Exhibit 10.1


 


Execution Version


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


CREDIT AGREEMENT


 


dated as of May 24, 2010


 


among


 


KODIAK OIL & GAS (USA) INC.,


as Borrower,


 


WELLS FARGO BANK, N.A.,


as Administrative Agent,


 


and


 


The Lenders Party Hereto


 










 


	
   

  	
   

  



 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
  DEFINITIONS AND ACCOUNTING MATTERS

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Terms Defined Above

  	
  1

  
	
  Section 1.02

  	
  Certain Defined Terms

  	
  1

  
	
  Section 1.03

  	
  Types of Loans and Borrowings

  	
  19

  
	
  Section 1.04

  	
  Terms Generally; Rules of Construction

  	
  19

  
	
  Section 1.05

  	
  Accounting Terms and Determinations; GAAP

  	
  19

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
  THE CREDITS

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Commitments

  	
  20

  
	
  Section 2.02

  	
  Loans and Borrowings

  	
  20

  
	
  Section 2.03

  	
  Requests for Borrowings

  	
  21

  
	
  Section 2.04

  	
  Interest Elections

  	
  22

  
	
  Section 2.05

  	
  Funding of Borrowings

  	
  23

  
	
  Section 2.06

  	
  Termination and Reduction of Aggregate Maximum Credit
  Amounts

  	
  24

  
	
  Section 2.07

  	
  Borrowing Base

  	
  24

  
	
  Section 2.08

  	
  Letters of Credit

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
  PAYMENTS OF PRINCIPAL AND
  INTEREST; PREPAYMENTS; FEES

  
	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Repayment of Loans

  	
  33

  
	
  Section 3.02

  	
  Interest

  	
  33

  
	
  Section 3.03

  	
  Alternate Rate of Interest

  	
  34

  
	
  Section 3.04

  	
  Prepayments

  	
  34

  
	
  Section 3.05

  	
  Fees

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
  PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

  
	
   

  	
   

  	
   

  
	
  Section 4.01

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

  	
  37

  
	
  Section 4.02

  	
  Presumption of Payment by the Borrower

  	
  38

  
	
  Section 4.03

  	
  Certain Deductions by the Administrative Agent

  	
  39

  
	
  Section 4.04

  	
  Disposition of Proceeds

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
  INCREASED COSTS; BREAK
  FUNDING PAYMENTS; TAXES; ILLEGALITY

  
	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Increased Costs

  	
  39

  
	
  Section 5.02

  	
  Break Funding Payments

  	
  40

  
	
  Section 5.03

  	
  Taxes

  	
  41

  
	
  Section 5.04

  	
  Mitigation Obligations; Replacement of Lenders

  	
  42

  
	
  Section 5.05

  	
  Illegality

  	
  43

  



 


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  ARTICLE VI

  
	
  CONDITIONS PRECEDENT

  
	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Effective Date

  	
  43

  
	
  Section 6.02

  	
  Each Credit Event

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
  REPRESENTATIONS AND
  WARRANTIES

  
	
   

  	
   

  	
   

  
	
  Section 7.01

  	
  Organization; Powers

  	
  46

  
	
  Section 7.02

  	
  Authority; Enforceability

  	
  47

  
	
  Section 7.03

  	
  Approvals; No Conflicts

  	
  47

  
	
  Section 7.04

  	
  Financial Condition; No Material Adverse Change

  	
  47

  
	
  Section 7.05

  	
  Litigation

  	
  48

  
	
  Section 7.06

  	
  Environmental Matters

  	
  48

  
	
  Section 7.07

  	
  Compliance with the Laws and Agreements; No Defaults

  	
  49

  
	
  Section 7.08

  	
  Investment Company Act

  	
  49

  
	
  Section 7.09

  	
  Taxes

  	
  50

  
	
  Section 7.10

  	
  ERISA

  	
  50

  
	
  Section 7.11

  	
  Disclosure; No Material Misstatements

  	
  50

  
	
  Section 7.12

  	
  Insurance

  	
  51

  
	
  Section 7.13

  	
  Restriction on Liens

  	
  51

  
	
  Section 7.14

  	
  Subsidiaries

  	
  51

  
	
  Section 7.15

  	
  Location of Business and Offices

  	
  51

  
	
  Section 7.16

  	
  Properties; Titles, Etc.

  	
  52

  
	
  Section 7.17

  	
  Maintenance of Properties

  	
  53

  
	
  Section 7.18

  	
  Gas Imbalances, Prepayments

  	
  53

  
	
  Section 7.19

  	
  Marketing of Production

  	
  53

  
	
  Section 7.20

  	
  Swap Agreements

  	
  54

  
	
  Section 7.21

  	
  Use of Loans and Letters of Credit

  	
  54

  
	
  Section 7.22

  	
  Solvency

  	
  54

  
	
  Section 7.23

  	
  Foreign Corrupt Practices

  	
  54

  
	
  Section 7.24

  	
  Money Laundering

  	
  55

  
	
  Section 7.25

  	
  OFAC

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
  AFFIRMATIVE COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 8.01

  	
  Financial Statements; Ratings Change; Other Information

  	
  55

  
	
  Section 8.02

  	
  Notices of Material Events

  	
  58

  
	
  Section 8.03

  	
  Existence; Conduct of Business

  	
  58

  
	
  Section 8.04

  	
  Payment of Obligations

  	
  59

  
	
  Section 8.05

  	
  Performance of Obligations under Loan Documents

  	
  59

  
	
  Section 8.06

  	
  Operation and Maintenance of Properties

  	
  59

  
	
  Section 8.07

  	
  Insurance

  	
  60

  
	
  Section 8.08

  	
  Books and Records; Inspection Rights

  	
  60

  
	
  Section 8.09

  	
  Compliance with Laws

  	
  60

  
	
  Section 8.10

  	
  Environmental Matters

  	
  60

  
	
  Section 8.11

  	
  Further Assurances

  	
  61

  



 


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  Section 8.12

  	
  Reserve Reports

  	
  62

  
	
  Section 8.13

  	
  Title Information

  	
  63

  
	
  Section 8.14

  	
  Additional Collateral; Additional Guarantors

  	
  64

  
	
  Section 8.15

  	
  ERISA Compliance

  	
  64

  
	
  Section 8.16

  	
  Marketing Activities

  	
  65

  
	
  Section 8.17

  	
  Post-Closing Condition

  	
  65

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
  NEGATIVE COVENANTS

  
	
   

  	
   

  	
   

  
	
  Section 9.01

  	
  Financial Covenants

  	
  66

  
	
  Section 9.02

  	
  Debt

  	
  66

  
	
  Section 9.03

  	
  Liens

  	
  67

  
	
  Section 9.04

  	
  Dividends, Distributions, Redemptions and Restricted
  Payments

  	
  67

  
	
  Section 9.05

  	
  Investments, Loans and Advances

  	
  67

  
	
  Section 9.06

  	
  Nature of Business; International Operations

  	
  69

  
	
  Section 9.07

  	
  Limitation on Leases

  	
  69

  
	
  Section 9.08

  	
  Proceeds of Notes

  	
  69

  
	
  Section 9.09

  	
  ERISA Compliance

  	
  69

  
	
  Section 9.10

  	
  Sale or Discount of Receivables

  	
  70

  
	
  Section 9.11

  	
  Mergers, Etc

  	
  70

  
	
  Section 9.12

  	
  Sale of Properties

  	
  70

  
	
  Section 9.13

  	
  Environmental Matters

  	
  71

  
	
  Section 9.14

  	
  Transactions with Affiliates

  	
  71

  
	
  Section 9.15

  	
  Subsidiaries

  	
  71

  
	
  Section 9.16

  	
  Negative Pledge Agreements; Dividend Restrictions

  	
  71

  
	
  Section 9.17

  	
  Gas Imbalances, Take-or-Pay or Other Prepayments

  	
  71

  
	
  Section 9.18

  	
  Swap Agreements

  	
  72

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  
	
  EVENTS OF DEFAULT;
  REMEDIES

  
	
   

  	
   

  	
   

  
	
  Section 10.01

  	
  Events of Default

  	
  73

  
	
  Section 10.02

  	
  Remedies

  	
  75

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  
	
  THE AGENTS

  
	
   

  	
   

  	
   

  
	
  Section 11.01

  	
  Appointment; Powers

  	
  76

  
	
  Section 11.02

  	
  Duties and Obligations of Administrative Agent

  	
  76

  
	
  Section 11.03

  	
  Action by Administrative Agent

  	
  77

  
	
  Section 11.04

  	
  Reliance by Administrative Agent

  	
  77

  
	
  Section 11.05

  	
  Subagents

  	
  78

  
	
  Section 11.06

  	
  Resignation or Removal of Administrative Agent

  	
  78

  
	
  Section 11.07

  	
  Agents as Lenders

  	
  78

  
	
  Section 11.08

  	
  No Reliance

  	
  78

  
	
  Section 11.09

  	
  Administrative Agent May File Proofs of Claim

  	
  79

  
	
  Section 11.10

  	
  Authority of Administrative Agent to Release Collateral and
  Liens

  	
  80

  
	
  Section 11.11

  	
  The Syndication Agent and the Documentation Agent

  	
  80

  



 


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  ARTICLE XII

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section 12.01

  	
  Notices

  	
  80

  
	
  Section 12.02

  	
  Waivers; Amendments

  	
  81

  
	
  Section 12.03

  	
  Expenses, Indemnity; Damage Waiver

  	
  82

  
	
  Section 12.04

  	
  Successors and Assigns

  	
  84

  
	
  Section 12.05

  	
  Survival; Revival; Reinstatement

  	
  87

  
	
  Section 12.06

  	
  Counterparts; Integration; Effectiveness

  	
  88

  
	
  Section 12.07

  	
  Severability

  	
  88

  
	
  Section 12.08

  	
  Right of Setoff

  	
  88

  
	
  Section 12.09

  	
  GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS

  	
  89

  
	
  Section 12.10

  	
  Headings

  	
  90

  
	
  Section 12.11

  	
  Confidentiality

  	
  90

  
	
  Section 12.12

  	
  Interest Rate Limitation

  	
  91

  
	
  Section 12.13

  	
  EXCULPATION PROVISIONS

  	
  91

  
	
  Section 12.14

  	
  Collateral Matters; Swap Agreements

  	
  92

  
	
  Section 12.15

  	
  No Third Party Beneficiaries

  	
  92

  
	
  Section 12.16

  	
  USA Patriot Act Notice

  	
  92

  



 


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ANNEXES, EXHIBITS AND SCHEDULES


 


	
  Annex I

  	
  List
  of Maximum Credit Amounts

  
	
   

  	
   

  
	
  Exhibit A

  	
  Form of
  Note

  
	
  Exhibit B

  	
  Form of
  Borrowing Request

  
	
  Exhibit C

  	
  Form of
  Interest Election Request

  
	
  Exhibit D

  	
  Form of
  Compliance Certificate

  
	
  Exhibit E

  	
  Form of
  Assignment and Assumption

  
	
   

  	
   

  
	
  Schedule 7.05

  	
  Litigation

  
	
  Schedule 7.14

  	
  Subsidiaries
  and Partnerships

  
	
  Schedule 7.18

  	
  Gas
  Imbalances

  
	
  Schedule 7.19

  	
  Marketing
  Contracts

  
	
  Schedule 7.20

  	
  Swap
  Agreements

  
	
  Schedule 9.05

  	
  Investments

  



 


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THIS CREDIT AGREEMENT dated as of May 24,
2010, is among: Kodiak Oil & Gas (USA) Inc., a corporation duly formed
and existing under the laws of the State of Colorado (the “Borrower”);
each of the Lenders from time to time party hereto; and Wells Fargo Bank, N.A.,
as administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the “Administrative Agent”).


