Exhibit 10.2


 


Execution Version


 


GUARANTEE AND COLLATERAL AGREEMENT


 


made by


 


each of the Grantors (as defined herein)


 


in favor of


 


WELLS FARGO BANK, N.A.,


 


as Administrative Agent


 


Dated as of May 24, 2010


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Definitions

  	
  1

  
	
  Section 1.02

  	
  Other
  Definitional Provisions; References

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II Guarantee

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Guarantee

  	
  3

  
	
  Section 2.02

  	
  Payments

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE III Grant of Security Interest

  	
  4

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Grant
  of Security Interest

  	
  4

  
	
  Section 3.02

  	
  Transfer
  of Pledged Securities

  	
  7

  
	
  Section 3.03

  	
  Grantors
  Remains Liable under Accounts, Chattel Paper and Payment Intangibles

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV Acknowledgments, Waivers and Consents

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Acknowledgments,
  Waivers and Consents

  	
  7

  
	
  Section 4.02

  	
  No
  Subrogation, Contribution or Reimbursement

  	
  10

  
	
   

  	
   

  	
   

  
	
  ARTICLE V Representations and Warranties

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Representations
  in Credit Agreement

  	
  11

  
	
  Section 5.02

  	
  Benefit
  to the Guarantor

  	
  11

  
	
  Section 5.03

  	
  Solvency

  	
  11

  
	
  Section 5.04

  	
  Title;
  No Other Liens

  	
  11

  
	
  Section 5.05

  	
  Perfected
  First Priority Liens

  	
  12

  
	
  Section 5.06

  	
  Legal
  Name, Organizational Status, Chief Executive Office

  	
  12

  
	
  Section 5.07

  	
  Prior
  Names, Addresses, Locations of Tangible Assets

  	
  12

  
	
  Section 5.08

  	
  Pledged
  Securities

  	
  12

  
	
  Section 5.09

  	
  Goods

  	
  12

  
	
  Section 5.10

  	
  Instruments
  and Chattel Paper

  	
  12

  
	
  Section 5.11

  	
  Truth
  of Information; Accounts

  	
  13

  
	
  Section 5.12

  	
  Governmental
  Obligors

  	
  13

  
	
  Section 5.13

  	
  Patents
  and Trademarks

  	
  13

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI Covenants

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Covenants
  in Credit Agreement

  	
  13

  
	
  Section 6.02

  	
  Maintenance
  of Perfected Security Interest; Further Documentation

  	
  14

  
	
  Section 6.03

  	
  Maintenance
  of Records

  	
  15

  
	
  Section 6.04

  	
  Right
  of Inspection

  	
  15

  
	
  Section 6.05

  	
  Further
  Identification of Collateral

  	
  15

  
	
  Section 6.06

  	
  Changes
  in Locations, Name, etc.

  	
  15

  
	
  Section 6.07

  	
  Compliance
  with Contractual Obligations

  	
  16

  
	
  Section 6.08

  	
  Limitations
  on Dispositions of Collateral

  	
  16

  



 

















 


	
  Section 6.09

  	
  Pledged
  Securities

  	
  16

  
	
  Section 6.10

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

  	
  17

  
	
  Section 6.11

  	
  Analysis
  of Accounts, Etc.

  	
  17

  
	
  Section 6.12

  	
  Instruments
  and Tangible Chattel Paper

  	
  18

  
	
  Section 6.13

  	
  Maintenance
  of Equipment

  	
  18

  
	
  Section 6.14

  	
  Patents
  and Trademarks

  	
  18

  
	
  Section 6.15

  	
  Commercial
  Tort Claims

  	
  19

  
	
  Section 6.16

  	
  Letter-of-Credit
  Rights

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII Remedial Provisions

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Pledged
  Securities

  	
  20

  
	
  Section 7.02

  	
  Collections
  on Accounts, Etc.

