Production Participation Plan



  
 WHITING PETROLEUM
CORPORATION 
  
 PRODUCTION PARTICIPATION PLAN

  
 (As Amended and Restated Effective April 23, 2004)

  









 WHITING PETROLEUM CORPORATION 
  
 PRODUCTION PARTICIPATION PLAN 
  

(As Amended and Restated Effective April 23, 2004) 
  
 PREAMBLE 
  
 WHITING PETROLEUM CORPORATION, a Delaware corporation (collectively with Whiting Oil and Gas Corporation, its wholly-owned subsidiary and a Delaware
corporation, the “Company”), hereby establishes the following production participation plan (the “Plan”). The Plan is intended to provide greater incentives to the Company’s employees to increase the profitability of the
Company and to enable the Company to attract, motivate and retain valuable employees upon whom, in large measure, the continued profitability of the Company depends. 
  
 ARTICLE I 
  
 Definitions 
  
 The following words and phrases shall have the meaning set forth below unless the context clearly indicates otherwise: 
  
 1.1 “Committee” means the Compensation Committee of the
Board of Directors of Whiting Petroleum Corporation. 
  
 1.2
“Company” means Whiting Petroleum Corporation and Whiting Oil and Gas Corporation, collectively, and any successor thereto. 
  
 1.3 “Compensation” means the total salary paid or accrued to a Participant by the Company or a wholly owned subsidiary of the Company
during a Plan Year, excluding bonuses, reimbursed expenses and other extraordinary items. 
  
 1.4 “Effective Date” means January 1, 1981. 
  
 1.5 “Employee” means each common-law salaried employee of the Company or a subsidiary of the Company who performs services for the Company or a subsidiary on a full-time basis, as determined by the
Company. 
  









 1.6 “Participant” means an Employee, or former Employee, who is eligible to receive
distributions in accordance with the terms of the Plan. 
  
 1.7
“Plan Year” means the twelve-month period on which the records of the Plan are kept, which shall be the same as the fiscal year of the Company. 
  

1.8 Pronouns: Gender and Number. Unless the context clearly indicates otherwise, words in any gender shall include the other genders and the
singular shall include the plural and vice versa. 
  
 ARTICLE II

  
 Participation in the Plan 
  
 2.1 Participation. 
  
 Each Employee of the Company shall become a Participant in
the Plan on his date of employment by the Company. 
  
 2.2
Enrollment – Procedure. 
  
 Each
Participant shall fill out and sign an enrollment form supplied by the Committee and return it to the Committee. The enrollment form shall state, among other information, the Participant’s post office address and date of birth and a designation
of the names and post office addresses of his beneficiaries. 
  
 2.3 Absences. 
  
 A leave of
absence approved in writing by the Company shall not constitute a termination of employment for purposes of computing years of service with the Company for determining vesting under section 4.4. 
  
 ARTICLE III 
  
 Company Contributions 
  
 3.1 Allocation of Income Attributable to Pools Formed Prior to January 1, 1995. For periods prior to January 1, 1995, the Company allocated on its
books, for Plan purposes, certain deemed overriding royalty interests with respect to certain specified oil and gas properties. Interests in wells allocated to the Plan which were either spudded or purchased during each Plan Year prior to January 1,
1995 form separate accounting pools (the “Pre-1995 Pools”). The calculation of income allocable to the Plan and the Participants in the Plan with 

  

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respect to the Pre-1995 Pools, and the distributions to Participants of such income, shall continue to be made in accordance with the provisions of the Plan
as in effect prior to the effective date of this Amendment. 
  
 3.2 Allocation of Income to the Plan for the 1995 Plan Year and Subsequent Plan Years. Effective as of January 1, 1995, the Company shall allocate to the Plan a specified percentage of the net income with respect to the oil and gas
wells allocated to the Plan which were either spudded or purchased during each Plan Year, beginning with the calendar 1995 Plan Year. The Company shall determine in its discretion, each Plan Year, the wells that shall be allocated to the Plan and
the wells that are allocated to the Plan during each Plan Year shall form a separate accounting pool (the “Post-1994 Pools”). The Pre-1995 Pools and the Post-1994 Pools are hereinafter sometimes referred to, in the aggregate, as the
“Pools”. The amount of income that shall be allocated to the Plan each Plan Year with respect to each Pool formed in 1995 and later Plan Years shall be based upon the net income each Plan Year attributable to the oil and gas properties
allocated to each such Pool. The amount of income allocable to the Plan each Plan Year from each Post-1994 Pool shall be based upon the net income attributable to each such Pool’s oil and gas properties, multiplied by a percentage derived from
a sliding scale schedule based upon the Company’s overall earnings, before interest expense and income taxes, for each such Plan Year. The Company shall establish a schedule with respect to each Plan Year beginning with the 1995 Plan Year
pursuant to which the percentage of net property level income that shall be allocated to the Plan from all Post-1994 Pools with respect to each such Plan Year shall be determined. The applicable percentages for 1995 are attached hereto as Exhibit A.
For each Plan Year subsequent to 1995, the Company shall prepare and approve, as a new Exhibit A, a new schedule establishing the levels of contribution to the Plan based upon the Company’s earnings before interest expense and taxes for such
Plan Year. The applicable percentage of property-level net income for each Plan Year attributable to each Post-1994 Pool shall be distributed annually in accordance with Article IV. 
  