 


R E C I T A L S


 


A.            The Borrower has requested that the
Lenders provide certain loans to and extensions of credit on behalf of the
Borrower.


 


B.            The Lenders have agreed to make such
loans and extensions of credit subject to the terms and conditions of this
Agreement.


 


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


 


ARTICLE I


Definitions and Accounting Matters


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


Borrowing
Base Utilization Grid


 


	
  Borrowing Base Utilization Percentage

  	
   

  	
  <25.0%

  	
   

  	
  >25.0%
  <50.0%

  	
   

  	
  350.0% <75.0%

  	
   

  	
  375.0% <90.0%

  	
   

  	
  390.0%

  
	
  Eurodollar
  Loans

  	
   

  	
  2.25%

  	
   

  	
  2.50%

  	
   

  	
  2.75%

  	
   

  	
  3.00%

  	
   

  	
  3.25%

  
	
  ABR
  Loans

  	
   

  	
  1.25%

  	
   

  	
  1.50%

  	
   

  	
  1.75%

  	
   

  	
  2.00%

  	
   

  	
  2.25%

  
	
  Commitment
  Fee Rate

  	
   

  	
  0.50%

  	
   

  	
  0.50%

  	
   

  	
  0.50%

  	
   

  	
  0.50%

  	
   

  	
  0.50%

  



 


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


 


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


 


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


 


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


 


2

















 


Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


“Change
in Law” means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender
or the Issuing Bank (or, for purposes of Section 5.01(b)), by any lending
office of such Lender or by such Lender’s or the Issuing Bank’s holding
company, if any) with any request, guideline or directive (whether or not
having the force of law) of any Governmental Authority made or issued after the
date of this Agreement.


 


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


 


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


 


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


 


“Consolidated
Net Income” means with respect to the Parent, the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any
Person in which the Borrower or any Consolidated Subsidiary has an interest 


 


4

















 


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


 


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


 


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


 


“Debt”
means, for any Person, the sum of the following (without duplication): (a) all
obligations of such Person for borrowed money or evidenced by bonds, bankers’
acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic
Leases; (f) all Debt (as defined in the other clauses of this definition)
of others secured by (or for which the holder of such Debt has an existing
right, contingent or otherwise, to be secured by) a Lien on any Property of
such Person, whether or not such Debt is assumed by such Person; (g) all
Debt (as defined in the other clauses of this definition) of others guaranteed
by such Person or in which such Person otherwise assures a creditor against
loss of the Debt (howsoever such assurance shall be made) to the extent of the
lesser of the amount of such Debt and the maximum stated amount of such
guarantee or assurance against loss; (h) all obligations or undertakings
of such Person to maintain or cause to be maintained the financial position or
covenants of others or to purchase the Debt or Property of others; (i) obligations
to deliver commodities, goods or services, including, without limitation, 


 


5

















 


Hydrocarbons, in consideration of one
or more advance payments, other than gas balancing arrangements in the ordinary
course of business; (j) obligations to pay for goods or services even if
such goods or services are not actually received or utilized by such Person; (k) any
Debt (as defined in the other clauses of this definition) of a partnership for
which such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l) obligations
of such Person with respect to Disqualified Capital Stock; and (m) the
undischarged balance of any production payment created by such Person or for
the creation of which such Person directly or indirectly received payment.  The Debt of any Person shall include all
obligations of such Person of the character described above to the extent such
Person remains legally liable in respect thereof notwithstanding that any such
obligation is not included as a liability of such Person under GAAP.


 


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


 


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


 


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


 


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


 


“EBITDAX”
means, for any period, the sum of Consolidated Net Income for such period plus
the following expenses or charges to the extent deducted from Consolidated Net
Income in such period: interest, income taxes, depreciation, depletion,
amortization, exploration expenses and other similar noncash charges including
non-cash compensation payments made pursuant to and in accordance with stock
option plans or other benefit plans for management of the Borrower and unrealized
losses incurred in connection with Swap Agreements, minus all noncash income,
including unrealized gains incurred in connection with Swap Agreements, added
to Consolidated Net Income.


 


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


 


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


 


6

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


8
















 


which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the Borrower
or any Guarantor is located and (c) in the case of a Foreign Lender (other
than an assignee pursuant to a request by the Borrower under Section 5.04(a)),
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 5.03(d), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts with respect to such withholding tax pursuant to Section 5.03(a) or
Section 5.03(b).


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Guarantors”
means


 


9

















 


(a)           the Parent; and


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Indemnified
Taxes” means Taxes other than Excluded Taxes.


 


10

















 


“Initial
Reserve Report” means the report of Netherland, Sewell &
Associates, Inc. dated as of February 11, 2010, with respect to
certain Oil and Gas Properties of the Borrower and its Subsidiaries as of December 31,
2009.


 


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


 


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


 


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


 


“Interest
Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest
Period pertaining to a Eurodollar Borrowing that commences on the last Business
Day of a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.


 


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


 


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


 


“Investment”
means, for any Person: (a) the acquisition (whether for cash, Property,
services or securities or otherwise) of Equity Interests of any other Person or
any agreement to make any such acquisition (including, without limitation, any “short
sale” or any sale of any securities at a time when such securities are not
owned by the Person entering into such short 


 


11

















 


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


 


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


 


“LC
Commitment” at any time means five million dollars ($5,000,000).


 


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


 


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


 


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


 


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


 


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


 


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


 


12

















 


Eurodollar Borrowing for such Interest
Period shall be the rate (rounded upwards, if necessary, to the next 1/100 of
1%) at which dollar deposits of an amount comparable to such Eurodollar
Borrowing and for a maturity comparable to such Interest Period are offered by the
principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period.


 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any Subsidiary in respect of any
Swap Agreement at any time shall be the Swap Termination Value.


 


“Maturity
Date” means May 24, 2014.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


14

















 


machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.


 


“Other
Taxes” means any and all present or future stamp or documentary taxes or
any other excise or Property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement and any other Loan Document.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


15

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Restricted
Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in the
Borrower or any of its Subsidiaries, or any payment (whether in cash,
securities or other Property), including any sinking fund or similar deposit,
on account of the purchase, redemption, retirement, acquisition, cancellation
or termination of any such Equity Interests in the Borrower or any of its
Subsidiaries or any option, warrant or other right to acquire any such Equity
Interests in the Borrower or any of its Subsidiaries.


 


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


 


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


 


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


 


16

















 


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


 


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


 


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


 


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


 


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


 


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


 


“subsidiary”
means, with respect to any Person (the “parent”) at any date, any other
Person the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements
were prepared in accordance with GAAP as of such date, as well as any other
Person (a) of which Equity Interests representing more than 50% of the
equity or more than 50% of the ordinary voting power (irrespective of whether
or not at the time Equity Interests of any other class or classes of such
Person shall have 


 


17

















 


or might have voting power by reason of
the happening of any contingency) or, in the case of a partnership, any general
partnership interests are, as of such date, owned, controlled or held, or (b) that
is, as of such date, otherwise Controlled, by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.


 


“Subsidiary”
means any subsidiary of the Borrower.


 


“Swap
Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement, whether exchange traded,
“over-the-counter” or otherwise, involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities,
or economic, financial or pricing indices or measures of economic, financial or
pricing risk or value or any similar transaction or any combination of these
transactions; provided that no phantom stock or similar plan providing for
payments only on account of services provided by current or former directors,
officers, employees or consultants of the Borrower or the Subsidiaries shall be
a Swap Agreement.


 


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


 


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


 


“Taxes”
means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.


 


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


 


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


 


18
















 


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


 


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


 


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


 


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


 


Section 1.05                                Accounting Terms and Determinations; GAAP. 
Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all financial statements and certificates and reports
as to financial matters required to be furnished to the Administrative Agent or
the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a
basis consistent with the Financial Statements except for changes in which the
Parent and the 


 


19

















 


Borrower’s independent certified public accountants concur and which
are disclosed to Administrative Agent on the next date on which financial
statements are required to be delivered to the Lenders pursuant to Section 8.01(a);
provided that, unless the Borrower and the Majority Lenders shall otherwise
agree in writing, no such change shall modify or affect the manner in which
compliance with the covenants contained herein is computed such that all such
computations shall be conducted utilizing financial information presented
consistently with prior periods.


 


ARTICLE II

The Credits


 


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


 


Section 2.02                                Loans and Borrowings.


 


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


 


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


 


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


 


20

















 


(d)                                 Notes.  The Loans
made by each Lender shall be evidenced by a single promissory note of the
Borrower in substantially the form of Exhibit A, dated, in the case of (i) any
Lender party hereto as of the date of this Agreement, as of the date of this
Agreement or (ii) any Lender that becomes a party hereto pursuant to an
Assignment and Assumption, as of the effective date of the Assignment and
Assumption, payable to the order of such Lender in a principal amount equal to
its Maximum Credit Amount as in effect on such date, and otherwise duly
completed.  In the event that any Lender’s
Maximum Credit Amount increases or decreases for any reason (whether pursuant
to Section 2.06, Section 12.04(a) or otherwise), the Borrower
shall deliver or cause to be delivered on the effective date of such increase
or decrease, a new Note payable to the order of such Lender in a principal
amount equal to its Maximum Credit Amount after giving effect to such increase
or decrease, and otherwise duly completed and each such Lender shall deliver
the prior effective Note to the Borrower promptly upon receipt of such new
Note.  The date, amount, Type, interest
rate and, if applicable, Interest Period of each Loan made by each Lender, and
all payments made on account of the principal thereof, shall be recorded by such
Lender on its books for its Note, and, prior to any transfer, may be endorsed
by such Lender on a schedule attached to such Note or any continuation thereof
or on any separate record maintained by such Lender.  Failure to make any such notation or to attach
a schedule shall not affect any Lender’s or the Borrower’s rights or
obligations in respect of such Loans or affect the validity of such transfer by
any Lender of its Note.


 


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


 


(i)                                     the aggregate amount of the requested
Borrowing;


 


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


 


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


 


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


 


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


 


21

















 


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


 


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


 


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


 


Section 2.04                                Interest Elections.


