude any other or further exercise thereof or the
exercise of any other right. 




        Section 6.    Secured Party as Attorney-in-Fact for Pledgor.    



        (a)    Secured Party Appointed Attorney-in-Fact.    Pledgor hereby irrevocably appoints
Secured Party as Pledgor's attorney-in-fact, with full authority after the occurrence and during the continuance of an Event of Default to act for Pledgor and in the name of
Pledgor, and, in Secured Party's discretion, subject to Pledgor's revocable rights specified in Section 2(d), to take any action and to execute any instrument which Secured Party may deem
necessary or advisable to accomplish the purposes of this Second Pledge Agreement, including, without limitation, to receive, indorse, and collect all instruments made payable to Pledgor representing
the proceeds of the sale of the Pledged Collateral, or any distribution in respect of the Pledged Collateral and to give full discharge for the same. Pledgor hereby acknowledges, consents and agrees
that the power of attorney granted pursuant to this Section 6 is irrevocable and coupled with an interest. 


        (b)    Secured Party May Perform.    Secured Party may from time-to-time, at its option and
expense, perform any act which Pledgor agrees hereunder to perform and which Pledgor shall fail to perform after being requested in writing so to perform (it being understood that no such request need
be given after the occurrence and during the continuance of any Event of Default and after notice thereof by Secured Party to Pledgor) and Secured Party may from time-to-time
take any other action which Secured Party reasonably deems necessary for the maintenance, preservation or protection of any of the Pledged Collateral or of its security interest therein. Secured Party
shall be obligated to provide notice to Pledgor of any action taken hereunder by telecopy or by registered mail. 


        (c)    Secured Party Has No Duty.    The powers conferred on Secured Party hereunder are solely to protect its
interest in the Pledged Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Pledged Collateral in its possession and the accounting for moneys
actually received by it hereunder, Secured Party shall have no duty as to any Pledged Collateral or responsibility for taking any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Pledged Collateral. 


        (d)    Reasonable Care.    Secured Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equal to that which Secured Party accords its own property, it being understood
that Secured Party shall have no responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relative to any
Pledged Collateral, whether or not Secured Party has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to
any Pledged Collateral. 




        Section 7.    Miscellaneous.    



        (a)    Expenses.    Pledgor will upon demand pay to Secured Party for its benefit and the benefit of the Lenders the
amount of any reasonable out-of-pocket expenses, including the reasonable fees and disbursements of its counsel and of any experts, which Secured Party and the Lenders may
incur in
connection with (i) the custody, preservation, use, or operation of, or the sale, collection, or other realization of, any of the Pledged Collateral, (ii) the exercise or enforcement of
any of the rights of Secured Party or any Lender hereunder, and (iii) the failure by Pledgor to perform or observe any of the provisions hereof. 


        (b)    Amendments, Etc.    No amendment or waiver of any provision of this Second Pledge Agreement nor consent to any
departure by Pledgor herefrom shall be effective unless made in 



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writing and authenticated by Pledgor and Secured Party. In addition, no such amendment or waiver shall be effective unless given or entered into with the necessary approvals of the Lenders as
required in the Subordinated Credit Agreement. Any such waiver or consent, whether by Secured Party or Secured Party and the Lenders shall be effective only in the specific instance and for the
specific purpose for which given. 


        (c)    Addresses for Notices.    All notices and other communications provided for hereunder shall be in the manner
and to the addresses set forth in the Subordinated Credit Agreement. 



