Exhibit
10.4


 




 





 


 


SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT


 


 


made by


 


each of the Grantors (as defined herein)


 


in favor of


 


 


WELLS FARGO ENERGY CAPITAL, INC.,


 


as Administrative Agent


 


 


Dated as of November 30, 2010


 


 




 




















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
  1

  
	
  Section 1.02

  	
   

  	
  Other
  Definitional Provisions; References

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  GUARANTEE

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Guarantee

  	
  3

  
	
  Section 2.02

  	
   

  	
  Payments

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  GRANT
  OF SECURITY INTEREST

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Grant
  of Security Interest

  	
  4

  
	
  Section 3.02

  	
   

  	
  Transfer
  of Pledged Securities

  	
  6

  
	
  Section 3.03

  	
   

  	
  Grantors
  Remains Liable under Accounts, Chattel Paper and Payment Intangibles

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  ACKNOWLEDGMENTS,
  WAIVERS AND CONSENTS

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Acknowledgments,
  Waivers and Consents

  	
  7

  
	
  Section 4.02

  	
   

  	
  No
  Subrogation, Contribution or Reimbursement

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Representations
  in Credit Agreement

  	
  10

  
	
  Section 5.02

  	
   

  	
  Benefit
  to the Guarantor

  	
  10

  
	
  Section 5.03

  	
   

  	
  Solvency

  	
  10

  
	
  Section 5.04

  	
   

  	
  Title;
  No Other Liens

  	
  10

  
	
  Section 5.05

  	
   

  	
  Perfected
  Second Priority Liens

  	
  10

  
	
  Section 5.06

  	
   

  	
  Legal
  Name, Organizational Status, Chief Executive Office

  	
  11

  
	
  Section 5.07

  	
   

  	
  Prior
  Names, Addresses, Locations of Tangible Assets

  	
  11

  
	
  Section 5.08

  	
   

  	
  Pledged
  Securities

  	
  11

  
	
  Section 5.09

  	
   

  	
  Goods

  	
  11

  
	
  Section 5.10

  	
   

  	
  Instruments
  and Chattel Paper

  	
  11

  
	
  Section 5.11

  	
   

  	
  Truth
  of Information; Accounts

  	
  12

  
	
  Section 5.12

  	
   

  	
  Governmental
  Obligors

  	
  12

  
	
  Section 5.13

  	
   

  	
  Patents
  and Trademarks

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  COVENANTS

  	
  12

  
	
  Section 6.01

  	
   

  	
  Covenants
  in Credit Agreement

  	
  12

  
	
  Section 6.02

  	
   

  	
  Maintenance
  of Perfected Security Interest; Further Documentation

  	
  12

  
	
  Section 6.03

  	
   

  	
  Maintenance
  of Records

  	
  13

  
	
  Section 6.04

  	
   

  	
  Right
  of Inspection

  	
  14

  
	
  Section 6.05

  	
   

  	
  Further
  Identification of Collateral

  	
  14

  
	
  Section 6.06

  	
   

  	
  Changes
  in Locations, Name, etc.

  	
  14

  
	
  Section 6.07

  	
   

  	
  Compliance
  with Contractual Obligations

  	
  14

  



 


i

















 


TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.08

  	
   

  	
  Limitations
  on Dispositions of Collateral

  	
  15

  
	
  Section 6.09

  	
   

  	
  Pledged
  Securities

  	
  15

  
	
  Section 6.10

  	
   

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

  	
  16

  
	
  Section 6.11

  	
   

  	
  Analysis
  of Accounts, Etc.

  	
  16

  
	
  Section 6.12

  	
   

  	
  Instruments
  and Tangible Chattel Paper

  	
  17

  
	
  Section 6.13

  	
   

  	
  Maintenance
  of Equipment

  	
  17

  
	
  Section 6.14

  	
   

  	
  Patents
  and Trademarks

  	
  17

  
	
  Section 6.15

  	
   

  	
  Commercial
  Tort Claims

  	
  18

  
	
  Section 6.16

  	
   

  	
  Letter-of-Credit
  Rights

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  REMEDIAL
  PROVISIONS

  	
  19

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Pledged
  Securities

  	
  19

  
	
  Section 7.02

  	
   

  	
  Collections
  on Accounts, Etc.

  	
  20

  
	
  Section 7.03

  	
   

  	
  Proceeds

  	
  20

  
	
  Section 7.04

  	
   

  	
  Colorado
  UCC and Other Remedies

  	
  21

  
	
  Section 7.05

  	
   

  	
  Private
  Sales of Pledged Securities

  	
  22

  
	
  Section 7.06

  	
   

  	
  Waiver;
  Deficiency

  	
  23

  
	
  Section 7.07

  	
   

  	
  Non-Judicial
  Enforcement

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  THE
  ADMINISTRATIVE AGENT

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

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

  	
  23

  
	
  Section 8.02

  	
   

  	
  Duty
  of Administrative Agent

  	
  25

  
	
  Section 8.03

  	
   

  	
  Execution
  of Financing Statements

  	
  25

  
	