 3.3 Sale of Interest. If the Company sells or transfers its interest in a well (including the spacing unit on which
such well is located) that is being used to determine the amount of Plan income pursuant to Section 3.1 or 3.2, that portion of the net profit from such sale, but before income taxes, representing in the case of Pre-1995 Pools, the production
interest allocated to the Plan, and in the case of Post-1994 Pools, the Production Plan Percentage as set 

  

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forth on Exhibit A for the Plan Year during which such sale is closed, shall be distributable to the Participants eligible to share in income distributions
from the Pool in question in the same manner as current income from production with respect to that Pool for the Plan Year during which such sale occurs. 
  
 ARTICLE IV 
  
 Allocation and Distribution of Net Income 
  
 4.1 Allocation of Current Pool Net Income. As of the last day of each Plan Year, beginning with the Plan Year ending December 31, 1981, the
Committee shall allocate the accrued net income allocable to the Pool created for that Year among the Participants employed by the Company on the last day of that Plan Year in the following manner: 
  
 (a) Thirty-three and one-third percent (33-1/3%) of the net
income of each Year’s current Pool shall be allocated among the Participants in the proportion which the Compensation of each Participant for such Year bears to the total Compensation of all Participants for such Plan Year. 
  
 (b) Up to sixty-six and two-thirds percent (66-2/3%) of the
net income of each Year’s current Pool shall be available for allocation among any Participants who receive points pursuant to this section 4.1(b). Up to 666 points may be awarded annually based upon each Participant’s contributions to the
Company with respect to that Plan Year. However, there is no requirement that any points be awarded with respect to any given Plan Year. Points will be awarded only to Participants who have put forth extraordinary effort on behalf of the Company in
cases where the Company has materially benefited from such effort. The Committee shall determine the points to be awarded to all eligible Participants. The determination of the Committee as to whether to award any points during a given Plan Year,
and as to the points awarded to each eligible Participant, shall be solely within the discretion of the Committee, and all decisions of the Committee shall be final and binding on all Participants and beneficiaries. All decisions with respect to the
award of points shall remain confidential. 
  
 The portion of such sixty-six and two-thirds percent of the Pool’s net income to be allocated to each Participant receiving points shall be equal to the percentage that the Participant’s points are of the 666 possible points for
that Plan Year. If fewer than 666 points are awarded during any Plan Year, the unallocated portion of the sixty-six and two-thirds percent 

  

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of the net income for that Plan Year shall be allocated and paid to Participants in the same proportion as the amounts paid under section 4.1(a). 

 
 4.2 Allocation of Prior Pool Net Income. 
  
 The accrued net income for each Plan Year allocable to each
separate Pool formed under the Plan during prior Plan Years shall be allocated only among those Participants who originally shared in the allocation of the net income of such Pool pursuant to section 4.1 (or their beneficiaries) and who are either
employed by the Company as of the last day of the latest Plan Year or are vested in accordance with section 4.4. The accrued net income attributable to each prior Pool shall be allocated among those persons eligible to share in such income based
upon their original sharing ratios in such Pool (the “Original Sharing Ratios”); provided, however, that, in the case of Pre-2004 Pools (as defined in section 4.4(b) below), the Original Sharing Ratios shall be increased proportionately to
account for the forfeiture of interests because of (a) the termination of employment of Participants prior to becoming fully vested in accordance with section 4.4, or (b) those matters specified in section 4.5; provided further, that, in the case of
Post-2003 Pools (as defined in section 4.4(c) below), Original Sharing Ratios shall remain the same at all times and not be impacted by the forfeiture of any interests. 
  
 4.3 Distribution of Net Income. 
  
 As soon as practicable after the end of each Plan Year, beginning with the Plan Year ending December 31,
1981, the Company shall distribute to each Participant (or his beneficiary) in one lump sum his allocable share of the net income of the Plan for the preceding Plan Year, less any required withholding of income taxes or other amounts applicable to
payments made to Employees of the Company. 
  
 4.4 Vesting.

  
 (a) General. If a Participant with
less than one full year of employment with the Company terminates his employment with the Company for any reason, he shall cease to be a Participant in this Plan and all rights of such Employee under this Plan shall terminate. 
  