  	
  21

  
	
  Section 7.03

  	
  Proceeds

  	
  21

  
	
  Section 7.04

  	
  Colorado
  UCC and Other Remedies

  	
  22

  
	
  Section 7.05

  	
  Private
  Sales of Pledged Securities

  	
  23

  
	
  Section 7.06

  	
  Waiver;
  Deficiency

  	
  24

  
	
  Section 7.07

  	
  Non-Judicial
  Enforcement

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII The Administrative
  Agent

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 8.01

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

  	
  24

  
	
  Section 8.02

  	
  Duty
  of Administrative Agent

  	
  26

  
	
  Section 8.03

  	
  Execution
  of Financing Statements

  	
  26

  
	
  Section 8.04

  	
  Authority
  of Administrative Agent

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX Subordination of
  Indebtedness

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  Subordination
  of All Guarantor Claims

  	
  27

  
	
  Section 9.02

  	
  Claims
  in Bankruptcy

  	
  27

  
	
  Section 9.03

  	
  Payments
  Held in Trust

  	
  28

  
	
  Section 9.04

  	
  Liens
  Subordinate

  	
  28

  
	
  Section 9.05

  	
  Notation
  of Records

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE X Miscellaneous

  	
  28

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Waiver

  	
  28

  
	
  Section 10.02

  	
  Notices

  	
  29

  
	
  Section 10.03

  	
  Payment
  of Expenses, Indemnities, Etc.

  	
  29

  
	
  Section 10.04

  	
  Amendments
  in Writing

  	
  30

  
	
  Section 10.05

  	
  Successors
  and Assigns

  	
  30

  
	
  Section 10.06

  	
  Invalidity

  	
  30

  
	
  Section 10.07

  	
  Counterparts

  	
  30

  
	
  Section 10.08

  	
  Survival

  	
  30

  
	
  Section 10.09

  	
  Captions

  	
  30

  
	
  Section 10.10 

  	
  No
  Oral Agreements

  	
  31

  
	
  Section 10.11

  	
  Governing
  Law; Submission to Jurisdiction

  	
  31

  



 


ii

















 


	
  Section 10.12

  	
  Acknowledgments

  	
  32

  
	
  Section 10.13

  	
  Additional
  Grantors

  	
  32

  
	
  Section 10.14

  	
  Set-Off

  	
  33

  
	
  Section 10.15

  	
  Releases

  	
  33

  
	
  Section 10.16 

  	
  Reinstatement

  	
  34

  
	
  Section 10.17 

  	
  Acceptance

  	
  34

  



 


SCHEDULES:


 


1.                                       Notice Addresses of Guarantors


 


2.                                       Description of Pledged Securities


 


3.                                       Filings and Other Actions Required to Perfect Security Interests


 


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


 


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


 


6.                                       Patents and Patent Licenses


 


7.                                       Trademarks and Trademark Licenses


 


ANNEX:


 


1.                                       Form of Assumption Agreement


 


iii
















 


This GUARANTEE AND
COLLATERAL AGREEMENT, dated as of May 24, 2010, is made by KODIAK OIL &
GAS (USA) INC., a Colorado corporation (the “Borrower”) and each of
the other signatories hereto other than the Administrative Agent (the Borrower
and each of the other signatories hereto other than the Administrative Agent,
together with any other Subsidiary of the Borrower that becomes a party hereto
from time to time after the date hereof, the “Grantors”), in favor of
WELLS FARGO BANK, N.A., as administrative agent (in such capacity, together
with its successors in such capacity, the “Administrative
Agent”), for the banks and other financial institutions (the
“Lenders”) from time to time parties
to that certain Credit Agreement, dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the
Lenders, the Administrative Agent, and the other Agents party thereto.


 


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


 


ARTICLE I


Definitions


 


Section 1.01           Definitions.


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


“Permitted
Hedging Agreement” shall mean any Swap Agreement permitted to be
entered into by the Borrower or any Guarantor pursuant to Section 9.18 of
the Credit Agreement that is between any Grantor and any Lender or any
Affiliate of any Lender, regardless of whether such Person or its Affiliate is
a Lender thereafter.


 


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


 


2

















 


“Secured Parties”
shall mean, collectively, the Administrative Agent, the Issuing Bank, the
Lenders, and any Lender or Affiliate of a Lender that is a party to a Permitted
Hedging Agreement and those counterparties to Permitted Hedging Agreements that
were entered into while such Person or its Affiliate was a Lender, regardless
of whether such Person is a Lender or an Affiliate thereafter.


 


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


 


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


 


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


 


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


 


ARTICLE II


Guarantee


 


Section 2.01           Guarantee.