        (d)    Continuing Security Interest; Transfer of Interest.    This Second Pledge Agreement shall create a continuing
security interest in the Pledged Collateral and, unless expressly released by Secured Party, shall (i) remain in full force and effect until payment in full and termination of the Secured
Obligations, (ii) be binding upon Pledgor, Secured Party, the Lenders and their successors, and assigns, and (iii) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of and be binding upon, Secured Party, the Lenders and their respective successors, transferees, and assigns. Upon the payment in full and termination of the Secured
Obligations, the security interest granted hereby shall terminate and all rights to the Pledged Collateral shall revert to Pledgor to the extent such Pledged Collateral shall not have been sold or
otherwise applied pursuant to the terms hereof. Without limiting the generality of the foregoing clause, when any Lender assigns or otherwise transfers any interest held by it under the Subordinated
Credit Agreement or other Subordinated Loan Document to any other Person pursuant to the terms of the Subordinated Credit Agreement or other Subordinated Loan Document, that other Person shall
thereupon become vested with all the benefits held by such Lender under this Second Pledge Agreement. Upon any such termination, Secured Party will, at Pledgor's expense, deliver all Pledged
Collateral to Pledgor, execute and deliver to Pledgor such documents as Pledgor shall reasonably request and take any other actions reasonably requested to evidence or effect such termination. 



        (e)    Waivers.    Pledgor hereby waives: 



        (i)    promptness,
diligence, notice of acceptance, and any other notice with respect to any of the Secured Obligations and this Second Pledge Agreement; 


        (ii)  any
requirement that Secured Party or any Lender protect, secure, perfect, or insure any Lien or any Property subject thereto or exhaust any right or take any action
against Pledgor, any other Guarantor, Borrower or any other Person or any collateral; and 



        (iii)  any
duty on the part of Secured Party to disclose to Pledgor any matter, fact, or thing relating to the business, operation, or condition of Pledgor, any other
Guarantor, Borrower and their respective assets now known or hereafter known by such Person. 




        (f)    Severability.    Wherever possible each provision of this Second Pledge Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision of this Second Pledge Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to
the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Second Pledge Agreement. 


        (g)    Choice of Law.    This Second Pledge Agreement shall be governed by and construed and enforced in accordance
with the laws of the state of New York, except to the extent that the validity or perfection of the security interests hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the state of New York. 


        (h)    Counterparts.    For the convenience of the parties, this Second Pledge Agreement may be executed in multiple
counterparts, each of which for all purposes shall be deemed to be an 



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original, and all such counterparts shall together constitute but one and the same Pledge Agreement. 


        (i)    Reinstatement.    If, at any time after payment in full by Pledgor of all Secured Obligations and termination
of Secured Party's security interest, any payments on the Secured Obligations previously made by Pledgor or any other person must be disgorged by Secured Party for any reason whatsoever, including,
without limitation, the insolvency, bankruptcy or reorganization of Pledgor or such Person, this Second Pledge Agreement and Secured Party's security interests herein shall be reinstated as to all
disgorged payments as though such payments had not been made, and Pledgor shall sign and deliver to Secured Party all documents, and shall do such other acts and things, as may be necessary to
reinstate and perfect Secured Party's security interest. 


        (j)    Amendment and Restatement.    This Pledge Agreement amends and restates in its entirety the Existing Security
Documents, and all of the terms hereof shall supersede the terms and provisions thereof. This Pledge Agreement renews and extends all Liens existing by virtue of the Existing Security Documents, but
the terms, provisions and conditions of such Liens shall hereafter be governed in all respects by this Pledge Agreement. 




        Executed
as of the date first above written. 


        [SIGNATURES
OF PLEDGOR AND SECURED PARTY] 


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SCHEDULE I    
    
    EXISTING SECURITY DOCUMENTS    
  


[To
be provided.] 


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SCHEDULE II    
    
    PLEDGED COLLATERAL    
  


[Pledgor
to provide.] 