  Section 8.04

  	
   

  	
  Authority
  of Administrative Agent

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  SUBORDINATION
  OF INDEBTEDNESS

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  Subordination
  of All Guarantor Claims

  	
  26

  
	
  Section 9.02

  	
   

  	
  Claims
  in Bankruptcy

  	
  26

  
	
  Section 9.03

  	
   

  	
  Payments
  Held in Trust

  	
  27

  
	
  Section 9.04

  	
   

  	
  Liens
  Subordinate

  	
  27

  
	
  Section 9.05

  	
   

  	
  Notation
  of Records

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  MISCELLANEOUS

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01

  	
   

  	
  Waiver

  	
  27

  
	
  Section 10.02

  	
   

  	
  Notices

  	
  27

  
	
  Section 10.03

  	
   

  	
  Payment
  of Expenses, Indemnities, Etc.

  	
  28

  
	
  Section 10.04

  	
   

  	
  Amendments
  in Writing

  	
  28

  
	
  Section 10.05

  	
   

  	
  Successors
  and Assigns

  	
  28

  
	
  Section 10.06

  	
   

  	
  Invalidity

  	
  29

  
	
  Section 10.07

  	
   

  	
  Counterparts

  	
  29

  
	
  Section 10.08

  	
   

  	
  Survival

  	
  29

  
	
  Section 10.09

  	
   

  	
  Captions

  	
  29

  



 


ii

















 


TABLE OF CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.10

  	
   

  	
  No
  Oral Agreements

  	
  29

  
	
  Section 10.11

  	
   

  	
  Governing
  Law; Submission to Jurisdiction

  	
  29

  
	
  Section 10.12

  	
   

  	
  Acknowledgments

  	
  30

  
	
  Section 10.13

  	
   

  	
  Additional
  Grantors

  	
  31

  
	
  Section 10.14

  	
   

  	
  Set-Off

  	
  31

  
	
  Section 10.15

  	
   

  	
  Releases

  	
  31

  
	
  Section 10.16

  	
   

  	
  Reinstatement

  	
  32

  
	
  Section 10.17

  	
   

  	
  Acceptance

  	
  32

  
	
  Section 10.18

  	
   

  	
  Intercreditor
  Agreement

  	
  33

  



 


SCHEDULES:


 


1.                                       Notice
Addresses of Guarantors


 


2.                                       Description of
Pledged Securities


 


3.                                       Filings and
Other Actions Required to Perfect Security Interests


 


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


 


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


 


6.                                       Patents and
Patent Licenses


 


7.                                       Trademarks and
Trademark Licenses


 


ANNEX:


 


1.                                       Form of
Assumption Agreement


 


iii
















 


This
SECOND LIEN GUARANTEE AND COLLATERAL AGREEMENT, dated as of November 30,
2010, is made by KODIAK OIL & GAS (USA) INC., a Colorado corporation
(the “Borrower”) and each of the other signatories hereto other than the
Administrative Agent (the Borrower and each of the other signatories hereto
other than the Administrative Agent, together with any other Subsidiary of the
Borrower that becomes a party hereto from time to time after the date hereof,
the “Grantors”), in favor of WELLS FARGO ENERGY CAPITAL, INC., as
administrative agent (in such capacity, together with its successors in such
capacity, the “Administrative Agent”), for the banks and other financial
institutions (the “Lenders”) from time to time parties to that certain
Second Lien Credit Agreement, dated as of even date herewith (as amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among the Borrower, the Lenders, the Administrative Agent, and the other Agents
party thereto.


 


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


 


ARTICLE I

Definitions


 


Section 1.01  Definitions.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Discharge
of First Lien Obligations” shall have the meaning assigned to such term in
the Intercreditor Agreement.


 


1

















 


“First
Lien Administrative Agent” has the meaning assigned to such term in the
Intercreditor Agreement.


 


“First
Lien Guarantee and Collateral Agreement” means that certain Guarantee and
Collateral Agreement, dated as of May 24, 2010, made by each of the
Grantors party thereto in favor of First Lien Administrative Agent.


 


“First
Lien Obligations” has the meaning assigned to such term in the
Intercreditor Agreement.


 


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


 


“Intercreditor
Agreement” shall have the meaning assigned to such term in Section 10.18.


 


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


 


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


 


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


 


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


 


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


 


2

















 


other
income of or on any of the property referred to in this definition and (e) all
books and records relating to any of the property referred to in this
definition.


 


“Secured
Parties” shall mean, collectively, the Administrative Agent and the
Lenders.


 


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


 


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


 


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


 


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


 


ARTICLE II

Guarantee


 


Section 2.01  Guarantee.