 


(a)                                  Conversion and Continuance. 
Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.  Thereafter, the Borrower may elect to convert
such Borrowing to a different Type or to continue such Borrowing and, in the
case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as
provided in this Section 2.04.  The
Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably
among the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing.


 


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


 


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


 


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


 


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


 


22

















 


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


 


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


 


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


 


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


 


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


 


Section 2.05                                Funding of Borrowings.


 


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


 


(b)                                 Presumption of Funding by the Lenders. 
Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing,
the Administrative Agent may assume that such Lender has made such share available
on such date in accordance with Section 2.05(a) and may, in reliance
upon such 


 


23

















 


assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation
or (ii) in the case of the Borrower, the interest rate applicable to ABR
Loans.  If such Lender pays such amount
to the Administrative Agent, then such amount shall constitute such Lender’s
Loan included in such Borrowing.


 


Section 2.06                                Termination and Reduction of Aggregate Maximum Credit
Amounts.


 


(a)                                  Scheduled Termination of Commitments. 
Unless previously terminated, the Commitments shall terminate on the
Maturity Date.  If at any time the
Aggregate Maximum Credit Amounts or the Borrowing Base is terminated or reduced
to zero, then the Commitments shall terminate on the effective date of such
termination or reduction.


 


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


 


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


 


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


 


Section 2.07                                Borrowing Base.


 


(a)                                  Initial Borrowing Base. 
For the period from and including the Effective Date to but excluding
the first Redetermination Date, the amount of the Borrowing Base shall be
twenty million dollars $20,000,000. 
Notwithstanding the foregoing, the Borrowing Base may be subject to
further adjustments from time to time pursuant to Section 2.07(e), Section 8.13(c) or
Section 9.12.


 


(b)                                 Scheduled and Interim Redeterminations. 
The Borrowing Base shall be redetermined semi-annually in accordance
with this Section 2.07 (a “Scheduled 


 


24

















 


Redetermination”), and, subject to Section 2.07(d), such
redetermined Borrowing Base shall become effective and applicable to the
Borrower, the Agents, the Issuing Bank and the Lenders on April 1st and October 1st
of each year, commencing October 1, 2010. 
In addition, (i) the Borrower may, by notifying the Administrative Agent thereof, and the Administrative
Agent may, at the direction of the Majority Lenders, by notifying the Borrower
thereof, one time during any 6-month period, each elect to cause the Borrowing
Base to be redetermined between Scheduled Redeterminations and (ii) at any
time any of the Borrower’s Oil and Gas Properties included in the most recent
Reserve Report which have been given value in the then current Borrowing Base
are subject to leases or other agreements with federally recognized Indian
Tribes and the Administrative Agent has not received (A) an opinion of
counsel acceptable to the Administrative Agent regarding such Oil and gas
Properties and (B) any applicable consents to waivers required by the
Administrative Agent, the Administrative Agent may cause the Borrowing Base to
be redetermined (each of (i) and (ii) an “Interim Redetermination”),
each of (i) and (ii) in accordance with this Section 2.07.


 


(c)                                  Scheduled and Interim  Redetermination Procedure.


 


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


 


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


 


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


 


25

















 


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


 


(iii)                               Any Proposed Borrowing Base that would increase the
Borrowing Base then in effect must be approved or deemed to have been approved
by all of the Lenders as provided in this Section 2.07(c)(iii); and any
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect must be approved or be deemed to have been approved by the Majority
Lenders as provided in this Section 2.07(c)(iii).  Upon receipt of the Proposed Borrowing Base
Notice, each Lender shall have fifteen (15) days to agree with the Proposed
Borrowing Base or disagree with the Proposed Borrowing Base by proposing an
alternate Borrowing Base; provided, however, that in the event there is only
one Lender and such Lender is also the Administrative Agent or an Affiliate
thereof, such Lender will be deemed to have approved the Proposed Borrowing
Base on the date of the delivery of the Proposed Borrowing Base Notice to the
Borrower.  If at the end of such fifteen
(15) days, any Lender has not communicated its approval or disapproval in
writing to the Administrative Agent, such silence shall be deemed to be an
approval of the Proposed Borrowing Base. 
If, at the end of such 15-day period, all of the Lenders, in the case of
a Proposed Borrowing Base that would increase the Borrowing Base then in
effect, or the Majority Lenders, in the case of a Proposed Borrowing Base that
would decrease or maintain the Borrowing Base then in effect, have approved or
deemed to have approved, as aforesaid, then the Proposed Borrowing Base shall
become the new Borrowing Base, effective on the date specified in Section 2.07(d).  If, however, at the end of such 15-day
period, all of the Lenders or the Majority Lenders, as applicable, have not
approved or deemed to have approved, as aforesaid, then the Administrative
Agent shall poll the Lenders to ascertain the highest Borrowing Base then
acceptable to the Majority Lenders for purposes of this Section 2.07 and,
so long as such amount does not increase the Borrowing Base then in effect,
such amount shall become the new Borrowing Base, effective on the date
specified in Section 2.07(d).


 


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


 


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


 


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


 


26

















 


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


 


(e)                                  Potential Reduction of Borrowing Base
Upon Termination of Swap Agreements.  If the
Borrower or any Subsidiary completes a Restructuring or Restructurings with an
aggregate negative net marked-to-market economic effect between any two
successive Scheduled Redetermination Dates greater than five percent (5%) of
the then current Borrowing Base, the Administrative Agent and the Majority
Lenders shall have the right to immediately redetermine the Borrowing Base
based upon the most recent Engineering Reports and such other information
(including, without limitation, the status of title information with respect to
the Oil and Gas Properties as described in the Engineering Reports and the
existence of any other Debt) as the Administrative Agent deems appropriate in
its sole discretion and consistent with its normal oil and gas lending criteria
as it exists at the particular time and such redetermination shall not be
counted as an Interim Redetermination.


 


Section 2.08                                Letters of Credit.


 


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


 


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


 


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


 


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


 


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


 


27

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(e)                                  Reimbursement. 
If the Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying
to the Administrative Agent an amount equal to such LC Disbursement not later
than 12:00 noon,


 


28
















 


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


 


(f)                                    Obligations Absolute. 
The Borrower’s obligation to reimburse LC Disbursements as provided in Section 2.08(e) shall
be absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability
of any Letter of Credit, any Letter of Credit Agreement or this Agreement, or
any term or provision therein, (ii) any draft or other document presented
under a Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect, (iii) payment
by the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that does not comply with the terms of such Letter of Credit or
any Letter of Credit Agreement, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section 2.08(f), constitute a legal or equitable
discharge of, or provide a right of setoff against, the Borrower’s obligations
hereunder.  Neither the Administrative
Agent, the Lenders nor the Issuing Bank, nor any of their Related Parties shall
have any liability or responsibility by reason of or in connection with the
issuance or transfer of any Letter of Credit or any payment or failure to make
any payment thereunder (irrespective of any of the circumstances referred to in
the preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required 


 


29

















 


to make a drawing thereunder), any error in interpretation of technical
terms or any consequence arising from causes beyond the control of the Issuing
Bank; provided that the foregoing shall not be construed to excuse the Issuing
Bank from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. 
The parties hereto expressly agree that, in the absence of gross
negligence or willful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be
deemed to have exercised all requisite care in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to documents
presented which appear on their face to be in substantial compliance with the
terms of a Letter of Credit, the Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for
further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are
not in strict compliance with the terms of such Letter of Credit.


 


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


 


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


 


(i)                                     Replacement of the Issuing Bank. 
The Issuing Bank may be replaced at any time by written agreement among
the Borrower, the Administrative Agent, the replaced Issuing Bank and the
successor Issuing Bank.  The Administrative
Agent shall notify the Lenders of any such replacement of the Issuing
Bank.  At the time any such replacement
shall become effective, the Borrower shall pay all unpaid fees accrued for the
account of the replaced Issuing Bank pursuant to Section 3.05(a).  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of the Issuing Bank under this Agreement with respect to Letters of
Credit to be issued thereafter and (ii) references herein to the term “Issuing
Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall
require.  After the replacement of the
Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of the Issuing Bank
under this 


 


30

















 


Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.


 


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


 


31

















 


shall be returned to the Borrower within three Business Days after all
Events of Default have been cured or waived.


 


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


 


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


 


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


 


(iii)                               if the reallocation described in clause (ii) above
cannot, or can only partially, be effected, then the Borrower shall within one (1) Business
Day following notice by the Administrative Agent cash collateralize such
Defaulting Lender’s LC Exposure (after giving effect to any partial
reallocation pursuant to clause (ii) above) in accordance with the
procedures set forth in Section 2.08(e) for so long as such LC
Exposure is outstanding;


 


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


 


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


 


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


 


(l)                                     So long as any Lender is a Defaulting
Lender, the Issuing Bank shall not be required to issue, amend or increase any
Letter of Credit, unless it is satisfied that the related exposure will be 100%
covered by the Commitments of the Non-Defaulting Lenders and/or cash collateral
will be provided by the Borrower in accordance with Section 2.08(k), and
participating 


 


32

















 


interests in any such newly issued or increased Letter of Credit shall
be allocated among Non-Defaulting Lenders in a manner consistent with Section 2.08(k) (and
Defaulting Lenders shall not participate therein).


 


ARTICLE III

Payments of Principal and Interest; Prepayments; Fees


 


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


 


Section 3.02                                Interest.


 


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


 


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


 


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


 


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


 


(e)                                  Interest Rate Computations. 
All interest hereunder shall be computed on the basis of a year of 360
days, unless such computation would exceed the Highest Lawful Rate, in which
case interest shall be computed on the basis of a year of 365 days (or 366 days
in a leap 


 


33

















 


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


 


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


 


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


 


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


 


then the Administrative Agent shall give
notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly
as practicable thereafter and, until the Administrative Agent notifies the
Borrower and the Lenders that the circumstances giving rise to such notice no
longer exist, (i) any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing
Request requests a Eurodollar Borrowing, such Borrowing shall be made either as
an ABR Borrowing or at an alternate rate of interest determined by the Majority
Lenders as their cost of funds.


 


Section 3.04                                Prepayments.


 


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


 


(b)                                 Notice and Terms of Optional Prepayment. 
The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Denver,
Colorado time, three Business Days before the date of prepayment, or (ii) in
the case of prepayment of an ABR Borrowing, not later than 11:00 a.m.,
Denver, Colorado time, one Business Day before the date of prepayment.  Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid.  Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Borrowing
shall be in an amount that would be permitted in the case of an advance of a
Borrowing of the same Type as provided in Section 2.02.  Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 3.02(d).


 


34

















 


(c)                                  Mandatory Prepayments.