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 EXHIBIT H  


 

FORM OF SECOND SECURITY AGREEMENT  


        THE OBLIGATIONS UNDER THIS INSTRUMENT ARE EXPRESSLY SUBORDINATED TO THE AMENDED AND RESTATED SECURITY AGREEMENT EXECUTED BY DEBTOR (AS
HEREINAFTER DEFINED) IN FAVOR OF SOCIÉTÉ GÉNÉRALE ("SG"), THE ADMINISTRATIVE AGENT FOR THE BENEFIT OF THE SENIOR LENDERS (AS HEREINAFTER
DEFINED), THAT PROVIDES, AND IS INTENDED TO PROVIDE, A FIRST PRIORITY SECURITY INTEREST IN THE COLLATERAL (AS HEREINAFTER DEFINED) TO SECURE THE OBLIGATIONS MORE PARTICULARLY DESCRIBED IN THAT CERTAIN
SECOND AMENDED AND RESTATED CREDIT AGREEMENT BY AND AMONG DEBTOR, BRIGHAM EXPLORATION COMPANY, BRIGHAM, INC., SG, THE ROYAL BANK OF SCOTLAND PLC ("RBS"), AND THE OTHER LENDERS PARTY THERETO
FROM TIME TO TIME (COLLECTIVELY, "SENIOR LENDERS"). THIS INSTRUMENT IS SUBJECT TO THE TERMS AND PROVISIONS OF THAT CERTAIN AMENDED AND RESTATED INTERCREDITOR AGREEMENT DATED MARCH    , 2003
BY AND BETWEEN THE SENIOR LENDERS.


        This
Amended and Restated Second Security Agreement dated as of March    , 2003 ("Second Security Agreement") is by and between
Brigham Oil & Gas, L.P., a Delaware limited partnership ("Grantor"), and The Royal Bank of Scotland plc, as agent for the Lenders party to the
Subordinated Credit Agreement described below ("Secured Party"). 


INTRODUCTION  


        A.    Grantor,
Brigham Exploration Company, a Delaware corporation, Brigham, Inc., a Nevada corporation, the lenders party thereto, and The Royal Bank of Scotland plc,
as agent for such lenders (the "Agent"), catered into that certain Subordinated Credit Agreement dated October 31, 2000, as amended (the
"Existing Credit Agreement"). 



        B.    In
order to secure the full and punctual payment and performance of the obligations under the Existing Credit Agreement and the other loan documents contemplated thereby,
the Grantor executed and delivered the security instruments described on Schedule I attached hereto (the "Existing Security Documents") in favor
of the Agent and has granted a continuing security interest in and to the Collateral (as hereafter defined). 


        C.    Grantor,
Brigham Exploration Company, a Delaware corporation, Brigham, Inc., a Nevada corporation, the lenders named therein (the "Lenders") and Secured Party, as
agent for the Lenders, have entered into the Amended and Restated Subordinated Credit Agreement dated as of March    , 2003 (as amended, restated or otherwise modified from
time-to-time, the "Subordinated Credit Agreement"), which, among other things, amends and restates the Existing Credit Agreement
in its entirety. 


        D.    Under
the Subordinated Credit Agreement, it is a condition to the making of Advances by the Lenders that Grantor shall amend and restate the Existing Security Documents
to secure its Obligations under the Subordinated Credit Agreement by entering into this Second Security Agreement. 



        E.    Grantor
and Société Générale, as administrative agent for the lenders party ("Senior
Agent") to that certain Second Amended and Restated Credit Agreement, dated as of the date hereof, have entered into the Amended and Restated Security Agreement, dated as of
the date hereof (the "Senior Security Agreement"). 


        Therefore,
Grantor hereby agrees with Secured Party for its benefit and the ratable benefit of the Lenders as follows: 



        Section 1.    Definitions.    All capitalized terms not otherwise defined in this Second Security Agreement
that are defined in the Subordinated Credit Agreement shall have the meaning assigned to 


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such terms by the Subordinated Credit Agreement. Any capitalized terms used in this Second Security Agreement that are defined in Article 9 of the Uniform Commercial Code as adopted in the
State of New York ("UCC") shall have the meanings assigned to those terms by the UCC as of the date of this Second Security Agreement, whether specified
elsewhere in this Second Security Agreement or not. All other rules of interpretation set forth in Section 1.05 of the Subordinated Credit Agreement shall apply to this Second Security
Agreement and are hereby incorporated herein by reference. 