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


ARTICLE III

Grant of Security Interest


 


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


 


(1)                                  all Accounts;


 


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


 


(3)                                  all Commercial
Tort Claims;


 


4

















 


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


 


(5)                                  all Documents;


 


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


 


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


 


(8)                                  all
Instruments;


 


(9)                                  all Investment
Property;


 


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


 


(11)                            all Patents;


 


(12)                            all Patent
Licenses;


 


(13)                            all Pledged
Securities;


 


(14)                            all Supporting
Obligations;


 


(15)                            all Trademarks;


 


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


 


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


 


Notwithstanding
anything herein to the contrary, in no event shall the security interest
granted pursuant to this Article II attach to, or the term “Collateral” be
deemed to include, (a) any of the outstanding equity interests in a
Subsidiary of any Grantor organized under the laws of a jurisdiction not
located in the United States of America ( a “Foreign Subsidiary”) (i) in
excess of 65% of the voting power of all classes of equity interests of such
Foreign Subsidiary entitled to vote in the election of directors or other
similar body of such Foreign Subsidiary or (ii) to the extent that the
pledge thereof is prohibited by the laws of the jurisdiction of such Foreign
Subsidiary’s organization; (b) any equity interest in any Foreign
Subsidiary that is not a first-tier Subsidiary of any Grantor; (c) any
lease, license, contract, property rights or agreement to which a Grantor is a
party or any of such Grantor’s rights or interests thereunder, if, and for so
long as and to the extent that, the grant of the security interest hereunder
would constitute or result in (i) the abandonment, invalidation or
unenforceability of any material right, title or interest of such Grantor
therein or (ii) a breach or termination pursuant to the terms of, or a
default under, any such lease, license, contract, property rights or agreement
(other than to the extent that any such 


 


5

















 


breach,
termination or default would be rendered ineffective pursuant to Section 9-406,
9-407, 9-408 or 9-409 of the Uniform Commercial Code (or any successor
provision or provisions) of any relevant jurisdiction, any other applicable law
or principles of equity), provided, however, that the security interest granted
hereunder (x) shall attach immediately when the condition causing such
abandonment, invalidation or unenforceability is remedied, (y) shall
attach immediately to any severable term of such lease, license, contract,
property rights or agreement to the extent that such attachment does not result
in any of the consequences specified in (i) or (ii) above and (z) shall
attach immediately to any such lease, license, contract, property rights or
agreement to which the account debtor or such Grantor’s counterparty has
consented to such attachment; and (d) any application to register any
Trademark prior to the filing under applicable law of a verified statement of
use (or the equivalent) for such Trademark to the extent the creation of a
security interest therein or the grant of a mortgage thereon would void or
invalidate such Trademark (collectively, the “Excluded Property”);
provided, however, that any Collateral (or any portion thereof) that ceases to
satisfy the criteria for Excluded Property (whether as a result of a Grantor
obtaining any necessary consent, any change in any rule of law, statute or
regulation or otherwise) shall no longer be Excluded Property and the security
interest granted hereunder shall attach immediately to such Collateral (or
portion thereof) at such time.


 


Section 3.02  Transfer of Pledged Securities.  All certificates and instruments representing
or evidencing the Pledged Securities shall be delivered to and held pursuant
hereto by the First Lien Administrative Agent or a Person designated by the
First Lien Administrative Agent, in either case, which shall act as the Administrative
Agent’s bailee and agent in accordance with the terms of the Intercreditor
Agreement, and, in the case of an instrument or certificate in registered form,
shall be duly indorsed to the First Lien Administrative Agent or in blank by an
effective indorsement (whether on the certificate or instrument or on a
separate writing), and accompanied by any required transfer tax stamps to
effect the pledge of the Pledged Securities to the First Lien Administrative
Agent.  As required by and in compliance
with the Intercreditor Agreement, upon the Discharge of First Lien Obligations,
(i) the First Lien Administrative Agent shall transfer the possession and
control of all certificates and instruments representing or evidencing the
Pledged Securities, together with any necessary endorsements but without
recourse or warranty, and (ii) all Pledged Securities must be delivered or
transferred in such manner, and each Grantor shall take all such further action
as may be requested by the Administrative Agent, as to permit the
Administrative Agent to be a “protected purchaser” to the extent of its
security interest as provided in Section 8-303 of the Colorado UCC (if the
Administrative Agent otherwise qualifies as a protected purchaser).


 


Section 3.03  Grantors Remains Liable under Accounts,
Chattel Paper and Payment Intangibles. 
Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Accounts, Chattel Paper and Payment Intangibles
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
giving rise to each such Account, Chattel Paper or Payment Intangible.  Neither the Administrative Agent nor any
other Secured Party shall have any obligation or liability under any Account,
Chattel Paper or Payment Intangible (or any agreement giving rise thereto) by
reason of or arising out of this Agreement or the receipt by the Administrative
Agent or any such other Secured Party of any payment relating to such Account,
Chattel Paper or Payment Intangible, pursuant hereto, nor shall the
Administrative Agent or any other Secured Party be obligated in any manner to
perform any of the obligations of any Grantor 


 


6

















 


under or pursuant to any Account, Chattel Paper or
Payment Intangible (or any agreement giving rise thereto), to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any
Account, Chattel Paper or Payment Intangible (or any agreement giving rise
thereto), to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.