 


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


 


(ii)                                  Upon any redetermination of or adjustment
to the amount of the Borrowing Base in accordance with Section 2.07 (other
than Section 2.07(e)) or Section 8.13(c), if the total Revolving
Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then the
Borrower shall, within thirty (30) days following its receipt of the New
Borrowing Base Notice in accordance with Section 2.07(d) or the date
the adjustment occurs; either (A) prepay the Borrowings in an aggregate
principal amount equal to such excess, (B) notify the Administrative Agent
in writing that the Borrower will prepay such excess in four (4) equal
monthly installments beginning on the date that is fifteen (15) days following
its receipt of the New Borrowing Base Notice in accordance with Section 2.07(d) or
the date the adjustment occurs or (C) provide additional collateral
acceptable to the Lenders, in their sole discretion, to increase the Borrowing
Base to an amount that at least equals the outstanding aggregate principal
balance of the Loans.  If any excess
remains after prepaying all of the Borrowings as a result of an LC Exposure,
the Borrower will pay to the Administrative Agent on behalf of the Lenders an
amount equal to such excess to be held as cash collateral as provided in Section 2.08(j).  Notwithstanding the foregoing, the Borrower
shall be obligated to make such prepayment and/or deposit of cash collateral
required to be made pursuant to this Section 3.04(c)(i) on or prior
to the Termination Date.


 


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


 


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


 


35

















 


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


 


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


 


Section 3.05                                Fees.


 


(a)                                  Commitment Fees. 
The Borrower agrees to pay to the Administrative Agent for the account
of each Lender a commitment fee, which shall accrue at the applicable
Commitment Fee Rate on the average daily amount of the unused amount of the
Commitment of such Lender during the period from and including the date of this
Agreement to but excluding the Termination Date.  Accrued commitment fees shall be payable in
arrears on the last day of March, June, September and December of
each year and on the Termination Date, commencing on the first such date to
occur after the date hereof.  All
commitment fees shall be computed on the basis of a year of 360 days, unless
such computation would exceed the Highest Lawful Rate, in which case interest
shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).


 


(b)                                 Letter of Credit Fees. 
The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations
in Letters of Credit, which shall accrue at the same Applicable Margin used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the date
of this Agreement to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, (ii) to the Issuing Bank a fronting fee, which shall accrue at
the rate of 0.50% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the date of this Agreement to but
excluding the later of the date of termination of the Commitments and the date
on which there ceases to be any LC Exposure, provided that in no event shall
such fee be less than $500 during any quarter, and (iii) to the Issuing
Bank, for its own account, its standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder.  Participation fees
and fronting fees accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following
such last day, commencing on the first such date to occur after the date of
this Agreement; provided that all such fees shall be payable on the Termination
Date and any such fees accruing after the Termination Date shall be payable on
demand.  Any other fees payable to the
Issuing Bank pursuant to this Section 3.05(a) shall be payable within
10 days after demand.  All participation
fees and fronting fees shall be computed on the basis of a year of 360 days,
unless such computation would exceed the Highest Lawful Rate, in which case
interest shall be computed on the basis of a year of 365 days (or 366 days in a
leap year), and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).


 


36

















 


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


 


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


 


(e)                                  Borrowing Base Increase Fees. 
The Borrower agrees to pay to the Administrative Agent for the pro rata
account of each Lender, a Borrowing Base increase fee equal to 1% on the amount
of (i) each increase of the Borrowing Base based on Oil and Gas Properties
of the Borrower and its Subsidiaries previously included in the previous
Borrowing Base over the most recent Borrowing Base and (ii) each increase
in the Borrowing Base attributable to new Oil and Gas Properties acquired by
the Borrower and its Subsidiaries over the most recent Borrowing Base.  Such Borrowing Base increase fee may be
subject to adjustment based upon market conditions and the Borrower’s financial
profile, but in no event will any adjustment to such fee become effective
unless the Borrower has received written notice of any such adjustment 10 days
prior to the effectiveness of such adjustment.


 


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


 


ARTICLE IV

Payments; Pro Rata Treatment; Sharing of Set-offs


 


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


 


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


 


37

















 


shall be payable for the period of such extension.  All payments hereunder shall be made in
dollars.


 


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


 


(c)                                  Sharing of Payments by Lenders. 
If any Lender shall, by exercising any right of set-off or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on any
of its Loans or participations in LC Disbursements resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans
and participations in LC Disbursements and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and participations in LC Disbursements; provided that (i) if
any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and
the purchase price restored to the extent of such recovery, without interest,
and (ii) the provisions of this Section 4.01(c) shall not be
construed to apply to any payment made by the Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Loans or participations in LC Disbursements to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this Section 4.01(c) shall
apply).  The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.


 


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


 


38
















 


Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation.


 


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


 


Section 4.04                                Disposition of Proceeds.  The Security
Instruments contain an assignment by the Borrower and/or the Guarantors unto
and in favor of the Administrative Agent for the benefit of the Lenders of all
of the Borrower’s or each Guarantor’s interest in and to production and all
proceeds attributable thereto which may be produced from or allocated to the
Mortgaged Property.  The Security
Instruments further provide in general for the application of such proceeds to
the satisfaction of the Indebtedness and other obligations described therein
and secured thereby.  Notwithstanding the
assignment contained in such Security Instruments, until the occurrence of an
Event of Default, (a) the Administrative Agent and the Lenders agree that
they will neither notify the purchaser or purchasers of such production nor
take any other action to cause such proceeds to be remitted to the
Administrative Agent or the Lenders, but the Lenders will instead permit such
proceeds to be paid to the Borrower and its Subsidiaries and (b) the
Lenders hereby authorize the Administrative Agent to take such actions as may
be necessary to cause such proceeds to be paid to the Borrower and/or such
Subsidiaries.


 


ARTICLE V

Increased Costs; Break Funding Payments; Taxes; Illegality


 


Section 5.01                                Increased Costs.


 


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


 


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


 


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


 


and the result of any of the foregoing
shall be to increase the cost to such Lender of making or maintaining any
Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to 


 


39

















 


reduce the amount of any sum received
or receivable by such Lender (whether of principal, interest or otherwise),
then the Borrower will pay to such Lender such additional amount or amounts as
will compensate such Lender for such additional costs incurred or reduction
suffered.


 


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


 


(c)                                  Certificates. 
A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in Section 5.01(a) or
(b) shall be delivered to the Borrower and shall be conclusive absent
manifest error.  The Borrower shall pay
such Lender or the Issuing Bank, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.


 


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


 


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


 


40

















 


been applicable to such Loan, for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest
rate which such Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks
in the Eurodollar market.


 


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


 


Section 5.03                                Taxes.


 


(a)                                  Payments Free of Taxes. 
Any and all payments by or on account of any obligation of the Borrower
or any Guarantor under any Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if
the Borrower or any Guarantor shall be required to deduct any Indemnified Taxes
or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 5.03(a)),
the Administrative Agent, Lender or Issuing Bank (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrower or such Guarantor shall make such deductions and (iii) the
Borrower or such Guarantor shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.


 


(b)                                 Payment of Other Taxes by the Borrower. 
The Borrower shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.


 


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


 


(d)                                 Evidence of Payments. 
As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower or a Guarantor to a Governmental Authority, 


 


41

















 


the Borrower shall deliver to the Administrative Agent the original or
a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.


 


(e)                                  Foreign Lenders. 
Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement or any other Loan Document shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.


 


Section 5.04                                Mitigation Obligations; Replacement of Lenders.


 


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


 


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


 


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


 


ARTICLE VI

Conditions Precedent


 


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


 


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


 


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


 


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


 


43

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(j)                                     The Administrative Agent shall have received
title information as the Administrative Agent may reasonably require
satisfactory to the Administrative Agent setting 


 


44

















 


forth the status of title to at least 80% of the total value of the Oil
and Gas Properties evaluated in the Initial Reserve Report.


 


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


 


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


 


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


 


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


 


(o)                                 The Administrative Agent shall have
received from the Borrower a written policy regarding its and its Subsidiaries’
marketing activities for Hydrocarbons and furnish a copy thereof to the
Administrative Agent and the Lenders, such policy to be in form and substance
reasonably satisfactory to the Administrative Agent.


 


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


 


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


 


The
Administrative Agent shall notify the Borrower and the Lenders of the Effective
Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the
obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 12.02) at
or prior to 12:00 noon, Denver, Colorado time, on June 21, 2010 (and, in
the event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).


 


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


 


45

















 


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


 


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


 


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


 


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


 


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


 


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


 


ARTICLE VII

Representations and Warranties


 


The
Borrower represents and warrants to the Lenders that:


 


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


 


46

















 


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


 


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


 


Section 7.04                                Financial Condition; No Material Adverse Change.


 


(a)                                  The Borrower has heretofore furnished to
the Lenders the consolidated balance sheet and statements of income,
stockholders equity and cash flows of the Parent as of the fiscal year ended December 31,
2009, certified by Hein & Associates, independent public
accountants.  Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of the Parent, the Borrower and its Consolidated
Subsidiaries as of such date in accordance with GAAP.


 


(b)                                 Since December 31, 2009, (i) there
has been no event, development or circumstance that has had or could reasonably
be expected to have a Material Adverse Effect and (ii) the business of the
Borrower and its Subsidiaries has been conducted only in the ordinary course
consistent with past business practices.


 


(c)                                  Neither the Borrower nor any Subsidiary
has on the date hereof any material Debt (including Disqualified Capital Stock)
or any contingent liabilities, off-balance 


 


47

















 


sheet liabilities or partnerships, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the Financial Statements.


 


Section 7.05                                Litigation.


 


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


 


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


 


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


 


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


 


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


 


(c)                                  there are no claims, demands, suits,
orders, inquiries, or proceedings concerning any violation of, or any liability
(including as a potentially responsible party) under, any applicable
Environmental Laws that is pending or, to Borrower’s knowledge, threatened
against the Borrower or any Subsidiary or any of their respective Properties or
as a result of any operations at such Properties.


 


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


 


(e)                                  there has been no Release or, to the
Borrower’s knowledge, threatened Release, of Hazardous Materials at, on, under
or from the Borrower’s or any Subsidiary’s Properties, there are no
investigations, remediations, abatements, removals, or monitorings of


 


48
















 


Hazardous Materials required under applicable Environmental Laws at
such Properties and, to the knowledge of the Borrower, none of such Properties
are adversely affected by any Release or threatened Release of a Hazardous
Material originating or emanating from any other real property.


 


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


 


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


 


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


 


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


 


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


 


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


 


(c)                                  No Default has occurred and is
continuing.


 


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


 


49

















 


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


 


Section 7.10                                ERISA.