        Section 2.    Security Interest.    



        (a)    Grant of Security Interest.    Grantor hereby grants to Secured Party for its benefit and the ratable benefit
of the Lenders a lien on and security interest in the Collateral (as defined in Section 2(b) below) to secure the performance and payment of all Obligations of Grantor now or hereafter existing
under the Subordinated Credit Agreement, the Subordinated Notes and the other Subordinated Loan Documents to which it is a party, including any extensions, modifications, substitutions, amendments and
renewals thereof, whether for principal, interest, fees, expenses, indemnification, or otherwise, in each case, including the payment of amounts which would become due but for the operation of the
automatic stay under Section 362(a) of the United States Bankruptcy Code, 11 U.S.C. §§ 101 et seq., as amended. All such obligations shall be referred to in this Second
Security Agreement as the "Secured Obligations". 



        (b)    Collateral.    "Collateral" shall mean all of Grantor's right,
title, and interest in the following, whether now owned or hereafter acquired: 



        (i)    Accounts.    All Accounts and all other rights to payment owing or to be owing to Grantor, including all
Instruments, Documents and Chattel Paper that represent any right of Grantor to payment for Property sold or leased or for services rendered, whether or not it has been earned by performance (all such
Accounts, Instruments, Documents and Chattel Paper being the "Receivables"); 


        (ii)    Equipment.    All Equipment, and all parts thereof and all accessions and additions thereto; 


        (iii)    General Intangibles.    All General Intangibles or contract rights relating to, or existing in connection
with, the other Collateral (all such General Intangibles and contract rights being the "General Intangibles"); 



        (iv)    Inventory.    All Inventory, including, without limitation, all Goods, whether such Goods are in possession of
Grantor or of a bailee or other Person for sale, lease, storage, transit, processing, use or otherwise; 


        (v)    Records.    All ledger sheets, files, Records, and documents relating to the foregoing Collateral; and 


        (vi)    Proceeds.    All Proceeds of the foregoing Collateral and, to the extent not otherwise included, all payments
under any insurance, indemnity, warranty, or guaranty of or for the foregoing Collateral. 





        Section 3.    Representations and Warranties.    Grantor hereby represents and warrants the following to
Secured Party and the Lenders: 



        (a)    Ownership of Collateral; Liens.    Grantor is, and will be the record and beneficial owner of all Collateral
pledged by Grantor free and clear of any Lien, except for Liens created hereby or other Permitted Liens. No effective financing statement or other instrument similar in effect covering all or any part
of the Collateral is, or will be on file in any recording office, except such as may be filed in connection with this Second Security Agreement or in connection with other Permitted Liens or for which
satisfactory releases have been received by Secured Party. The execution, delivery and performance by Grantor of this Second Security Agreement and the grant 



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of the security interest in the Collateral to Secured Party are within Grantor's powers and have been duly authorized by all necessary governing action. 


        (b)    Authorization and Approvals.    No consent, order, authorization, or approval or other action by, and no notice
to or filing with, any Governmental Authority (other than the filing of financing statements) or any other Person (except for the Senior Agent and Senior Lenders) is required for (i) the due
execution, delivery and performance by Grantor of this Second Security Agreement, (ii) the grant by Grantor of the security interest in the Collateral granted by this Second Security Agreement,
(iii) the perfection of such security interest or (iv) the exercise by Secured Party or any Lender of its rights and remedies under this Second Security Agreement (except as may be
required in connection with such disposition by laws affecting the offering and sale of securities generally). 


        (c)    Lien Priority and Perfection.    On the Closing Date this Second Security Agreement will create valid and
continuing security interests in the Collateral, securing the payment of the Secured Obligations. Upon the filing of financing statements in the office(s) set forth on Schedule II attached
hereto, the security interests granted to Secured Party hereunder will constitute valid, perfected security interests in all Collateral with respect to which a security interest can be perfected by
the filing of a financing statement, subject only to Permitted Liens. 