 


ARTICLE IV

Acknowledgments, Waivers and Consents


 


Section 4.01  Acknowledgments, Waivers and Consents.


 


(a)                                  Each Guarantor
acknowledges and agrees that the obligations undertaken by it under this
Agreement involve the guarantee and each Grantor acknowledges and agrees that
the obligations undertaken by it involve the provision of collateral security
for the obligations of Persons other than such Grantor (other than the
Borrower) and that such Guarantor’s guarantee and such Grantor’s provision of
collateral security for the Obligations are absolute, irrevocable and
unconditional under any and all circumstances. 
In full recognition and furtherance of the foregoing, each Grantor understands
and agrees, to the fullest extent permitted under applicable law and except as
may otherwise be expressly and specifically provided in the Loan Documents,
that each Grantor shall remain obligated hereunder (including, without
limitation, with respect to the guarantee made by such Guarantor hereby and the
collateral security provided by such Grantor herein) and the enforceability and
effectiveness of this Agreement and the liability of such Grantor, and the
rights, remedies, powers and privileges of the Administrative Agent and the
other Secured Parties under this Agreement and the other Loan Documents shall
not be affected, limited, reduced, discharged or terminated in any way:


 


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


 


7

















 


(ii)                                  without regard
to, and each Grantor hereby expressly waives to the fullest extent permitted by
law any defense now or in the future arising by reason of, (A) the
illegality, invalidity or unenforceability of the Credit Agreement, any other
Loan Document, any of the Obligations or any other collateral security therefor
or guarantee or right of offset with respect thereto at any time or from time
to time held by the Administrative Agent or any other Secured Party, (B) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by any
Grantor or any other Person against the Administrative Agent or any other
Secured Party, (C) the insolvency, bankruptcy arrangement, reorganization,
adjustment, composition, liquidation, disability, dissolution or lack of power
of any Grantor or any other Person at any time liable for the payment of all or
part of the Obligations or the failure of the Administrative Agent or any other
Secured Party to file or enforce a claim in bankruptcy or other proceeding with
respect to any Person; or any sale, lease or transfer of any or all of the
assets of the any Grantor, or any changes in the shareholders of any Grantor; (D) the
fact that any Collateral or Lien contemplated or intended to be given, created
or granted as security for the repayment of the Obligations shall not be
properly perfected or created, or shall prove to be unenforceable or
subordinate to any other Lien, it being recognized and agreed by each of the
Grantors that it is not entering into this Agreement in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectability
or value of any of the Collateral for the Obligations; (E) any failure of
the Administrative Agent or any other Secured Party to marshal assets in favor
of any Grantor or any other Person, to exhaust any collateral for all or any
part of the Obligations, to pursue or exhaust any right, remedy, power or
privilege it may have against any Grantor or any other Person or to take any
action whatsoever to mitigate or reduce any Grantor’s liability under this
Agreement or any other Loan Document; (F) any law which provides that the
obligation of a surety or guarantor must neither be larger in amount nor in other
respects more burdensome than that of the principal or which reduces a surety’s
or guarantor’s obligation in proportion to the principal obligation; (G) the
possibility that the Obligations may at any time and from time to time exceed
the aggregate liability of such Grantor under this Agreement; or (H) any
other circumstance or act whatsoever (with or without notice to or knowledge of
any Grantor), which constitutes, or might be construed to constitute, an
equitable or legal discharge or defense of the Borrower for the Obligations, or
of such Grantor under the guarantee contained in Article II or with
respect to the collateral security provided by such Grantor herein, or which
might be available to a surety or guarantor, in bankruptcy or in any other instance.


 


(b)                                 Each Grantor
hereby waives to the extent permitted by law: 
(i) except as expressly provided otherwise in any Loan Document,
all notices to such Grantor, or to any other Person, including but not limited
to, notices of the acceptance of this Agreement, the guarantee contained in Article II
or the provision of collateral security provided herein, or the creation,
renewal, extension, modification, accrual of any Obligations, or notice of or
proof of reliance by the Administrative Agent or any other Secured Party upon
the guarantee contained in Article II or upon the collateral security
provided herein, or of default in the payment or performance of any of the
Obligations owed to the Administrative Agent or any other Secured Party and
enforcement of any right or remedy with respect thereto; or notice of any other
matters relating thereto; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in Article II
and the collateral security provided herein and no notice of creation of the
Obligations or any extension of credit already or hereafter contracted by or
extended to the 


 


8

















 


Borrower need be given to any Grantor; and all
dealings between the Borrower and any of the Grantors, on the one hand, and the
Administrative Agent and the other Secured Parties, on the other hand, likewise
shall be conclusively presumed to have been had or consummated in reliance upon
the guarantee contained in Article II and on the collateral security
provided herein; (ii) diligence and demand of payment, presentment,
protest, dishonor and notice of dishonor; (iii) any statute of limitations
affecting any Grantor’s liability hereunder or the enforcement thereof; (iv) all
rights of revocation with respect to the Obligations, the guarantee contained
in Article II and the provision of collateral security herein; and (v) all
principles or provisions of law which conflict with the terms of this Agreement
and which can, as a matter of law, be waived.