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 7.11                                Disclosure; No Material Misstatements. 
The Borrower has disclosed to the Administrative Agent and the Lenders
all agreements, instruments and corporate or other restrictions to which it or
any of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.  None of the
other reports, financial statements, certificates or other information furnished
by or on behalf of the Borrower or any Subsidiary to the Administrative Agent
or any Lender or 


 


50

















 


any of their Affiliates in connection with the negotiation of this
Agreement or any other Loan Document or delivered hereunder or under any other
Loan Document (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, the Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.  There is no fact
peculiar to the Borrower or any Subsidiary which could reasonably be expected
to have a Material Adverse Effect or in the future is reasonably likely to have
a Material Adverse Effect and which has not been set forth in this Agreement or
the Loan Documents or the other documents, certificates and statements
furnished to the Administrative Agent or the Lenders by or on behalf of the
Borrower or any Subsidiary prior to, or on, the date hereof in connection with
the transactions contemplated hereby. 
There are no statements or conclusions in any Reserve Report which are
based upon or include misleading information or fail to take into account
material information regarding the matters reported therein, it being
understood that projections concerning volumes attributable to the Oil and Gas
Properties of the Borrower and the Subsidiaries and production and cost
estimates contained in each Reserve Report are necessarily based upon
professional opinions, estimates and projections and that the Borrower and the
Subsidiaries do not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate.


 


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


 


Section 7.13                                Restriction on Liens.  Neither the
Borrower nor any of the Subsidiaries is a party to any material agreement or
arrangement (other than Capital Leases creating Liens permitted by Section 9.03(c) and
agreements related to the deferred purchase price of Property creating Liens
permitted by Section 9.03(d), but then only on the Property subject of
such Capital Lease or deferred purchase price), or subject to any order,
judgment, writ or decree, which either restricts or purports to restrict its
ability to grant Liens to the Administrative Agent and the Lenders on or in
respect of their Properties to secure the Indebtedness and the Loan Documents.


 


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


 


Section 7.15                                Location of Business and Offices. 
The Borrower’s jurisdiction of organization is Colorado; the name of the
Borrower as listed in the public records of its 


 


51

















 


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


 


Section 7.16                                Properties; Titles, Etc.


 


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


 


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


 


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


 


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


 


(e)                                  The Borrower and each Subsidiary owns, or
is licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual Property material to its business, and the use thereof by the
Borrower and such Subsidiary does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.  The Borrower and its
Subsidiaries either own or have valid licenses or other rights to use all 


 


52

















 


databases, geological data, geophysical data, engineering data, seismic
data, maps, interpretations and other technical information used in their
businesses as presently conducted, subject to the limitations contained in the
agreements governing the use of the same, which limitations are customary for
companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have
a Material Adverse Effect.


 


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


 


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


 


Section 7.19                                Marketing of Production.  Except for
contracts listed and in effect on the date hereof on Schedule 7.19, and
thereafter either disclosed in writing to the Administrative Agent or included
in the most recently delivered Reserve Report (with respect to all of which
contracts the Borrower represents that it or its Subsidiaries are receiving a
price for all production sold thereunder which is computed substantially in
accordance with the terms of the relevant contract and are not having deliveries
curtailed substantially below the subject 


 


53

















 


Property’s delivery capacity), no material agreements exist which are
not cancelable on 60 days notice or less without penalty or detriment for the
sale of production from the Borrower’s or its Subsidiaries’ Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that (a) pertain
to the sale of production at a fixed price and (b) have a maturity or
expiry date of longer than six (6) months from the date hereof.


 


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


 


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


 


Section 7.22                                Solvency.  After giving
effect to the transactions contemplated hereby, (a) the aggregate assets
(after giving effect to amounts that could reasonably be received by reason of
indemnity, offset, insurance or any similar arrangement), at a fair valuation,
of the Borrower and the Guarantors, taken as a whole, will exceed the aggregate
Debt of the Borrower and the Guarantors on a consolidated basis, as the Debt
becomes absolute and matures, (b) each of the Borrower and the Guarantors
will not have incurred or intended to incur, and will not believe that it will incur,
Debt beyond its ability to pay such Debt (after taking into account the timing
and amounts of cash to be received by each of the Borrower and the Guarantors
and the amounts to be payable on or in respect of its liabilities, and giving
effect to amounts that could reasonably be received by reason of indemnity,
offset, insurance or any similar arrangement) as such Debt becomes absolute and
matures and (c) each of the Borrower and the Guarantors will not have (and
will have no reason to believe that it will have thereafter) unreasonably small
capital for the conduct of its business.


 


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


 


54

















 


Subsidiaries and its and their Affiliates have conducted their business
in material compliance with the FCPA and have instituted and maintain policies
and procedures designed to ensure, and which are reasonably expected to
continue to ensure, continued compliance therewith.


 


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


 


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


 


ARTICLE VIII

Affirmative Covenants


 


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


 


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


 


(a)                                  Annual Financial Statements. 
As soon as available, but in any event in accordance with then
applicable law and not later than ninety (90) days after the end of each fiscal
year of the Parent, its audited consolidated balance sheet and related
statements of operations, stockholders’ equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all reported on by Hein & Associates or
other independent public accountants of recognized national standing (without a
“going concern” or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that
such consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Parent and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied.


 


(b)                                 Quarterly Financial Statements. 
As soon as available, but in any event in accordance with then
applicable law and not later than forty-five (45) days after the end of each of
the first three fiscal quarters of each fiscal year of the Parent, its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for 


 


55

















 


such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Parent and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes.


 


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


 


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


 


(e)                                  Certificate of Financial Officer — Swap
Agreements.  Concurrently with the delivery of each
Reserve Report hereunder, a certificate of a Financial Officer, in form and
substance satisfactory to the Administrative Agent, setting forth as of such
date, a true and complete list of all Swap Agreements of the Borrower and each
Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark-to-market
value therefor, any new credit support agreements relating thereto not listed
on Schedule 7.20, any margin required or supplied under any credit support
document, and the counterparty to each such agreement.


 


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


 


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


 


56

















 


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


 


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


 


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


 


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


 


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


 


(m)                               Information Regarding Borrower and
Guarantors.  Prompt written notice (and in any event
within thirty (30) days prior thereto) of any change (i) in the Borrower
or any Guarantor’s corporate name or in any trade name used to identify such
Person in the conduct of its business or in the ownership of its Properties, (ii) in
the location of the Borrower or any Guarantor’s chief executive office or
principal place of business, (iii) in the Borrower or any Guarantor’s
identity or corporate structure or in the jurisdiction in which such Person is
incorporated or formed, (iv) in the Borrower or any Guarantor’s jurisdiction
of organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in the Borrower or any Guarantor’s
federal taxpayer identification number or foreign equivalent.


 


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


 


57

















 


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


 


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


 


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


 


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


 


(a)                                  the occurrence of any Default;


 


(b)                                 the filing or commencement of, or the
threat in writing of, any action, suit, proceeding, investigation or
arbitration by or before any arbitrator or Governmental Authority against or
affecting the Borrower or any Affiliate thereof not previously disclosed in
writing to the Lenders or any material adverse development in any action, suit,
proceeding, investigation or arbitration (whether or not previously disclosed
to the Lenders) that, in either case, if adversely determined, could reasonably
be expected to result in liability in excess of $250,000, not fully covered by
insurance, subject to normal deductibles; and


 


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


 


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


 


Section 8.03                                Existence; Conduct of Business. 
The Borrower will, and will cause each Subsidiary to, do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business and maintain, if necessary,
its qualification to do business in each other jurisdiction in which its Oil
and Gas Properties is located or the ownership of its Properties requires such
qualification, except where the failure to so qualify could not reasonably


 


58
















 


be expected to have a Material Adverse Effect; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 9.11.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


59





















 


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


 


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


 


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


 


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


 


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


 


Section 8.10                                Environmental Matters.


 


(a)                                  The Borrower shall at its sole expense: (i) comply,
and shall cause its Properties and operations and each Subsidiary and each
Subsidiary’s Properties and operations to comply, with all applicable
Environmental Laws, the breach of which could be reasonably expected to have a
Material Adverse Effect; (ii) not Release or threaten to Release, and
shall cause each Subsidiary not to Release or threaten to Release, any
Hazardous Material on, under, about or from any of the Borrower’s or its
Subsidiaries’ Properties or any other property offsite the Property to the
extent caused by the Borrower’s or any of its Subsidiaries’ operations except
in compliance with applicable Environmental Laws, the Release or threatened
Release of which could reasonably be expected to have a Material Adverse
Effect; (iii) timely obtain or file, and 


 


60

















 


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


 


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


 


(c)                                  The Borrower will, and will cause each
Subsidiary to, provide environmental assessments, audits and tests in
accordance with the most current version of the American Society of Testing
Materials standards upon request by the Administrative Agent and the Lenders
and no more than once per year in the absence of any Event of Default (or as
otherwise required to be obtained by the Administrative Agent or the Lenders by
any Governmental Authority), in connection with any future acquisitions of Oil
and Gas Properties or other Properties.


 


Section 8.11                                Further Assurances.


 


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


 


61

















 


Agreement or any of the Security Instruments or the priority thereof,
or to make any recordings, file any notices or obtain any consents, all as may
be reasonably necessary or appropriate, in the sole discretion of the
Administrative Agent, in connection therewith.


 


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


 


Section 8.12                                Reserve Reports.


 


(a)                                  On or before March 1st and September 1st
of each year, commencing September 1, 2010, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report evaluating the Oil
and Gas Properties of the Borrower and its Subsidiaries as of the immediately
preceding January 1st and July 1st. 
The Reserve Report as of January 1 of each year shall be prepared
by one or more Approved Petroleum Engineers, and the July 1 Reserve Report
of each year shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures used in
the immediately preceding January 1 Reserve Report.


 


(b)                                 In the event of an Interim
Redetermination, the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures used in
the immediately preceding January 1 Reserve Report.  For any Interim Redetermination requested by
the Administrative Agent or the Borrower pursuant to Section 2.07(b), the
Borrower shall provide such Reserve Report with an “as of” date as required by
the Administrative Agent as soon as possible, but in any event no later than
thirty (30) days following the receipt of such request.


 


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


 


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entered into subsequent to the later of the date hereof or the most
recently delivered Reserve Report which the Borrower could reasonably be
expected to have been obligated to list on Schedule 7.19 had such agreement
been in effect on the date hereof and (vi) attached thereto is a schedule
of the Oil and Gas Properties evaluated by such Reserve Report that are
Mortgaged Properties and demonstrating the percentage of the total value of the
Oil and Gas Properties that the value of such Mortgaged Properties represent in
compliance with Section 8.14(a).


 


Section 8.13                                Title Information.


 


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


 


(b)                                 If the Borrower has provided title
information for additional Properties under Section 8.13(a), the Borrower
shall, within 60 days of notice from the Administrative Agent that material
title defects or exceptions exist with respect to such additional Properties,
either (i) cure any such title defects or exceptions (including defects or
exceptions as to priority) which are not permitted by Section 9.03 raised
by such information, (ii) substitute acceptable Mortgaged Properties with
no material title defects or exceptions except for Excepted Liens (other than
Excepted Liens described in clauses (e), (g) and (h) of such definition)
having an equivalent value or (iii) deliver title information in form and
substance acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, satisfactory title information on at least 80% of
the value of the Oil and Gas Properties evaluated by such Reserve Report.