        (d)    Legal Name; Address; Location of Records.    The name of Grantor set forth in the first paragraph of this
Second Security Agreement is the exact legal name of Grantor. The legal address of Grantor and the address of Grantor's principal place of business and chief executive office is 6300 Bridge Point
Parkway, Building 2, Suite 500, Austin, Texas 78730. Grantor keeps all records and documents relating to the Collateral at such address. 




        Section 4.    Grantor Covenants.    



        (a)    Further Assurances.    Grantor agrees that at any time, at Grantor's expense, Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that may be reasonably necessary or that Secured Party or any Lender may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby or to enable Secured Party or any Lender to exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Grantor will at Secured Party's request: 



        (i)    with
respect to any of the Collateral that is evidenced by a promissory note or other Instrument or by Chattel Paper and if, in the case of any such instrument, its
value exceeds $100,000, deliver and pledge to the Senior Agent under the Senior Security Agreement, such note, Instrument or Chattel Paper, duly indorsed and accompanied by duly executed instruments
of transfer or assignment, all in form and substance satisfactory to the Secured Party; and 



        (ii)  file
(or authorize the filing of) such financing or continuation statements, or amendments thereto, and such other instruments or notices as may be reasonably
necessary, or as Secured Party may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby. 




        (b)    Insurance.    



        (i)    Grantor
shall, at its own expense, maintain, or cause to be maintained, insurance with respect to the Collateral owned by Grantor in such amounts, against such risks, in
such form, and with such insurers, as the Subordinated Credit Agreement requires. Further, Grantor shall deliver certificates of insurance as the Subordinated Credit Agreement requires. 




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        (ii)  During
the continuance of any Event of Default, all loss casualty insurance payments in respect to such Collateral shall be paid to and applied by Secured Party as
specified in the Subordinated Credit Agreement. 




        (c)    Jurisdiction of Formation; Name Change.    Grantor shall not (i) amend, supplement, modify or restate
its certificate of limited partnership, limited partnership agreements, or other equivalent organizational documents if such amendment, supplement, modification or restatement would be materially
adverse to the interests of the Lenders, or (ii) unless the Grantor shall have given Secured Party at least ten (10) Business Days' prior written notice (or such lesser period as may be
agreed by Secured Party in writing), amend its name or change its jurisdiction of, organization, or formation. Promptly upon the request of Secured Party, Grantor shall take all such action as Secured
Party shall reasonably request to maintain the security interest of Secured Party in the Collateral granted hereby at all time fully perfected and in full force and effect. 


        (d)    Maintenance and Preservation of Records.    Grantor will hold and preserve, at its own cost and expense
satisfactory and complete records of the Collateral, including, but not limited to, Instruments, Documents, Chattel Paper, contracts, and Records with respect to the Receivables. 


        (e)    Liability Under Contracts and Receivables.    Notwithstanding anything in this Second Security Agreement to the
contrary, 



        (i)    the
execution of this Second Security Agreement shall not release Grantor from its obligations and duties under the contracts and agreements and Receivables included in
the Collateral to the extent set forth therein, 


        (ii)  the
exercise by Secured Party of any of its rights hereunder shall not release Grantor from any of its duties or obligations under the contracts and agreements and the
Receivables included in the Collateral, and 


        (iii)  Secured
Party shall not have any obligation or liability under the contracts and agreements and the Receivables included in the Collateral by reason of the execution
and delivery of this Second Security Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Grantor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder. 




        (f)    Transfer of Certain Collateral; Release of Certain Security Interests.    Grantor agrees that it shall not
sell, assign, or otherwise dispose of any Collateral except as otherwise permitted under the Subordinated Credit Agreement. Secured Party shall promptly, at Grantor's expense, execute and deliver all
further instruments and documents, and take all further action that Grantor may reasonably request in order to release its security interest in any Collateral that is disposed of in accordance with
the terms of the Subordinated Credit Agreement. 