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


ARTICLE III


Grant of Security Interest


 


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


 


4

















 


payment and performance
when due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations:


 


(1)           all
Accounts;


 


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


 


(3)           all
Commercial Tort Claims;


 


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


 


(5)           all
Documents;


 


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


 


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


 


(8)           all
Instruments;


 


(9)           all
Investment Property;


 


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


 


(11)         all
Patents;


 


(12)         all
Patent Licenses;


 


(13)         all
Pledged Securities;


 


(14)         all
Supporting Obligations;


 


(15)         all
Trademarks;


 


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


 


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


 


Notwithstanding anything
herein to the contrary, in no event shall the security interest granted pursuant
to this Article II attach to, or the term “Collateral” be deemed to
include, (a) any of the


 


5

















 


outstanding equity interests in a Subsidiary
of any Grantor organized under the laws of a jurisdiction not located in the
United States of America ( a “Foreign Subsidiary”) (i) in
excess of 65% of the voting power of all classes of equity interests of such
Foreign Subsidiary entitled to vote in the election of directors or other
similar body of such Foreign Subsidiary or (ii) to the extent that the
pledge thereof is prohibited by the laws of the jurisdiction of such Foreign
Subsidiary’s organization; (b) any equity interest in any Foreign
Subsidiary that is not a first-tier Subsidiary of any Grantor; (c) any
lease, license, contract, property rights or agreement to which a Grantor is a
party or any of such Grantor’s rights or interests thereunder, if, and for so
long as and to the extent that, the grant of the security interest hereunder
would constitute or result in (i) the abandonment, invalidation or
unenforceability of any material right, title or interest of such Grantor
therein or (ii) a breach or termination pursuant to the terms of, or a
default under, any such lease, license, contract, property rights or agreement
(other than to the extent that any such breach, termination or default would be
rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of
the Uniform Commercial Code (or any successor provision or provisions) of any
relevant jurisdiction, any other applicable law or principles of equity),
provided, however, that the security interest granted hereunder (x) shall
attach immediately when the condition causing such abandonment, invalidation or
unenforceability is remedied, (y) shall attach immediately to any
severable term of such lease, license, contract, property rights or agreement
to the extent that such attachment does not result in any of the consequences
specified in (i) or (ii) above and (z) shall attach immediately to
any such lease, license, contract, property rights or agreement to which the
account debtor or such Grantor’s counterparty has consented to such attachment;
and (d) any application to register any Trademark prior to the filing under
applicable law of a verified statement of use (or the equivalent) for such
Trademark to the extent the creation of a security interest therein or the
grant of a mortgage thereon would void or invalidate such Trademark
(collectively, the “Excluded Property”); provided,
however, that any Collateral (or any portion thereof) that ceases to satisfy
the criteria for Excluded Property (whether as a result of a Grantor obtaining
any necessary consent, any change in any rule of law, statute or
regulation or otherwise) shall no longer be Excluded Property and the security
interest granted hereunder shall attach immediately to such Collateral (or
portion thereof) at such time.


 


6
















 


Section 3.02                                Transfer of Pledged Securities.  All certificates and instruments representing
or evidencing the Pledged Securities shall be delivered to and held pursuant
hereto by the Administrative Agent or a Person designated by the Administrative
Agent and, in the case of an instrument or certificate in registered form,
shall be duly indorsed to the Administrative Agent or in blank by an effective
indorsement (whether on the certificate or instrument or on a separate
writing), and accompanied by any required transfer tax stamps to effect the
pledge of the Pledged Securities to the Administrative Agent. Notwithstanding
the preceding sentence, all Pledged Securities must be delivered or transferred
in such manner, and each Grantor shall take all such further action as may be
requested by the Administrative Agent, as to permit the Administrative Agent to
be a “protected purchaser” to the extent of its security interest as provided
in Section 8-303 of the Colorado UCC (if the Administrative Agent
otherwise qualifies as a protected purchaser).


 


Section 3.03                                Grantors Remains Liable under Accounts, Chattel Paper and Payment
Intangibles.  Anything herein to the contrary
notwithstanding, each Grantor shall remain liable under each of the Accounts,
Chattel Paper and Payment Intangibles to observe and perform all the conditions
and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise to each such Account,
Chattel Paper or Payment Intangible. Neither the Administrative Agent nor any
other Secured Party shall have any obligation or liability under any Account,
Chattel Paper or Payment Intangible (or any agreement giving rise thereto) by
reason of or arising out of this Agreement or the receipt by the Administrative
Agent or any such other Secured Party of any payment relating to such Account,
Chattel Paper or Payment Intangible, pursuant hereto, nor shall the
Administrative Agent or any other Secured Party be obligated in any manner to
perform any of the obligations of any Grantor under or pursuant to any Account,
Chattel Paper or Payment Intangible (or any agreement giving rise thereto), to
make any payment, to make any inquiry as to the nature or the sufficiency of
any payment received by it or as to the sufficiency of any performance by any
party under any Account, Chattel Paper or Payment Intangible (or any agreement
giving rise thereto), to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may have
been assigned to it or to which it may be entitled at any time or times.