 


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


 


Section 4.02  No Subrogation, Contribution or
Reimbursement.  Notwithstanding any
payment made by any Grantor hereunder or any set-off or application of funds of
any Grantor by the Administrative Agent or any other Secured Party, no Grantor
shall be entitled to be subrogated to any of the rights of the Administrative
Agent or any other Secured Party against the Borrower or any other Grantor or
any collateral security or guarantee or right of offset held by the
Administrative Agent or any other Secured Party for the payment of the
Obligations, nor shall any Grantor seek or be entitled to seek any indemnity,
exoneration, participation, contribution or reimbursement from the Borrower or
any other Grantor in respect of payments made by such Grantor hereunder, and
each Grantor hereby expressly waives, releases, and agrees not to exercise any
all such rights of subrogation, reimbursement, indemnity and contribution.  Each Grantor further agrees that to the
extent that such waiver and release set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any rights of
subrogation, reimbursement, indemnity and contribution such Grantor may have
against the Borrower, any other Grantor or against any collateral or security
or guarantee or right of offset held by the Administrative Agent or any other
Secured Party shall be junior and subordinate to any rights the Administrative
Agent and the other Secured Parties may have against the Borrower and such
Grantor and to all right, title and interest the Administrative Agent and the
other Secured Parties may have in any collateral or security or guarantee or
right of offset.  The Administrative
Agent, for the benefit of the Secured Parties, may use, sell or dispose of any
item 


 


9

















 


of Collateral or security as it sees fit without
regard to any subrogation rights any Grantor may have, and upon any disposition
or sale, any rights of subrogation any Grantor may have shall terminate.


 


ARTICLE V

Representations and Warranties


 


To
induce the Administrative Agent and the other Secured Parties to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrower thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each other Secured Party that:


 


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


 


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


 


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


 


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


 


Section 5.05  Perfected Second Priority Liens.  The security interests granted pursuant to
this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent
in completed and duly executed form), will constitute valid perfected security
interests in all of the Collateral (other than trucks, trailers and other


 


10
















 


motor vehicles covered by a certificate of title law
of any state, Commercial Tort Claims subject to Section 6.15, Letter-of-Credit
Rights less than $500,000 and Deposit Accounts not maintained with the
Administrative Agent or its Affiliates) in favor of the Administrative Agent,
for the ratable benefit of the Secured Parties, as collateral security for such
Grantor’s obligations, enforceable in accordance with the terms hereof against
all creditors of such Grantor (except for the First Lien Administrative Agent
and the First Lenders prior to the Discharge of First Lien Obligations) and any
Persons purporting to purchase any Collateral from such Grantor and (b) are
prior to all other Liens on the Collateral in existence on the date hereof
except for Liens granted in connection with the Senior Revolving Credit
Documents and Excepted Liens which have priority over the Liens on the
Collateral by operation of law.  No
effective financing statement or other registration or instrument similar in
effect covering any Collateral is on file in any recording office except any
that has been filed in favor of the Senior Administrative Agent or the Senior
Lenders in connection with the Senior Revolving Credit Documents, those in
favor of the Secured Parties relating to this Agreement and any that has been
filed to perfect or protect any Excepted Lien.


 


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


 


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


 


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


 


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


 


Section 5.10  Instruments and Chattel Paper.  Such Grantor has delivered to the First Lien
Administrative Agent, as bailee and agent for the Administrative Agent in
accordance with the Intercreditor Agreement, all Collateral constituting
Instruments and Chattel Paper.  No
Collateral constituting Chattel Paper or Instruments contains any statement
therein to the effect that such Collateral has been assigned to an identified
party other than the First Lien Administrative Agent (in its own capacity for
the benefit of the Senior Lenders or in its capacity as bailee for the
Administrative Agent for the benefit of the Lenders, or in both capacities),
and the grant of a 


 


11

















 


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


 


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


 


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


 


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


 


ARTICLE VI

Covenants


 


Each
Grantor covenants and agrees with the Administrative Agent and the other
Secured Parties that, from and after the date of this Agreement until the
Obligations shall have been paid in full and the total Commitments shall have
terminated:


 


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


 


Section 6.02  Maintenance of Perfected Security
Interest; Further Documentation.


 


(a)                                  Such Grantor
shall maintain the security interest created by this Agreement as a perfected
security interest having at least the priority described in Section 5.05 


 


12

















 


and shall, in accordance with the terms of the
Intercreditor Agreement, defend such security interest against the claims and
demands of all Persons whomsoever except for Excepted Liens.


 


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


 


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


 


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


 


Section 6.03  Maintenance of Records.  Such Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without 


 


13

















 


limitation, a record of all payments received and
all credits granted with respect to the Accounts.  For the Administrative Agent’s and the other
Secured Parties’ further security, the Administrative Agent, for the ratable benefit
of the Secured Parties, shall have a security interest in all of such Grantor’s
books and records pertaining to the Collateral, and such Grantor shall turn
over any such books and records to the Administrative Agent or to its
representatives during normal business hours at the request of the
Administrative Agent and shall provide such clerical and other assistance as
may be reasonably requested with regard thereto.