        (g)    Receivables.    Grantor agrees that it will use commercially reasonable efforts to ensure that each Receivable: 



        (i)    is
and will be, in all material respects, the genuine, legal, valid, and binding obligation of the Account Debtor in respect thereof, representing an unsatisfied
obligation of such Account Debtor (except to the extent compromised or settled in the ordinary course of business), 



        (ii)  is
and will be, in all material respects, enforceable in accordance with its terms, is not and will not be subject to any setoffs, defenses, taxes, counterclaims,
except in the ordinary course of business, 


        (iii)  is
and will be, in all material respects, in compliance with all applicable Legal Requirements, whether federal, state, local or foreign, and 




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        (iv)  that
if evidenced by Chattel Paper, will not require the consent of the account debtor in respect thereof in connection with its assignment hereunder. 





        Section 5.    Remedies.    If any Event of Default shall have occurred and be continuing: 



        (a)    UCC Remedies.    



        (i)    To
the extent permitted by law, Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for in this Second Security
Agreement or otherwise available to it, all the rights and remedies of a secured party under the UCC (whether or not the UCC applies to the affected Collateral). This Second Security Agreement shall
not be construed to authorize the Secured Party to take any action prohibited by the UCC or to constitute a waiver by the Grantor of any right that the UCC does not permit the Grantor to waive. 



        (ii)  Upon
written notice to Grantor, all payments received by Grantor under or in connection with or in respect of the Collateral shall be deposited with Senior Agent or
Secured Party. 




        (b)    Assembly of Collateral.    Secured Party may, in its reasonable discretion, require Grantor to, at Grantor's
expense, promptly assemble all or part of the Collateral in such locations as Grantor and Secured Party may agree at such time and that is reasonably convenient to both parties, and make it available
to Secured Party at such locations. Secured Party may occupy any premises owned or leased by Grantor where the Collateral or any part thereof is assembled for a reasonable period in order to
effectuate its rights and remedies hereunder or under law, without obligation to Grantor in respect of such occupation. 


        (c)    Sale of Collateral.    Secured Party may sell all or part of the Collateral at a public or private sale, at any
of Secured Party's offices or elsewhere, for cash, on credit, or for future delivery, and upon such other terms as Secured Party may deem commercially reasonable. Secured Party shall give Grantor ten
(10) days' advance notice of the time and place of any public sale or the time after which any private sale is to be made reasonable notification, recognizing that if the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market shorter notice may be reasonable. Secured Party shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. 


        (d)    Contract Rights.    Secured Party may exercise any rights and remedies of Grantor under or in connection with
the Instruments, Documents, Chattel Paper, or contracts which represent Receivables, the General Intangibles, or otherwise relate to the Collateral, including, without limitation, any rights of
Grantor to demand or otherwise require payment of any amount under, or performance of any provisions of, the Instruments, Documents, Chattel Paper, or contracts which represent Receivables or the
General Intangibles. 


        (e)    Receivables.    



        (i)    Secured
Party may, or may direct Grantor to, take any action Secured Party deems necessary or advisable to enforce collection of the Receivables including, without
limitation, notifying the Account Debtors or obligors under any Receivables of the assignment of such Receivables to Secured Party and directing such Account Debtors or obligors to make payment of all
amounts due or to become due directly to Secured Party. Upon such notification and direction, and at the expense of Grantor, Secured Party may enforce collection of any such Receivables, and adjust,
settle, or compromise the amount or payment thereof in the same manner and to the same extent as Grantor might have done. 




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        (ii)  After
receipt by Grantor of the notice referred to in subparagraph (i) above, all amounts and Proceeds (including Instruments) received by Grantor in respect of
the Receivables shall be received in trust for the benefit of Secured Party hereunder, shall be segregated from other funds of Grantor, and shall promptly be paid over to Senior Agent or Secured Party
in the same form as so received (with any necessary indorsement) to be held as Collateral. Grantor shall not adjust, settle, or compromise the amount or payment of any Receivable, or release wholly or
partly any Account Debtor or obligor thereof, or allow any credit or discount thereon other than in the ordinary course of business and consistent with past practices. 