 


ARTICLE IV

Acknowledgments, Waivers and Consents


 


Section 4.01                                Acknowledgments, Waivers and Consents.


 


(a)           Each
Guarantor acknowledges and agrees that the obligations undertaken by it under
this Agreement involve the guarantee and each Grantor acknowledges and agrees
that the obligations undertaken by it involve the provision of collateral
security for the obligations of Persons other than such Grantor (other than the
Borrower) and that such Guarantor’s guarantee and such Grantor’s provision of
collateral security for the Obligations are absolute, irrevocable and
unconditional under any and all circumstances. In full recognition and
furtherance of the foregoing, each Grantor understands and agrees, to the
fullest extent permitted under applicable law and except as may otherwise be
expressly and specifically provided in the Loan Documents,


 


7

















 


that each Grantor shall remain obligated hereunder
(including, without limitation, with respect to the guarantee made by such
Guarantor hereby and the collateral security provided by such Grantor herein)
and the enforceability and effectiveness of this Agreement and the liability of
such Grantor, and the rights, remedies, powers and privileges of the
Administrative Agent and the other Secured Parties under this Agreement and the
other Loan Documents shall not be affected, limited, reduced, discharged or
terminated in any way:


 


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


 


(ii)          without
regard to, and each Grantor hereby expressly waives to the fullest extent
permitted by law any defense now or in the future arising by reason of, (A) the
illegality, invalidity or unenforceability of the Credit Agreement, any other
Loan Document, any Permitted Hedging Agreement, any of the Obligations or any
other collateral security therefor or guarantee or right of offset with respect
thereto at any time or from time to time held by the Administrative Agent or
any other Secured Party, (B) any defense, set-off or counterclaim (other
than a defense of payment or performance) which may at any time be available to
or be asserted by any Grantor or any other Person against the Administrative
Agent or any other Secured Party, (C) the insolvency, bankruptcy
arrangement, reorganization, adjustment, composition, liquidation, disability,
dissolution or lack of power of any Grantor or any other Person at any time
liable for the payment of all or part of the Obligations or the failure of the
Administrative Agent or any other Secured Party to file or enforce a claim in
bankruptcy or other proceeding with respect to any Person; or any sale, lease
or transfer of any or all of the assets of the any Grantor, or any changes in
the shareholders of any Grantor; (D) the fact that any Collateral or Lien
contemplated or intended to be given, created or granted as security for the
repayment of


 


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the
Obligations shall not be properly perfected or created, or shall prove to be
unenforceable or subordinate to any other Lien, it being recognized and agreed
by each of the Grantors that it is not entering into this Agreement in reliance
on, or in contemplation of the benefits of, the validity, enforceability,
collectability or value of any of the Collateral for the Obligations; (E) any
failure of the Administrative Agent or any other Secured Party to marshal
assets in favor of any Grantor or any other Person, to exhaust any collateral
for all or any part of the Obligations, to pursue or exhaust any right, remedy,
power or privilege it may have against any Grantor or any other Person or to
take any action whatsoever to mitigate or reduce any Grantor’s liability under
this Agreement or any other Loan Document; (F) any law which provides that
the obligation of a surety or guarantor must neither be larger in amount nor in
other respects more burdensome than that of the principal or which reduces a
surety’s or guarantor’s obligation in proportion to the principal obligation; (G) the
possibility that the Obligations may at any time and from time to time exceed
the aggregate liability of such Grantor under this Agreement; or (H) any
other circumstance or act whatsoever (with or without notice to or knowledge of
any Grantor), which constitutes, or might be construed to constitute, an
equitable or legal discharge or defense of the Borrower for the Obligations, or
of such Grantor under the guarantee contained in Article II or with
respect to the collateral security provided by such Grantor herein, or which
might be available to a surety or guarantor, in bankruptcy or in any other
instance.