 


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


 


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


 


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


 


Section 6.07  Compliance with Contractual Obligations.  Such Grantor will perform and comply in all
material respects with all its contractual obligations relating to the
Collateral 


 


14

















 


(including, without limitation, with respect to the
goods or services, the sale or lease or rendition of which gave rise or will
give rise to each Account).


 


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


 


Section 6.09  Pledged Securities.


 


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


 


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


 


15

















 


Pledged Securities or Proceeds thereof, or any
interest therein, except for the security interests created by this Agreement
or any other Security Instrument, Liens on Property securing the Debt under the
Senior Revolving Credit Documents or (iv) enter into any agreement or
undertaking restricting the right or ability of such Grantor or the
Administrative Agent to sell, assign or transfer any of the Pledged Securities
or Proceeds thereof.


 


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


 


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


 


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


 


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


 


Section 6.11  Analysis of Accounts, Etc.  The Administrative Agent shall have the right
from time to time to make test verifications of the Accounts, Chattel Paper and
Payment Intangibles in any manner and through any medium that it reasonably
considers advisable, and each Grantor, at such Grantor’s sole cost and expense,
shall furnish all such assistance and information as the Administrative Agent
may require in connection therewith.  At
any time and from time to time, upon the Administrative Agent’s request and at
the expense of each Grantor, such Grantor shall furnish to the Administrative
Agent reports showing reconciliations, aging and test verifications of, and
trial balances for, the Accounts, Chattel Paper and Payment Intangibles, and
all original and other documents evidencing, and relating to, the agreements
and 


 


16

















 


transactions which gave rise to the Accounts,
Chattel Paper and Payment Intangibles, including, without limitation, all
original orders, invoices and shipping receipts.


 


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


 


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


 


Section 6.14  Patents and Trademarks.


 


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


 


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


 


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


 


(d)                                 Whenever a
Grantor, either by itself or through any agent, employee, licensee or designee,
shall file an application for the registration of any Patent or Trademark with
the United States Patent and Trademark Office or any similar office or agency
in any other country or any political subdivision thereof, such Grantor shall
report such filing to the Administrative Agent and the other Secured Parties in
connection with the delivery by the 


 


17

















 


Borrower of the compliance certificates required
pursuant to Section 8.01(c) of the Credit Agreement.  Upon request of the Administrative Agent,
such Grantor shall execute and deliver any and all agreements, instruments,
documents, and papers as the Administrative Agent may reasonably request to
evidence the Administrative Agent’s and the other Secured Parties’ security
interest in any Patent or Trademark and the goodwill and General Intangibles of
such Grantor relating thereto or represented thereby, and such Grantor hereby
constitutes the Administrative Agent its attorney-in-fact to execute and file
all such writings for the foregoing purposes, all acts of such attorney being
hereby ratified and confirmed; such power being coupled with an interest is
irrevocable until the Obligations are paid in full and the Commitments are
terminated.


 


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


 


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


 


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


 


18

















 


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


 


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


 


ARTICLE VII

Remedial Provisions


 


Section 7.01  Pledged Securities.


 


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


 


(b)                                 If an Event of
Default shall occur and be continuing (and subject to the Intercreditor
Agreement), then at any time in the Administrative Agent’s discretion without
notice, (i) the Administrative Agent shall have the right to receive any and
all cash dividends, payments or other Proceeds paid in respect of the Pledged
Securities and make application thereof to the Obligations in accordance with Section
10.02 of the Credit Agreement, and (ii) any or all of the Pledged Securities
shall be registered in the name of the Administrative Agent or its nominee, and
the Administrative Agent or its nominee may thereafter exercise (x) all voting,
corporate and other rights pertaining to such Pledged Securities at any meeting
of shareholders (or other equivalent body) of the relevant Issuer or Issuers or
otherwise and (y) any and all rights of conversion, exchange and subscription
and any other rights, privileges or options pertaining to such Pledged
Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the organizational structure of any Issuer, or upon
the exercise by any Grantor or the Administrative Agent of any right, privilege
or option pertaining to such Pledged Securities, and in connection therewith,
the right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to 


 


19

















 


exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.


 


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


 


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


 


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


 


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


 


20
















 


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


 


Section 7.04  Colorado UCC and Other Remedies.


 


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


 


21

















 


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


 


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


 


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


 


22

















 


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


 


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


 


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


 


ARTICLE VIII

The Administrative Agent


 


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


 


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


 


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


 


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


 


(iii)                               (A) direct any
party liable for any payment under any of the Collateral to make payment of any
and all moneys due or to become due thereunder directly to the Administrative
Agent or as the Administrative Agent shall direct; (B) take possession of and 


 


23

















 


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


 


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


 


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


 


(c)                                  The expenses of
the Administrative Agent incurred in connection with actions undertaken as
provided in this Section 8.01, together with interest thereon at the
post-default rate specified in Section 3.02(c) of the Credit Agreement from the
date of payment by the Administrative Agent to the date reimbursed by the
relevant Grantor, shall be payable by such Grantor to the Administrative Agent
on demand.