        Section 6.    Application of Collateral.    The proceeds of any sale, or other realization upon all or any part
of the Collateral pledged by Grantor shall be applied by Secured Party in the order set forth in Section 7.06 of the Subordinated Credit Agreement. 


        Section 7.    Secured Party as Attorney-in-Fact for Grantor.    



        (a)    Attorney-In-Fact.    Grantor hereby irrevocably appoints Secured Party as Grantor's
attorney-in-fact, with full authority after the occurrence and during the continuance of an Event of Default to act for Grantor and in the name of Grantor to, in Secured
Party's discretion: 



        (i)    file
one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral; 


        (ii)  to
obtain and adjust insurance as required pursuant to Section 5.02 of the Subordinated Credit Agreement to the extent Grantor has failed to provide such
insurance; 


        (iii)  to
receive, indorse, and collect any drafts or other Instruments, Documents, and Chattel Paper which are part of the Collateral pledged by Grantor; 


        (iv)  to
take or cause to be taken, all actions necessary to perform or comply or cause performance or compliance with the terms of this Second Security Agreement, including,
without limitation, actions to pay or discharge taxes and Liens levied or placed on or threatened against the Collateral; 


        (v)  to
ask, demand, collect, sue for, recover, compromise, receive, and give acquittance and receipts for moneys due and to become due under or in respect of any of the
Collateral pledged by Grantor and to file any claims or take any action or institute any proceedings which Secured Party may deem necessary or desirable for the collection of any of such Collateral or
otherwise to enforce the rights of Secured Party with respect to any of such Collateral. 





        The
power of attorney granted hereby is coupled with an interest and is irrevocable. 



        (b)    Secured Party May Perform.    Secured Party may from time-to-time, at its option and
expense, perform any act which Grantor agrees hereunder to perform and which Grantor shall fail to perform after being requested in writing so to perform (it being understood that no such request need
be given after the occurrence and during the continuance of any Event of Default) and Secured Party may from time-to-time take any other action which Secured Party reasonably
deems necessary for the maintenance, preservation or protection of any of the Collateral or of its lien thereof and security interest therein. 


        (c)    Secured Party Has No Duty.    The powers conferred on Secured Party hereunder are solely to protect its
interest in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Secured Party shall have no duty as to any Collateral or 



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responsibility for taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. 




        (d)    Reasonable Care.    Secured Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which Secured Party accords its own Property, it being understood that Secured
Party shall have no responsibility for taking any necessary steps to preserve rights against any parties with respect to any Collateral. 


        Section 8.    Miscellaneous.    



        (a)    Expenses.    Grantor will upon demand pay to Secured Party for its benefit and the benefit of the Lenders the
amount of any reasonable out-of-pocket expenses, including the reasonable fees and disbursements of its counsel and of any experts, which Secured Party and the Lenders may
incur in connection with: 



        (i)    the
custody, preservation, use, or operation of, or the sale, collection, or other realization of, any of the Collateral, 


        (ii)  the
exercise or enforcement of any of the rights of Secured Party or any Lender hereunder, and 


        (iii)  the
failure by Grantor to perform or observe any of the provisions hereof. 




        (b)    Amendments; Etc.    No amendment or waiver of any provision of this Second Security Agreement nor consent to
any departure by Grantor herefrom shall be effective unless made in writing and authenticated by Grantor and Secured Party. In addition, no such amendment or waiver shall be effective unless given or
entered into with the necessary approvals of the Lenders as required in the Subordinated Credit Agreement. Any such waiver or consent, whether by Secured Party or Secured Party and the Lenders shall
be effective only in the specific instance and for the specific purpose for which given. 


        (c)    Addresses for Notices.    All notices and other communications provided for hereunder shall be made in the
manner and to the addresses set forth in the Subordinated Credit Agreement. 