 


(b)           Each Grantor hereby waives to the
extent permitted by law: (i) except as expressly provided otherwise in any
Loan Document, all notices to such Grantor, or to any other Person, including
but not limited to, notices of the acceptance of this Agreement, the guarantee
contained in Article II or the provision of collateral security provided
herein, or the creation, renewal, extension, modification, accrual of any
Obligations, or notice of or proof of reliance by the Administrative Agent or
any other Secured Party upon the guarantee contained in Article II or upon
the collateral security provided herein, or of default in the payment or
performance of any of the Obligations owed to the Administrative Agent or any
other Secured Party and enforcement of any right or remedy with respect
thereto; or notice of any other matters relating thereto; the Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in Article II and the collateral security provided
herein and no notice of creation of the Obligations or any extension of credit
already or hereafter contracted by or extended to the Borrower need be given to
any Grantor; and all dealings between the Borrower and any of the Grantors, on
the one hand, and the Administrative Agent and the other Secured Parties, on
the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in Article II and on
the collateral security provided herein; (ii) diligence and demand of
payment, presentment, protest, dishonor and notice of dishonor; (iii) any
statute of limitations affecting any Grantor’s liability hereunder or the
enforcement thereof; (iv) all rights of revocation with respect to the
Obligations, the guarantee contained in Article II and the provision of
collateral security herein; and (v) all principles or provisions of law
which conflict with the terms of this Agreement and which can, as a matter of
law, be waived.


 


(c)           When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Grantor, the Administrative Agent or any other Secured Party


 


9

















 


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


 


Section 4.02                                No Subrogation, Contribution or Reimbursement.  Notwithstanding any payment made
by any Grantor hereunder or any set-off or application of funds of any Grantor
by the Administrative Agent or any other Secured Party, no Grantor shall be
entitled to be subrogated to any of the rights of the Administrative Agent or
any other Secured Party against the Borrower or any other Grantor or any
collateral security or guarantee or right of offset held by the Administrative
Agent or any other Secured Party for the payment of the Obligations, nor shall
any Grantor seek or be entitled to seek any indemnity, exoneration,
participation, contribution or reimbursement from the Borrower or any other
Grantor in respect of payments made by such Grantor hereunder, and each Grantor
hereby expressly waives, releases, and agrees not to exercise any all such
rights of subrogation, reimbursement, indemnity and contribution. Each Grantor
further agrees that to the extent that such waiver and release set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation, reimbursement, indemnity and contribution
such Grantor may have against the Borrower, any other Grantor or against any
collateral or security or guarantee or right of offset held by the
Administrative Agent or any other Secured Party shall be junior and subordinate
to any rights the Administrative Agent and the other Secured Parties may have
against the Borrower and such Grantor and to all right, title and interest the
Administrative Agent and the other Secured Parties may have in any collateral
or security or guarantee or right of offset. The Administrative Agent, for the
benefit of the Secured Parties, may use, sell or dispose of any item of
Collateral or security as it sees fit without regard to any subrogation rights
any Grantor may have, and upon any disposition or sale, any rights of
subrogation any Grantor may have shall terminate.


 


ARTICLE V

Representations and Warranties


 


To induce the Administrative Agent and the other Secured
Parties to enter into the Credit Agreement and to induce the Lenders to make
their respective extensions of credit to the


 


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Borrower
thereunder and to induce the Lenders and Affiliates of the Lenders to enter
into Permitted Hedging Agreements, each Grantor hereby represents and warrants
to the Administrative Agent and each other Secured Party that:


 


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


 


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


 


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


 


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


 


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Section 5.05                                Perfected First
Priority Liens.  The security interests granted pursuant to
this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent
in completed and duly executed form), will constitute valid perfected security
interests in all of the Collateral (other than trucks, trailers and other motor
vehicles covered by a certificate of title law of any state, Commercial Tort
Claims subject to Section 6.15, Letter-of-Credit Rights less than $500,000
and Deposit Accounts not maintained with the Administrative Agent or its
Affiliates) in favor of the Administrative Agent, for the ratable benefit of
the Secured Parties, as collateral security for such Grantor’s obligations,
enforceable in accordance with the terms hereof against all creditors of such
Grantor and any Persons purporting to purchase any Collateral from such Grantor
and (b) are prior to all other Liens on the Collateral in existence on the
date hereof except for Excepted Liens which have priority over the Liens on the
Collateral by operation of law. No effective financing statement or other
registration or instrument similar in effect covering any Collateral is on file
in any recording office except any that has been filed in favor of the Secured
Parties relating to this Agreement and any that has been filed to perfect or
protect any Excepted Lien.