 


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


 


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most recent Reserve Report.  This
new Borrowing Base shall become effective immediately after receipt of such
notice.


 


Section 8.14                                Additional
Collateral; Additional Guarantors.


 


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


 


(b)                                 In the event that the Borrower or any
Subsidiary acquires or forms any Subsidiary, the Borrower shall promptly cause such
Subsidiary to guarantee the Indebtedness pursuant to the Guaranty
Agreement.  In connection with any such
guaranty, the Borrower shall, or shall cause such Subsidiary to, (i) execute
and deliver a supplement to the Guaranty Agreement executed by such Subsidiary,
(ii) pledge all of the Equity Interests of such new Subsidiary (including,
without limitation, delivery of original stock certificates evidencing the
Equity Interests of such Subsidiary, together with an appropriate undated stock
powers for each certificate duly executed in blank by the registered owner
thereof) and (iii) execute and deliver such other additional closing
documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.


 


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


 


Section 8.15                                ERISA Compliance.  The Borrower
will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate
to promptly furnish to the Administrative Agent (i) promptly after the
filing thereof with the United States Secretary of Labor or the Internal
Revenue Service, copies of each annual and other report with respect to each
Plan or any trust created thereunder, and (ii) immediately upon becoming
aware of the occurrence of any “prohibited transaction,” as described in
section 406 of ERISA or in section 4975 of the Code, in 


 


64

















 


connection with any Plan or any trust created thereunder, a written
notice signed by the President or the principal Financial Officer, the
Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service or the Department of Labor
with respect thereto.


 


Section 8.16                                Marketing Activities.


 


(a)                                  The Borrower will not, and will not
permit any of its Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than (i) contracts
for the sale of Hydrocarbons scheduled or reasonably estimated to be produced
from their proved Oil and Gas Properties during the period of such contract, (ii) contracts
for the sale of Hydrocarbons scheduled or reasonably estimated to be produced
from proved Oil and Gas Properties of third parties during the period of such
contract associated with the Oil and Gas Properties of the Borrower and its
Subsidiaries that the Borrower or one of its Subsidiaries has the right to
market pursuant to joint operating agreements, unitization agreements or other
similar contracts that are usual and customary in the oil and gas business and (iii) other
contracts for the purchase and/or sale of Hydrocarbons of third parties (A) which
have generally offsetting provisions (i.e. corresponding pricing mechanics,
delivery dates and points and volumes) such that no “position” is taken and (B) for
which appropriate credit support has been taken to alleviate the material
credit risks of the counterparty thereto.


 


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


 


Section 8.17                                Post-Closing Condition.


 


(a)                                  Within 30 days of after the date hereof,
the Borrower shall either (i) novate the Swap Agreement listed on Schedule
7.20 to the Administrative Agent or (ii) unwind the calls associated with
such Swap Agreement, so long as the remaining puts do not require the posting
of any collateral by the Borrower at any time.


 


(b)                                 On or before the first Scheduled
Redetermination Date following the Effective Date, the Administrative Agent
shall be reasonably satisfied that the Security Instruments create first
priority, perfected Liens (subject only to Excepted Liens identified in clauses
(a) to (d) and (f) of the definition thereof, but subject to the
provisos at the end of such definition) on at least 80% of the total value of
the Oil and Gas Properties evaluated in the Reserve Report delivered by the
Borrower for the purpose of determining the Borrowing Base on such Scheduled
Redetermination Date.


 


ARTICLE IX

Negative Covenants


 


Until
the Commitments have expired or terminated and the principal of and interest on
each Loan and all fees payable hereunder and all other amounts payable under
the Loan Documents have been paid in full and all Letters of Credit have
expired or terminated and all LC 


 


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Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:


 


Section 9.01                                Financial Covenants.


 


(a)                                  Ratio of Total Debt to EBITDAX. 
The Borrower will not, at any time, permit its ratio of Total Debt as of
such time to EBITDAX for the four fiscal quarters ending on the last day of the
fiscal quarter immediately preceding the date of determination for which
financial statements are available to be greater than 3.75 to 1.0.  Notwithstanding the foregoing, for the
purpose of determining EBITDAX of the Borrower and its Subsidiaries for this Section 9.01(a) for
the four fiscal quarters ending (i) March 31, 2010, EBITDAX shall be
equal to the EBITDAX of the Borrower and its Subsidiaries for the fiscal
quarter ending on such date multiplied by 4, (ii) June 30, 2010,
EBITDAX shall be equal to the EBITDAX of the Borrower and its Subsidiaries for
the two fiscal quarters ending on such date multiplied by 2 and (ii) September 30,
2010, EBITDAX shall be equal to the EBITDAX of the Borrower and its
Subsidiaries for the three fiscal quarters ending on such date multiplied by
4/3.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(f)                                    intercompany Debt between the Borrower
and any Subsidiary or between Subsidiaries to the extent permitted by Section 9.05(g);
provided that such Debt is not held, assigned, transferred, negotiated or
pledged to any Person other than the Borrower or one of its 


 


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Wholly-Owned Subsidiaries, and, provided further, that any such Debt
owed by either the Borrower or a Guarantor shall be subordinated to the
Indebtedness on terms set forth in the Guaranty Agreement.


 


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


 


(h)                                 Subordinated Parent Debt.


 


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


 


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


 


(a)                                  Liens securing the payment of any
Indebtedness.


 


(b)                                 Excepted Liens.


 


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


 


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


 


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


 


Section 9.04                                Dividends, Distributions, Redemptions and Restricted
Payments.  The Borrower will not, and will not permit
any of its Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, return any capital to its stockholders
or make any distribution of its Property to its Equity Interest holders, except
(a) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Capital Stock), (b) Subsidiaries may declare and pay
dividends ratably with respect to their Equity Interests, (c) the Borrower
may make cash distributions to the Parent with respect to the payment of
reasonable fees and expenses incurred in the ordinary course of business in
connection with the maintenance of its corporate existence, reporting
obligations, tax and accounting preparation and other similar fees and expenses
and (d) the Borrower may make Restricted Payments pursuant to and in
accordance with stock option plans or other benefit plans for management or
employees of the Borrower and its Subsidiaries.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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(k)                                  Investments in stock, obligations or
securities received in settlement of debts arising from Investments permitted
under this Section 9.05 owing to the Borrower or any Subsidiary as a
result of a bankruptcy or other insolvency proceeding of the obligor in respect
of such debts or upon the enforcement of any Lien in favor of the Borrower or
any of its Subsidiaries; provided that the Borrower shall give the
Administrative Agent prompt written notice in the event that the aggregate
amount of all Investments held at any one time under this Section 9.05(k) exceeds
$100,000.


 


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


 


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


 


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


 


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


 


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


 


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


 


(b)                                 fail to make, or permit any ERISA
Affiliate to fail to make, full payment when due of all amounts which, under
the provisions of any Plan, agreement relating thereto or 


 


69

















 


applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto.


 


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


 


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


 


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


 


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


 


70

















 


any such sale or other disposition is of a Subsidiary owning Oil and
Gas Properties, such sale or other disposition shall include all the Equity
Interests of such Subsidiary; (e) the sale or other disposition of Oil and
Gas Properties for other Oil and Gas Properties held by third parties to the
extent such exchanged Oil and Gas Property is not currently included in the
then applicable Borrowing Base and where the consideration therefore is solely
other Oil and Gas Properties of materially equivalent fair market value; and (f) sales
and other transfers of Oil and Gas Properties not regulated by Section 9.12(a) to
(e) and not currently included in the then applicable Borrowing Base
having a fair market value not to exceed $2,000,000 during any 12-month period.


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 9.18                                Swap Agreements.


 


(a)                                  The Borrower will not, and will not
permit any Subsidiary to, enter into any Swap Agreements with any Person other
than (i) Swap Agreements in respect of commodities (A) with an
Approved Counterparty, (B) the tenor of which is not more than 60 months
from the date such Swap Agreement is executed, and (C) the notional
volumes for which (when aggregated with other commodity Swap Agreements then in
effect other than basis differential swaps on volumes already hedged pursuant
to other Swap Agreements) do not exceed, as of the date such Swap Agreement is
executed, 85% of the reasonably anticipated projected production from proved,
developed, producing Oil and Gas Properties for each month during the period
during which such Swap Agreement is in effect for each of crude oil, natural
gas and natural gas liquids, calculated separately, and (ii) Swap
Agreements in respect of interest rates with an Approved Counterparty, as
follows:  (A) Swap Agreements
effectively converting interest rates from fixed to floating, the notional
amounts of which (when aggregated with all other Swap Agreements of the
Borrower and its Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed 75% of the then anticipated
principal amount of the Borrower’s Debt for borrowed money which bears interest
at a fixed rate and (B) Swap Agreements effectively converting interest
rates from floating to fixed, the notional amounts of which (when aggregated
with all other Swap Agreements of the Borrower and its Subsidiaries then in
effect effectively converting interest rates from floating to fixed) do not
exceed 75% of the then outstanding principal amount of the Borrower’s Debt for
borrowed money which bears interest at a floating rate.  Except as provided herein, in no event shall
any Swap Agreement contain any requirement, agreement or covenant for the
Borrower or any Subsidiary to post collateral or margin to secure their obligations
under such Swap Agreement or to cover market exposures and such Swap Agreements
shall not be for speculative purposes. 
Notwithstanding the foregoing, the Borrower and any Subsidiary may enter
into Swap Agreements in respect of crude oil or natural gas that are puts or
floors, provided that such puts and floors are independent and are not matched
with a ceiling or call (i.e., costless collars or participating structures).


 


(b)                                 The Borrower or any Subsidiary will not
unwind, sell, terminate, restructure, modify or otherwise affect (each a “Restructuring”)
any Swap Agreement in respect of commodities that was in effect at the time of
the most recent Borrowing Base determination if the aggregate net marked to
market economic effect of all such Restructurings between any two successive
Scheduled Redetermination Dates on the date of each such Restructure is
negative (which amount, if such Restructuring is settled for cash only, shall
equal the net amount of cash paid by the Borrower or its Subsidiary to the
counterparty) unless the aggregate negative net marked to market effect of such
Restructuring or Restructurings (between any two successive Scheduled
Redetermination Dates) is less than or equal to five percent (5%) of the then
current Borrowing Base.  Notwithstanding
the foregoing, the Borrower or any Subsidiary may complete a Restructuring or
Restructurings with an aggregate negative net marked to market economic effect
between any two successive Scheduled Redetermination Dates greater than five
percent (5%) of the then current Borrowing Base if the Borrower provides 10
days prior written notice of 


 


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such Restructuring or Restructurings to the Administrative Agent and
the Administrative Agent and the Majority Lenders shall have the right to immediately
redetermine the Borrowing Base pursuant to Section 2.07(e).