        (d)    Continuing Security Interest; Transfer of Interest.    This Second Security Agreement shall create a continuing
security interest in the Collateral and, unless expressly released by Secured Party, shall: 



        (i)    remain
in full force and effect until payment in full and termination of the Secured Obligations, 


        (ii)  be
binding upon Grantor, Secured Party, the Lenders and their successors, and assigns, and 



        (iii)  inure,
together with the rights and remedies of Secured Party, hereunder, to the benefit of Secured Party, the Lenders and their respective successors, transferees,
and assigns. 




Upon
the payment in full and termination of the Secured Obligations, the security interest granted hereby shall terminate and all rights to the Collateral pledged by Grantor shall revert to Grantor to
the extent such Collateral shall not have been sold or otherwise applied pursuant to the terms hereof. Without limiting the generality of the foregoing clause, when any Lender assigns or otherwise
transfers any interest held by it under the Subordinated Credit Agreement or other Subordinated Loan Document to any other Person pursuant to the terms of the Subordinated Credit Agreement or other
Subordinated Loan Document, that other Person shall thereupon become vested with all the benefits held by such Lender under this Second Security Agreement. Upon any such termination, Secured Party
will, at Grantor's 



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expense, execute and deliver to Grantor such documents as Grantor shall reasonably request and take any other actions reasonably requested to evidence or effect such termination. 


        (e)    Severability.    Wherever possible each provision of this Second Security Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any provision of this Second Security Agreement shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Second Security Agreement. 


        (f)    Choice of Law.    This Second Security Agreement shall be governed by and construed and enforced in accordance
with the laws of the state of New York, except to the extent that the validity or perfection of the security interests hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the state of New York. 



        (g)    Amendment and Restatement.    This Security Agreement amends and restates in its entirety the Existing Security
Documents, and all of the terms hereof shall supercede the terms and provisions thereof. This Security Agreement renews and extends all Liens existing by virtue of the Existing Security Documents,
but the terms, provisions and conditions of such Liens shall hereafter be governed in all respects by this Security Agreement. 



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        IN
WITNESS WHEREOF, the parties hereto have caused this Second Security Agreement to be duly executed as of the date first above written. 


[SIGNATURES
OF GRANTOR AND SECURED PARTY] 


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SCHEDULE I    
    
    EXISTING SECURITY DOCUMENTS    
  


        [To be provided.] 


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SCHEDULE II    
  
  UCC FILING LOCATIONS    
  


        [Grantor to provide.] 


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QuickLinks



Exhibit 10.54



TABLE OF CONTENTS


AMENDED AND RESTATED SUBORDINATED CREDIT AGREEMENT

INTRODUCTION

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS



ARTICLE II CREDIT FACILITIES


ARTICLE III CONDITIONS OF LENDING

ARTICLE IV REPRESENTATIONS AND WARRANTIES


ARTICLE V AFFIRMATIVE COVENANTS

ARTICLE VI NEGATIVE COVENANTS


ARTICLE VII EVENTS OF DEFAULT; REMEDIES

ARTICLE VIII THE GUARANTY


ARTICLE IX THE AGENT

ARTICLE X MISCELLANEOUS


EXHIBIT A FORM OF ASSIGNMENT AND ACCEPTANCE


EXHIBIT B Form of Compliance Certificate


EXHIBIT C



EXHIBIT D



EXHIBIT E – Form of Subordinated Note


EXHIBIT F FORM OF SECOND MORTGAGE AMENDMENT

AMENDED AND RESTATED SECOND MORTGAGE, DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING, AND FINANCING STATEMENT



Exhibit A


EXHIBIT G FORM OF SECOND PLEDGE AGREEMENT


SCHEDULE I EXISTING SECURITY DOCUMENTS


SCHEDULE II PLEDGED COLLATERAL



EXHIBIT H – Form of Second Security Agreement


SCHEDULE I EXISTING SECURITY DOCUMENTS


SCHEDULE II UCC FILING LOCATIONS