 


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


 


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


 


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


 


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


 


Section 5.10                                Instruments and
Chattel Paper.  Such Grantor has delivered to the
Administrative Agent all Collateral constituting Instruments and Chattel Paper.
No Collateral constituting Chattel Paper or Instruments contains any statement
therein to the effect that such Collateral has been assigned to an identified
party other than the Administrative Agent, and the


 


12
















 


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


 


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


 


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


 


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


 


ARTICLE VI

Covenants


 


Each
Grantor covenants and agrees with the Administrative Agent and the other
Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full, no Letter of Credit shall be
outstanding and the total Commitments shall have terminated:


 


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


 


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Section 6.02                                Maintenance of
Perfected Security Interest; Further Documentation.


 


(a)           Such
Grantor shall maintain the security interest created by this Agreement as a
perfected security interest having at least the priority described in Section 5.05
and shall defend such security interest against the claims and demands of all
Persons whomsoever except for Excepted Liens.


 


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


 


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


 


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


 


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Section 6.03                                Maintenance of Records.  Such Grantor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Accounts. For the Administrative Agent’s
and the other Secured Parties’ further security, the Administrative Agent, for
the ratable benefit of the Secured Parties, shall have a security interest in
all of such Grantor’s books and records pertaining to the Collateral, and such
Grantor shall turn over any such books and records to the Administrative Agent
or to its representatives during normal business hours at the request of the
Administrative Agent and shall provide such clerical and other assistance as
may be reasonably requested with regard thereto.


 


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


 


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


 


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


 


15

















 


that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of the
Administrative Agent’s security interest in the Collateral.


 


Section 6.07                                Compliance with Contractual Obligations.  Such Grantor will perform and
comply in all material respects with all its contractual obligations relating
to the Collateral (including, without limitation, with respect to the goods or
services, the sale or lease or rendition of which gave rise or will give rise
to each Account).


 


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


 


Section 6.09                                Pledged Securities.


 


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


 


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


 


16

















 


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


 


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


 


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


 


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


 


Section 6.11                                Analysis of
Accounts, Etc.  The Administrative Agent shall have the right
from time to time to make test verifications of the Accounts, Chattel Paper and
Payment Intangibles in any manner and through any medium that it reasonably
considers advisable, and each Grantor, at such Grantor’s sole cost and expense,
shall furnish all such assistance and information as the Administrative Agent
may require in connection therewith. At any time and from time to time, upon
the Administrative Agent’s request and at the expense of each Grantor, such Grantor
shall furnish to the Administrative Agent reports showing reconciliations,
aging and test verifications of, and trial balances for, the Accounts, Chattel
Paper and Payment Intangibles, and all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
Accounts, Chattel Paper and Payment Intangibles, including, without limitation,
all original orders, invoices and shipping receipts.


 


17

















 


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


 


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


 


Section 6.14                                Patents and
Trademarks.


 


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


 


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


 


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


 


(d)           Whenever a Grantor,
either by itself or through any agent, employee, licensee or designee, shall
file an application for the registration of any Patent or Trademark with the
United States Patent and Trademark Office or any similar office or agency in
any other country or any political subdivision thereof, such Grantor shall
report such filing to the Administrative Agent and the other Secured Parties in
connection with the delivery by the Borrower of the compliance certificates
required pursuant to Section 8.01(c) of the Credit Agreement. Upon
request of the Administrative Agent, such Grantor shall execute and deliver


 


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


 


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


 


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


 


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


 


19

















 


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


 


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


 


ARTICLE VII

Remedial Provisions


 


Section 7.01                                Pledged
Securities.


 


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


 


(b)           If
an Event of Default shall occur and be continuing, then at any time in the
Administrative Agent’s discretion without notice, (i) the Administrative
Agent shall have the right to receive any and all cash dividends, payments or
other Proceeds paid in respect of the Pledged Securities and make application
thereof to the Obligations in accordance with Section 10.02 of the Credit
Agreement, and (ii) any or all of the Pledged Securities shall be
registered in the name of the Administrative Agent or its nominee, and the
Administrative Agent or its nominee may thereafter exercise (x) all
voting, corporate and other rights pertaining to such Pledged Securities at any
meeting of shareholders (or other equivalent body) of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange
and subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the organizational structure of any Issuer, or upon
the exercise by any Grantor or the Administrative Agent of any right, privilege
or option pertaining to such Pledged Securities, and in connection therewith,
the right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated


 


20
















 


agency
upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.


 


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


 


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


 


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


 


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


 


21

















 


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


 


Section 7.04                                Colorado UCC
and Other Remedies.