 


24

















 


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


 


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


 


Section 8.03  Execution of Financing Statements.  Pursuant to the Colorado UCC and any other applicable
law, each Grantor authorizes the Administrative Agent, its counsel or its
representative, at any time and from time to time, to file or record financing
statements, continuation statements, amendments thereto and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the
Administrative Agent reasonably determines appropriate to perfect the security
interests of the Administrative Agent under this Agreement.  Additionally, each Grantor authorizes the
Administrative Agent, its counsel or its representative, at any time and from
time to time, to file or record such financing statements that describe the
collateral covered thereby as “all assets of the Grantor”, “all personal
property of the Grantor” or words of similar effect.  A 


 


25

















 


photographic or other reproduction of this Agreement
shall be sufficient as a financing statement or other filing or recording
document or instrument for filing or recording in any jurisdiction.


 


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


 


ARTICLE IX

Subordination of Indebtedness


 


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


 


Section 9.02  Claims in Bankruptcy.  In the event of receivership, bankruptcy,
reorganization, arrangement, debtor’s relief or other insolvency proceedings
involving any Grantor, the Administrative Agent on behalf of the Secured
Parties shall have the right to prove their claim in any proceeding, so as to
establish their rights hereunder and receive directly from the receiver,
trustee or other court custodian, dividends and payments which would otherwise
be payable upon Guarantor Claims.  Each
Grantor hereby assigns such dividends and payments to the Administrative Agent
for the benefit of the Secured Parties for application against the Obligations
as provided under Section 10.02 of the Credit Agreement.  Should any Agent or Secured Party receive,
for application upon the Obligations, any such dividend or payment which is
otherwise payable to any Grantor, and which, as between such Grantor, shall
constitute a credit upon the Guarantor Claims, then upon payment in full of the
Obligations, the intended recipient shall become subrogated to the rights of the
Administrative Agent and the other Secured Parties to the extent that such
payments to the Administrative Agent and the other Secured Parties on the
Guarantor Claims have contributed toward the liquidation of the Obligations,
and such subrogation shall be with respect to that proportion of the
Obligations which would have been unpaid if the Administrative Agent and the
other Secured Parties had not received dividends or payments upon the Guarantor
Claims.


 


26

















 


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


 


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


 


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


 


ARTICLE X

Miscellaneous


 


Section 10.01  Waiver.  No failure on the part of the Administrative
Agent or any other Secured Party to exercise and no delay in exercising, and no
course of dealing with respect to, any right, remedy, power or privilege under
any of the Loan Documents shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, power or privilege under any of the Loan
Documents preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. 
The rights, remedies, powers and privileges provided herein are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.  The exercise by the
Administrative Agent of any one or more of the rights, powers and remedies
herein shall not be construed as a waiver of any other rights, powers and
remedies, including, without limitation, any rights of set-off.


 


Section 10.02  Notices.  All notices and other communications provided
for herein shall be given in the manner and subject to the terms of Section 12.01
of the Credit Agreement; 


 


27

















 


provided that any such notice, request or demand to
or upon any Guarantor shall be addressed to such Guarantor at its notice
address set forth on Schedule 1.


 


Section 10.03  Payment of Expenses, Indemnities, Etc.


 


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


 


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


 


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


 


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


 


28

















 


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


 


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


 


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


 


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


 


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


 


Section 10.11  Governing Law; Submission to Jurisdiction.


 


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


 


(b)                                 Any legal
action or proceeding with respect to this Agreement or any other Loan Documents
to which a Grantor is a party shall be brought in the courts of the State of 


 


29

















 


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


 


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


 


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


 


Section 10.12  Acknowledgments.  Each Grantor hereby acknowledges that:


 


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


 


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


 


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


 


30
















 


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


 


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


 


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


 


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


 


Section 10.15  Releases.


 


(a)           Release Upon Payment in Full.  The grant of a security interest hereunder
and all of rights, powers and remedies in connection herewith shall remain in
full force and effect until the Administrative Agent has (i) retransferred
and delivered all Collateral in its possession to the Grantors, and (ii) executed
a written release or termination statement and 


 


31

















 


reassigned to the Grantors without recourse or
warranty any remaining Collateral and all rights conveyed hereby.  Upon the sale, transfer or other disposition
of Collateral permitted pursuant to the terms of Section 9.12 of the
Credit Agreement, the Administrative Agent, at the written request and expense
of the Borrower, will promptly release such Collateral to the Grantors.  Additionally, upon the complete payment of
the Obligations, the termination of the Credit Agreement and the total
Commitments and the compliance by the Grantors with all covenants and
agreements hereof, the Administrative Agent, at the written request and expense
of the Borrower, will promptly release, reassign and transfer the Collateral to
the Grantors and declare this Agreement to be of no further force or effect.