 


ARTICLE X

Events of Default; Remedies


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(g)                                 any event or condition occurs that
results in any Material Indebtedness becoming due prior to its scheduled
maturity or that enables or permits (with or without the giving of notice, the
lapse of time or both) the holder or holders of any Material Indebtedness or
any trustee or agent on its or their behalf to cause any Material Indebtedness
to become due, or to require the Redemption thereof or any offer to Redeem to
be made in respect thereof, prior to its 


 


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scheduled maturity or require the Borrower or any Subsidiary to make an
offer in respect thereof; provided that the cure of an occurrence of the
aforementioned shall be deemed a cure of the event giving rise to an Event of
Default under this Section 10.01(g).


 


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


 


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


 


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


 


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


 


(l)                                     the Loan Documents after delivery thereof
shall for any reason, except to the extent permitted by the terms thereof,
cease to be in full force and effect and valid, binding and enforceable in accordance
with their terms against the Borrower or a Guarantor party thereto or shall be
repudiated by any of them, or cease to create a valid and perfected Lien of the
priority required thereby on any of the collateral purported to be covered
thereby, except to the extent permitted by the terms of this Agreement, or the
Borrower or any Subsidiary or any of their Affiliates shall so state in
writing.


 


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(m)                               a Change in Control shall occur.


 


Section 10.02                          Remedies.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(v)                                 fifth, pro rata to any other Indebtedness;


 


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(vi)                              sixth, to serve as cash collateral to be held
by the Administrative Agent to secure the LC Exposure; and


 


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


 


ARTICLE XI

The Agents


 


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


 


Section 11.02                          Duties and Obligations of Administrative Agent. 
The Administrative Agent shall not have any duties or obligations except
those expressly set forth in the Loan Documents.  Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is
continuing (the use of the term “agent” herein and in the other Loan Documents
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the
Administrative Agent shall have no duty to take any discretionary action or
exercise any discretionary powers, except as provided in Section 11.03,
and (c) except as expressly set forth herein, the Administrative Agent
shall not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Subsidiaries
that is communicated to or obtained by the bank serving as Administrative Agent
or any of its Affiliates in any capacity. 
The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Administrative
Agent by the Borrower or a Lender, and shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness
of this Agreement, any other Loan Document or any other agreement, instrument
or document, (v) the satisfaction of any condition set forth in Article VI
or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent’s satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower and its Subsidiaries or any other
obligor or guarantor, or (vii) any failure by the Borrower or any other
Person (other than itself) to perform any of its obligations hereunder or under
any other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth 


 


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herein or therein.  For purposes
of determining compliance with the conditions specified in Article VI,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless
the Administrative Agent shall have received written notice from such Lender
prior to the proposed closing date specifying its objection thereto.


 


Section 11.03                          Action by Administrative Agent. 
The Administrative Agent shall have no duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby or by the other Loan Documents that the
Administrative Agent is required to exercise in writing as directed by the
Majority Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 12.02) and in all
cases the Administrative Agent shall be fully justified in failing or refusing
to act hereunder or under any other Loan Documents unless it shall (a) receive
written instructions from the Majority Lenders or the Lenders, as applicable,
(or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 12.02) specifying the action to
be taken and (b) be indemnified to its satisfaction by the Lenders against
any and all liability and expenses which may be incurred by it by reason of
taking or continuing to take any such action. 
The instructions as aforesaid and any action taken or failure to act
pursuant thereto by the Administrative Agent shall be binding on all of the
Lenders.  If a Default has occurred and
is continuing, then the Administrative Agent shall take such action with
respect to such Default as shall be directed by the requisite Lenders in the
written instructions (with indemnities) described in this Section 11.03,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Default
as it shall deem advisable in the best interests of the Lenders.  In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law.  If a Default has occurred and is continuing,
neither the Syndication Agent nor the Documentation Agent shall have any
obligation to perform any act in respect thereof.  The Administrative Agent shall not be liable
for any action taken or not taken by it with the consent or at the request of
the Majority Lenders or the Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section 12.02),
and otherwise the Administrative Agent shall not be liable for any action taken
or not taken by it hereunder or under any other Loan Document or under any
other document or instrument referred to or provided for herein or therein or
in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE,
except for its own gross negligence or willful misconduct.


 


Section 11.04                          Reliance by Administrative Agent. 
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to be made
by the proper Person, and shall not incur any liability for relying thereon and
each of the Borrower, the Lenders and the Issuing Bank hereby waives the right
to dispute the Administrative Agent’s record of such statement, except in the
case of gross negligence or willful misconduct by the 


 


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Administrative Agent.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.  The Administrative Agent may deem and treat
the payee of any Note as the holder thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent.


 


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


 


Section 11.06                          Resignation or Removal of Administrative Agent. 
Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this Section 11.06, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower,
and the Administrative Agent may be removed at any time with or without cause
by the Majority Lenders.  Upon any such
resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrower, to appoint a successor.  If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation or removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders and the
Issuing Bank, appoint a successor Agent which shall be a bank with an office in
New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as
Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder.  The fees payable by the
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.  After the Agent’s resignation hereunder, the
provisions of this Article XI and Section 12.03 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Agent.


 


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


 


Section 11.08                          No Reliance.  Each Lender
acknowledges that it has, independently and without reliance upon the
Administrative Agent, any other Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement and each other Loan Document to which
it is a party.


 


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


 


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


 


(a)                                  to file and prove a claim for the whole
amount of the principal and interest owing and unpaid in respect of the Loans
and all other Indebtedness that are owing and unpaid and to file such other
documents as may be necessary or advisable in order to have the claims of the
Lenders and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders and the
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders and the Administrative Agent under Section 12.03)
allowed in such judicial proceeding; and


 


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


 


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


 


Nothing
contained herein shall be deemed to authorize the Administrative Agent to
authorize or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, 


 


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adjustment
or composition affecting the Indebtedness or the rights of any Lender or to
authorize the Administrative Agent to vote in respect of the claim of any
Lender in any such proceeding.


 


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


 


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


 


ARTICLE XII

Miscellaneous


 


Section 12.01                          Notices.


 


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


 


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


 


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


 


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


 


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


 


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


 


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accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it; provided that approval of
such procedures may be limited to particular notices or communications.


 


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


 


Section 12.02                          Waivers; Amendments.


 


(a)                                  No failure on the part of the
Administrative Agent, any other Agent, the Issuing Bank or any Lender to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege, or any abandonment or discontinuance of steps to
enforce such right, power or privilege, under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies of
the Administrative Agent, any other Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of this Agreement
or any other Loan Document or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
Section 12.02(b), and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given.  Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any other Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.


 


(b)                                 Neither this Agreement nor any provision
hereof nor any Security Instrument nor any provision thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Majority Lenders or by the Borrower and
the Administrative Agent with the consent of the Majority Lenders; provided
that no such agreement shall (i) increase the Commitment or the Maximum
Credit Amount of any Lender without the written consent of such Lender, (ii) increase
the Borrowing Base without the written consent of each Lender, decrease or
maintain the Borrowing Base without the consent of the Majority Lenders, or
modify Section 2.07 in any manner without the consent of each Lender
(other than any Defaulting Lender); provided that a Scheduled Redetermination
may be postponed by the Majority Lenders, (iii) reduce the principal
amount of any Loan or LC Disbursement or reduce the rate of interest thereon,
or reduce any fees payable hereunder, or reduce any other Indebtedness
hereunder or under any other Loan Document, without the written consent of each
Lender affected thereby, (iv) postpone the scheduled date of payment or
prepayment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees payable hereunder, or any other Indebtedness
hereunder or under any other Loan Document, or reduce the amount of, waive or
excuse any such payment, or postpone or extend the Termination Date without the
written consent of each Lender affected thereby, (v) change Section 4.01(b) or
Section 4.01(c) in a manner that would alter the pro rata sharing of
payments required thereby, without the written consent of each Lender, (vi) waive
or amend Section


 


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3.04(b), Section 6.01, Section 8.14, Section 10.02(c) or
Section 12.14 or change the definition of the term “Subsidiary”, without
the written consent of each Lender (other than any Defaulting Lender), (vii) release
any Guarantor (except as set forth in the Guaranty Agreement), release any of
the collateral (other than as provided in Section 11.10), or reduce the
percentage set forth in Section 8.14(a) to less than 80%, without the
written consent of each Lender (other than any Defaulting Lender), or (viii) change
any of the provisions of this Section 12.02(b) or the definitions of “Majority
Lenders” or any other provision hereof specifying the number or percentage of
Lenders required to waive, amend or modify any rights hereunder or under any
other Loan Documents or make any determination or grant any consent hereunder
or any other Loan Documents, without the written consent of each Lender (other
than any Defaulting Lender); provided further that no such agreement shall
amend, modify or otherwise affect the rights or duties of the Administrative
Agent, any other Agent, or the Issuing Bank hereunder or under any other Loan
Document without the prior written consent of the Administrative Agent, such
other Agent or the Issuing Bank, as the case may be.  Notwithstanding the foregoing, any supplement
to Schedule 7.14 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon
receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.


 


Section 12.03                          Expenses, Indemnity; Damage Waiver.


 


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


 


(b)                                 THE BORROWER SHALL INDEMNIFY EACH AGENT,
THE ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE 


 


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FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”)
AGAINST, AND DEFEND AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES,
CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE
FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY
OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A
RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY,
THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT
OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE
FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN
DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv) ANY
LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM, INCLUDING,
WITHOUT LIMITATION, (A) ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND
FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION
WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF
CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT
NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION
OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (v) ANY OTHER ASPECT
OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS OF THE BORROWER
AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (vii) ANY
ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES OR
OPERATIONS, INCLUDING, THE PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED
RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF
HAZARDOUS MATERIALS ON OR AT ANY OF THEIR PROPERTIES, (ix) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE
BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY
OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME,
COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR
TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY
ACTUAL OR ALLEGED PRESENCE OR RELEASE OF 


 


83

















 


HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE
BORROWER OR ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED
IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER
ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, OR (xiv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION
OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT
OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY
THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE
SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER
ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED
THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF
SUCH INDEMNITEE.


 


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


 


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


 


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


 


Section 12.04                          Successors and Assigns.


 


(a)                                  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that (i) the
Borrower may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the 


 


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Borrower without such consent shall be null and void) and (ii) no
Lender may assign or otherwise transfer its rights or obligations hereunder
except in accordance with this Section 12.04.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), Participants
(to the extent provided in Section 12.04(c)) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.


 


(b)                                 Assignments:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(iii)                               Subject to Section 12.04(b)(iv) and the
acceptance and recording thereof, from and after the effective date specified
in each Assignment and Assumption the 


 


85

















 


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


 


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


 


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


 


(c)                                  Participations.


 


(i)                                     Any Lender may, without the consent of
the Borrower, the Administrative Agent or the Issuing Bank, sell participations
to one or more banks or other entities (a “Participant”) in all or a
portion of such Lender’s rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative
Agent, the Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any 


 


86

















 


provision of this Agreement; provided that such agreement or instrument
may provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver described in the proviso to Section 12.02
that affects such Participant.  In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03. 
Subject to Section 12.04(c)(ii), the Borrower agrees that each
Participant shall be entitled to the benefits of Section 5.01, Section 5.02
and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(a).  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 12.08 as
though it were a Lender, provided such Participant agrees to be subject to Section 4.01(c) as
though it were a Lender.