 


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


 


22

















 


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


 


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


 


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


 


23

















 


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


 


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


 


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


 


ARTICLE VIII

The Administrative Agent


 


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


 


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


 


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


 


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


 


24

















 


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


 


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


 


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


 


(c)           The
expenses of the Administrative Agent incurred in connection with actions
undertaken as provided in this Section 8.01, together with interest
thereon at the post-


 


25

















 


default rate specified in Section 3.02(c) of the
Credit Agreement from the date of payment by the Administrative Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to
the Administrative Agent on demand.


 


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


 


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


 


Section 8.03                                Execution of
Financing Statements.  Pursuant to the Colorado UCC and any other
applicable law, each Grantor authorizes the Administrative Agent, its counsel
or its representative, at any time and from time to time, to file or record
financing statements, continuation statements, amendments thereto and other
filing or recording documents or


 


26

















 


instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the
Administrative Agent reasonably determines appropriate to perfect the security
interests of the Administrative Agent under this Agreement. Additionally, each
Grantor authorizes the Administrative Agent, its counsel or its representative,
at any time and from time to time, to file or record such financing statements
that describe the collateral covered thereby as “all assets of the Grantor”, “all
personal property of the Grantor” or words of similar effect. A photographic or
other reproduction of this Agreement shall be sufficient as a financing
statement or other filing or recording document or instrument for filing or
recording in any jurisdiction.


 


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


 


ARTICLE IX

Subordination of Indebtedness


 


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


 


Section 9.02                                Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief or other insolvency proceedings
involving any Grantor, the Administrative Agent on behalf of the Secured
Parties shall have the right to prove their claim in any proceeding, so as to
establish their rights hereunder and receive directly from the receiver,
trustee or other court custodian, dividends and payments which would otherwise
be payable upon Guarantor Claims. Each Grantor hereby assigns such dividends
and payments to the Administrative Agent for the benefit of the Secured Parties
for application against the Obligations as provided under Section 10.02 of
the Credit Agreement. Should any Agent or Secured Party receive, for
application upon the Obligations, any such dividend or payment which


 


27

















 


is
otherwise payable to any Grantor, and which, as between such Grantor, shall
constitute a credit upon the Guarantor Claims, then upon payment in full of the
Obligations, the intended recipient shall become subrogated to the rights of
the Administrative Agent and the other Secured Parties to the extent that such
payments to the Administrative Agent and the other Secured Parties on the
Guarantor Claims have contributed toward the liquidation of the Obligations,
and such subrogation shall be with respect to that proportion of the
Obligations which would have been unpaid if the Administrative Agent and the
other Secured Parties had not received dividends or payments upon the Guarantor
Claims.


 


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


 


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


 


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


 


ARTICLE X

Miscellaneous


 


Section 10.01                          Waiver.  No failure on the part of the Administrative
Agent or any other Secured Party to exercise and no delay in exercising, and no
course of dealing with respect to, any right, remedy, power or privilege under
any of the Loan Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under any of the
Loan Documents preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers
and privileges provided herein are


 


28
















 


cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law. The exercise by the Administrative Agent
of any one or more of the rights, powers and remedies herein shall not be
construed as a waiver of any other rights, powers and remedies, including,
without limitation, any rights of set-off.


 


Section 10.02                          Notices.  All notices and other
communications provided for herein shall be given in the manner and subject to
the terms of Section 12.01 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.


 


Section 10.03                          Payment of
Expenses, Indemnities, Etc.


 


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


 


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


 


29

















 


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


 


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


 


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


 


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


 


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


 


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


 


30

















 


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


 


Section 10.11                          Governing Law., Submission to Jurisdiction.


 


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


 


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


 


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


 


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


 


31

















 


Section 10.12                          Acknowledgments.  Each Grantor hereby acknowledges that:


 


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


 


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


 


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


 


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


 


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


 


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


 


32

















 


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


 


Section 10.15                          Releases.


 


(a)                                  Release Upon
Payment in Full. The grant of a security
interest hereunder and all of rights, powers and remedies in connection
herewith shall remain in full force and effect until the Administrative Agent
has (i) retransferred and delivered all Collateral in its possession to
the Grantors, and (ii) executed a written release or termination statement
and reassigned to the Grantors without recourse or warranty any remaining
Collateral and all rights conveyed hereby. Upon the sale, transfer or other
disposition of Collateral permitted pursuant to the terms of Section 9.12
of the Credit Agreement, the Administrative Agent, at the written request and
expense of the Borrower, will promptly release such Collateral to the Grantors.
Additionally, upon the complete payment of the Obligations, the termination of
the Letters of Credit, Permitted Hedging Agreements secured hereby, Credit
Agreement and the total Commitments and the compliance by the Grantors with all
covenants and agreements hereof, the Administrative Agent, at the written
request and expense of the Borrower, will promptly release, reassign and
transfer the Collateral to the Grantors and declare this Agreement to be of no
further force or effect.