 


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


 


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


 


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


 


Section 10.17  Acceptance.  Each Grantor hereby expressly waives notice
of acceptance of this Agreement, acceptance on the part of the Administrative
Agent and the other Secured 


 


32

















 


Parties being conclusively presumed by their request
for this Agreement and delivery of the same to the Administrative Agent.


 


Section 10.18  Intercreditor Agreement.  Reference is made to the Intercreditor
Agreement dated as of November 30, 2010 (as amended, restated,
supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among the Company, Wells Fargo
Bank, National Association, as First Lien Administrative Agent (as defined
therein), and Wells Fargo Energy Capital, Inc., as Second Lien
Administrative Agent (as defined therein). Notwithstanding anything herein to
the contrary, the lien and security interest granted to the Administrative
Agent, for the benefit of the Secured Parties, pursuant to this Agreement and
the exercise of any right or remedy by the Administrative Agent and the other
Secured Parties hereunder are subject to the provisions of the Intercreditor
Agreement.  In the event of any conflict
or inconsistency between the provisions of the Intercreditor Agreement and this
Agreement, the provisions of the Intercreditor Agreement shall control.


 


[Reminder of Page Intentionally Left Blank.


 


Signature Page of Borrower and Administrative
Agent Follows.]


 


33

















 


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


 


	
  BORROWER:

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James P. Henderson

  
	
   

  	
   

  	
  James
  P. Henderson

  
	
   

  	
   

  	
  Chief
  Financial Officer

  



 


SIGNATURE PAGE


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Acknowledged
and Agreed to as

of the date hereof by:


 


	
  ADMINISTRATIVE
  AGENT:

  	
  WELLS
  FARGO ENERGY CAPITAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Bryan McDavid

  
	
   

  	
   

  	
  Bryan
  McDavid

  
	
   

  	
   

  	
  Vice
  President

  



 


SIGNATURE PAGE


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Schedule 1


 


NOTICE ADDRESSES OF GRANTORS


 


	
  1.

  	
  Kodiak
  Oil & Gas (USA) Inc.

  
	
   

  	
   

  
	
   

  	
  Notice
  Address:

  
	
   

  	
   

  
	
   

  	
  1625
  Broadway, Suite 250

  
	
   

  	
  Denver,
  Colorado 80202

  
	
   

  	
  Attention:
  James P. Henderson

  
	
   

  	
  Telephone:
  303-592-8030

  
	
   

  	
  Facsimile:
  303-592-8071

  



 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Schedule 2


 


DESCRIPTION OF PLEDGED SECURITIES


 


None.


 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Schedule 3


 


FILINGS AND OTHER ACTIONS

REQUIRED TO PERFECT SECURITY INTERESTS


 


Uniform
Commercial Code Filings


 


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


 


Actions
with respect to Pledged Securities


 


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


 


Description
of Commercial Tort Claims


 


None


 


Actions
with respect to Letter-of-Credit Rights in excess of $500,000


 


None


 


Actions
with respect to Equipment Covered by a Certificate of Title


 


Notation
of the Administrative Agent’s security interest on the certificate of title of
each item of Equipment


 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Schedule 4


 


CORRECT LEGAL NAME, LOCATION OF JURISDICTION OF

ORGANIZATION, ORGANIZATIONAL IDENTIFICATION

NUMBER, TAXPAYOR IDENTIFICATION NUMBER AND

CHIEF EXECUTIVE OFFICE


 


	
  1.

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

  
	
   

  	
  Organizational
  Identification Number: 20031303362

  
	
   

  	
  Taxpayer
  Identification Number: 57-1191218

  
	
   

  	
  Chief
  Executive Office:

  	
  1625
  Broadway, Suite 250

  
	
   

  	
   

  	
  Denver,
  Colorado 80202

  



 


GUARANTEE
AND COLLATERAL AGREEMENT


 
















 


Schedule 5


 


PRIOR NAMES AND PRIOR CHIEF EXECUTIVE OFFICE


 


	
  1.

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

  
	
   

  	
  Prior
  Names: None

  
	
   

  	
  Prior
  Chief Executive Office:

  	
  1625
  Broadway, Suite 330

  
	
   

  	
   

  	
  Denver, Colorado 80202

  



 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Schedule 6


 


PATENTS AND PATENT LICENSES


 


None.


 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Schedule 7


 


TRADEMARKS AND TRADEMARK LICENSES


 


None.


 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


ACKNOWLEDGMENT AND CONSENT


 


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


 


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


 


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


 


	
   

  	
  [NAME OF ISSUER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address
  for Notices:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  
					



 


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


 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


Annex I


 


ASSUMPTION AGREEMENT


 


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


 


W I T N E S S E T H:


 


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


 


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


 


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


 


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


 


NOW,
THEREFORE, IT IS AGREED:


 


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


 


GUARANTEE AND COLLATERAL
AGREEMENT


 

















 


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


 


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


 


	
   

  	
  [ADDITIONAL GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


GUARANTEE AND COLLATERAL
AGREEMENT


 


Annex I - 2