 


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


 


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


 


Section 12.05                          Survival; Revival; Reinstatement.


 


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


 


87

















 


(b)                                 To the extent that any payments on the
Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, debtor in possession, receiver or other Person under any
bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and the Administrative Agent’s and the Lenders’
Liens, security interests, rights, powers and remedies under this Agreement and
each Loan Document shall continue in full force and effect.  In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be reasonably
requested by the Administrative Agent and the Lenders to effect such
reinstatement.


 


Section 12.06                          Counterparts; Integration; Effectiveness.


 


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


 


(b)                                 This Agreement, the other Loan Documents
and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and thereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof and thereof.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.


 


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


 


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


 


Section 12.08                          Right of Setoff.  If an Event
of Default shall have occurred and be continuing, each Lender and each of its
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other obligations (of whatsoever kind, including, without limitations
obligations under Swap Agreements) at any time


 


88
















 


owing by such Lender or Affiliate to or for the credit or the account
of the Borrower or any Subsidiary against any of and all the obligations of the
Borrower or any Subsidiary owed to such Lender now or hereafter existing under
this Agreement or any other Loan Document, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations may be unmatured.  The rights of each Lender under this Section 12.08
are in addition to other rights and remedies (including other rights of setoff)
which such Lender or its Affiliates may have.


 


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


 


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


 


(b)                                 ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF
COLORADO OR OF THE UNITED STATES OF AMERICA FOR THE DISTRICT OF COLORADO, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR
ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.  THIS
SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM
OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING
JURISDICTION.


 


(c)                                  EACH PARTY HEREBY (i) IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED 


 


89

















 


HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.


 


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


 


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


 


90

















 


are provided to the Borrower, the Administrative Agent or such Lender
relating to such tax treatment or tax structure.


 


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


 


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


 


91

















 


INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND
EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT
IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS
OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY.  EACH PARTY HERETO AGREES AND
COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY
PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE
PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
“CONSPICUOUS.”


 


Section 12.14                          Collateral Matters; Swap Agreements. 
The benefit of the Security Instruments and of the provisions of this
Agreement relating to any collateral securing the Indebtedness shall also
extend to and be available to those Lenders or their Affiliates which are
counterparties to any Swap Agreement with the Borrower or any of its
Subsidiaries on a pro rata basis
in respect of any obligations of the Borrower or any of its Subsidiaries which
arise under any such Swap Agreement while such Person or its Affiliate is a
Lender, but only while such Person or its Affiliate is a Lender, including any
Swap Agreements between such Persons in existence prior to the date
hereof.  No Lender or any Affiliate of a
Lender shall have any voting rights under any Loan Document as a result of the
existence of obligations owed to it under any such Swap Agreements.


 


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


 


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


 


[SIGNATURES BEGIN NEXT PAGE]


 


92

















 


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


 


	
  BORROWER:

  	
  KODIAK
  OIL & GAS (USA) INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James P. Henderson

  
	
   

  	
   

  	
  James
  P. Henderson

  
	
   

  	
   

  	
  Chief Financial Officer

  



 


[Signature
Page- Credit Agreement]


 


1

















 


	
  ADMINISTRATIVE
  AGENT:

  	
  WELLS
  FARGO BANK, N.A.,

  
	
   

  	
  as
  Administrative Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Oleg Kogan

  
	
   

  	
   

  	
  Oleg
  Kogan

  
	
   

  	
   

  	
  Vice President

  



 


[Signature
Page- Credit Agreement]


 


2

















 


	
  LENDERS:

  	
  WELLS
  FARGO BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Oleg Kogan

  
	
   

  	
   

  	
  Oleg
  Kogan

  
	
   

  	
   

  	
  Vice President

  



 


[Signature
Page- Credit Agreement]


 


3

















 


ANNEX I

LIST OF MAXIMUM CREDIT AMOUNTS


 


Aggregate Maximum
Credit Amounts


 


	
  Name of Lender

  	
   

  	
  Applicable
  Percentage

  	
   

  	
  Maximum
  Credit Amount

  	
   

  
	
  Wells Fargo Bank, National Association

  	
   

  	
  100.00

  	
  %

  	
  $

  	
  200,000,000

  	
   

  
	
  TOTAL

  	
   

  	
  100.00

  	
  %

  	
  $

  	
  200,000,000

  	
   

  



 


1

















 


EXHIBIT A

FORM OF NOTE


 




	
  $[          ]

  	
   

  	
  [          ],
  201[     ]

  






 


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


 


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


 


This
Note is one of the Notes referred to in the Credit Agreement dated as of May 24,
2010 among the Borrower, the Administrative Agent, and the other agents and
lenders signatory thereto (including the Lender), and evidences Loans made by
the Lender thereunder (such Credit Agreement as the same may be amended,
supplemented or restated from time to time, the “Credit Agreement”).  Capitalized terms used in this Note have the
respective meanings assigned to them in the Credit Agreement.


 


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


 


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


 


	
   

  	
  KODIAK
  OIL & GAS (USA) INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


1

















 


EXHIBIT B

FORM OF BORROWING REQUEST


 


[                   ],
201[   ]


 


KODIAK
OIL & GAS (USA) INC., a Colorado corporation (the “Borrower”),
pursuant to Section 2.03 of the Credit Agreement dated as of May 24,
2010 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, Wells
Fargo Bank, National Association, as Administrative Agent and the other agents
and lenders (the “Lenders”) which are or become parties thereto (unless
otherwise defined herein, each capitalized term used herein is defined in the
Credit Agreement), hereby requests a Borrowing as follows:


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


[                                                        ]


[                                                        ]


[                                                        ]


[                                                        ]


[                                                        ]


 


1
















 


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


 


	
   

  	
  KODIAK
  OIL & GAS (USA) INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


2

















 


EXHIBIT C

FORM OF INTEREST ELECTION REQUEST


 


[                ],
201[   ]


 


KODIAK
OIL & GAS (USA) INC., a Colorado corporation (the “Borrower”),
pursuant to Section 2.04 of the Credit Agreement dated as of May 24,
2010 (together with all amendments, restatements, supplements or other
modifications thereto, the “Credit Agreement”) among the Borrower, Wells
Fargo Bank, National Association, as Administrative Agent and the other agents
and lenders (the “Lenders”) which are or become parties thereto (unless
otherwise defined herein, each capitalized term used herein is defined in the
Credit Agreement), hereby makes an Interest Election Request as follows:


 


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


 


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


 


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


 


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


 


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


 


	
   

  	
  KODIAK
  OIL & GAS (USA) INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


1

















 


EXHIBIT D

FORM OF

COMPLIANCE CERTIFICATE


 


The
undersigned hereby certifies that he/she is the
[          ] of KODIAK OIL &
GAS (USA) INC., a Colorado corporation (the “Borrower”), and that as
such he/she is authorized to execute this certificate on behalf of the
Borrower.  With reference to the Credit
Agreement dated as of May 24, 2010 (together with all amendments, restatements,
supplements or other modifications thereto being the “Agreement”) among
the Borrower, Wells Fargo Bank, National Association, as Administrative Agent,
and the other agents and lenders (the “Lenders”) which are or become a
party thereto, and such Lenders, the undersigned represents and warrants as
follows (each capitalized term used herein having the same meaning given to it
in the Agreement unless otherwise specified):


 


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


 


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


 


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


 


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


 


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


 


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


 


1

















 


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


 


EXECUTED
AND DELIVERED this
[          ] day of
[          ].


 


	
   

  	
  KODIAK
  OIL & GAS (USA) INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						



 


 


2

















 


EXHIBIT E

FORM OF ASSIGNMENT AND ASSUMPTION


 


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


 


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


 


	
  1.

  	
   

  	
  Assignor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignee:

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Borrower:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Administrative
  Agent: 

  	
                                                           ,
  as the administrative agent under the Credit Agreement

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Credit
  Agreement:

  	
  The
  Credit Agreement dated as of May 24, 2010 among Kodiak Oil &
  Gas (USA) Inc., the Lenders parties thereto, Wells Fargo Bank, National
  Association, as Administrative Agent, and the other agents parties thereto]

  



 






(1) Select as applicable.


 


1

















 


6.                                       Assigned
Interest:


 


	
  Commitment
  Assigned

  	
   

  	
  Aggregate Amount of

  Commitment/Loans for

  all Lenders

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned

  	
   

  	
  Percentage Assigned of

  Commitment/Loans(2)

  	
   

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
  $

  	
   

  	
  $

  	
   

  	
   

  	
  %

  



 


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


 


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


 


	
   

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
    Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  
	
   

  	
  [NAME
  OF ASSIGNEE]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
    Title:

  	
   

  



 






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


 


2

















 


	
  Consented
  to and Accepted:

  	
   

  
	
   

  	
   

  
	
  WELLS
  FARGO BANK, NATIONAL ASSOCIATION, as

  	
   

  
	
  Administrative
  Agent

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
    Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Consented
  to:

  	
   

  
	
   

  	
   

  
	
  KODIAK
  OIL & GAS (USA) INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
    Title:

  	
   

  



 


3

















 


ANNEX 1


 


STANDARD TERMS AND CONDITIONS FOR


ASSIGNMENT AND ASSUMPTION


 


1.  Representations and
Warranties.


 


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


 


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


 


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


 


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


 


4

















 


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


 


5

















 


SCHEDULE 7.05


LITIGATION


 


None.


 


1
















 


SCHEDULE 7.14

SUBSIDIARIES AND PARTNERSHIPS


 


None.


 


1

















 


SCHEDULE 7.19


MARKETING CONTRACTS


 


None.


 


1

















 


SCHEDULE 7.20


SWAP AGREEMENTS


 


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


 


Effective Date: March 1,
2010


Termination Date: December 31,
2010


Notional Quantity
per Month (BBL):


 


	
  March 2010

  	
   

  	
  6,200

  	
   

  
	
  April 2010

  	
   

  	
  6,000

  	
   

  
	
  May 2010

  	
   

  	
  6,200

  	
   

  
	
  June 2010

  	
   

  	
  6,000

  	
   

  
	
  July 2010

  	
   

  	
  6,200

  	
   

  
	
  August 2010

  	
   

  	
  6,200

  	
   

  
	
  September 2010

  	
   

  	
  6,000

  	
   

  
	
  October 2010

  	
   

  	
  6,200

  	
   

  
	
  November 2010

  	
   

  	
  6,000

  	
   

  
	
  December 2010

  	
   

  	
  6,200

  	
   

  



 


Net Mark to Market
Value: $73,194


 


1

















 


SCHEDULE 9.05


INVESTMENTS


 


None.


 


1