 


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


 


33

















 


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


 


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


 


Section 10.17                          Acceptance.  Each Grantor hereby expressly
waives notice of acceptance of this Agreement, acceptance on the part of the
Administrative Agent and the other Secured Parties being conclusively presumed
by their request for this Agreement and delivery of the same to the
Administrative Agent.


 


34
















 


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


 


 


	
  BORROWER:

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James P. Henderson

  
	
   

  	
   

  	
  James
  P. Henderson

  
	
   

  	
   

  	
  Chief
  Financial Officer

  



 


SIGNATURE PAGE


GUARANTEE AND COLLATERAL AGREEMENT


 

















 


Acknowledged
and Agreed to as of the date hereof by:


 


 


	
  ADMINISTRATIVE AGENT:

  	
  WELLS FARGO BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Oleg Kogan

  
	
   

  	
   

  	
  Oleg Kogan

  
	
   

  	
   

  	
  Vice President

  



 


SIGNATURE PAGE


GUARANTEE AND COLLATERAL AGREEMENT


 

















 


Schedule 1


 


NOTICE ADDRESSES OF GRANTORS


 


1.                                       Kodiak Oil &
Gas (USA) Inc.


 


Notice
Address:


 


1625
Broadway, Suite 250


Denver,
Colorado 80202


Attention:
James P. Henderson


Telephone:
303-592-8030


Facsimile. 303-592-8071


 

















 


Schedule 2


 


DESCRIPTION OF PLEDGED SECURITIES


 


None.


 

















 


Schedule 3


 


FILINGS AND OTHER ACTIONS

REQUIRED TO PERFECT SECURITY INTERESTS


 


Uniform
Commercial Code Filings


 


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


 


Actions
with respect to Pledged Securities


 


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


 

















 


Schedule 4


 


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


 


	
  1.

  	
  Kodiak Oil & Gas (USA) Inc., a Colorado
  corporation
 Organizational Identification Number:
  20031303362

  Taxpayer Identification Number: 57-1191218

  
	
   

  	
  Chief Executive Office:

  	
  1625 Broadway, Suite 250

  
	
   

  	
   

  	
  Denver, Colorado 80202

  



 

















 


Schedule 5


 


PRIOR NAMES AND PRIOR CHIEF
EXECUTIVE OFFICE


 


	
  1.

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

  
	
   

  	
  Prior Names: None

  
	
   

  	
  Prior Chief Executive Office: 1625 Broadway,
  Suite 330

  
	
   

  	
   

  	
  Denver,
  Colorado 80202

  



 

















 


Schedule 6


 


PATENTS AND PATENT LICENSES


 


None.


 
















 


Schedule 7


 


TRADEMARKS AND TRADEMARK LICENSES


 


None.


 

















 


ACKNOWLEDGMENT AND CONSENT


 


The
undersigned hereby acknowledges receipt of a copy of the Guarantee and
Collateral Agreement dated as of May 24, 2010 (the “Agreement”), made by
the Grantors parties thereto for the benefit of Wells Fargo Bank, N.A., as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:


 


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


 


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


 


	
   

  	
  [NAME OF ISSUER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Address
  for Notices:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  
					



 






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


 

















 


Annex I


 


Assumption Agreement


 


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


 


W I T N E S S E T H:


 


WHEREAS, KODIAK OIL & GAS (USA) INC. (the “Borrower”),
the Lenders, the Administrative Agent and the other Agents, have entered into a
Credit Agreement, dated as of May 24, 2010 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”);


 


WHEREAS, in connection with the Credit Agreement, the
Borrower and certain of its Subsidiaries have entered into the Guarantee and
Collateral Agreement, dated as of May 24, 2010 (as amended, supplemented
or otherwise modified from time to time, the “Guarantee and Collateral
Agreement”) in favor of the Administrative Agent for the benefit of the Lenders
and Affiliates of the Lenders;


 


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


 


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


 


NOW, THEREFORE, IT IS AGREED:


 


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


 

















 


is
true and correct on and as the date hereof (after giving effect to this
Assumption Agreement) as if made on and as of such date.


 


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


 


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


 


	
   

  	
  [ADDITIONAL GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


2