 (b) Vesting For Plan Years Prior to 2004. A
Participant who is credited with one or more full years of employment with the Company at the date of his termination of employment shall continue to participate in Pools relating to Plan Years prior to 2004 (the “Pre-2004 Pools”) on a
vested basis in accordance with the following schedule: 
  

			
	 Full Years of Employment

	  	Vested Percentage of Future Income


	 1
	  	20%
	 2
	  	40%
	 3
	  	60%
	 4
	  	80%
	 5
	  	100%

  

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 A vested Participant shall continue to share in the distribution of accrued net income from all Pre-2004 Pools in which
he originally shared in the same manner as Participants who are employed by the Company, based upon his vested percentage at the date of his termination of employment and his percentage of the net income of each such Pre-2004 Pool as of the end of
the Plan Year immediately preceding or coincident with the date of his termination of employment. For purposes of this section (b), employment prior to January 1, 1981 shall be disregarded and only full Plan Years of employment after January 1, 1981
shall be credited to Participants. 
  
 (c)
Vesting for Plan Year 2004 and Subsequent Plan Years. For any Participant who is credited with one or more full years of employment with the Company at the date of his termination of employment with the Company, such Participant’s right
to continue to participate in each Pool relating to the Plan Year 2004 and subsequent Plan Years (the “Post-2003 Pools”) in which he originally shared shall vest in accordance with the following schedule: 
  

			
	 Full Years Elapsed Since
 Beginning of Plan Year
 Relating to Pool

	  	 Cumulative Vested
 Percentage
 of Participation
 in Pool


	 fewer than 1
	  	0%
	 1
	  	20%
	 2
	  	40%
	 3
	  	60%
	 4
	  	80%
	 5 or more
	  	100%

  
 A Participant shall continue to share
in the distribution of accrued net income from each Post-2003 Pool in which he originally shared in the same manner as Participants who are employed by the Company, based upon his cumulative vested percentage of his participation in such Post-2003
Pool at the date of his termination of employment and his percentage of the net income of each such Post-2003 Pool as of the end of the Plan Year immediately preceding or coincident 

  

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with the date of his termination of employment. Notwithstanding any other provision of this Plan to the contrary, upon a Participant’s reaching age 65
while still employed by the Company, such Participant’s right to continue to participate in each Post-2003 Pool in which he originally shared shall become fully vested. 
  
 (d) If a Participant dies or becomes disabled (as determined by the Committee) prior to becoming fully
vested in accordance with (b) or (c) above, as applicable, such Participant (or his beneficiary) shall nevertheless be fully vested for purposes of future distributions from the Plan and shall be entitled to receive future distributions of Plan
income in accordance with (b) or (c) above, as applicable. 
  
 4.5
Forfeiture-Termination for Cause. 
  
 (a)
If a Participant’s employment with the Company is terminated for cause, as determined by the Company, the Participant, regardless of his or her vested percentage, shall not be entitled to any further distributions or payments from the Plan.

  
 (b) If a vested terminated Participant is
later determined by the Company to have engaged in any activity which would be grounds for termination for cause while employed by the Company, such Participant shall, upon such determination, forfeit all rights to any further payments from the
Plan. 
  
 4.6 Purchase of Interests by Company. 

 
 The Company may, at its sole option, purchase the entire
vested interest under the Plan of any terminated or deceased Participant. The Company shall notify the terminated Participant, or the beneficiary of a deceased Participant, within 120 days after the end of any Plan Year, of its election to purchase
such person’s interest under the Plan. Payment for any interest so purchased shall be made by the Company, by its check, within 60 days after the expiration of said notice period. The purchase price of any interest so purchased shall be based
on the fair market value of the Participant’s (or beneficiary’s) interest under the Plan as of the end of the immediately preceding Plan Year. The determination of fair market value shall be made by the Company, using the valuation
reports, discount rates and other factors then being used by the Company for the purchase of oil and gas interests from third parties. 
  

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 ARTICLE V 
  
 Allocation of Administrative Responsibilities 
  
 5.1 The Company. 
  
 The Company shall be responsible for: (a) keeping accurate books and accounts with respect to all income which it receives attributable to
interests which have been allocated to the Plan; (b) keeping accurate books and records with respect to its Employees and their Compensation and furnishing such data to the Committee; and (c) making payments to Plan Participants and their
beneficiaries in accordance with the provisions of the Plan. 
  
 5.2 The Committee. 
  
 The
Committee shall administer the Plan and shall have all powers necessary for that purpose, including, but not by way of limitation, power to interpret the Plan, to determine the eligibility, status and rights of all persons under the Plan and in
general to decide any dispute. The Committee shall direct all distributions in accordance with the provisions of the Plan and shall maintain all Plan records except records required to be kept by the Company. 
  
 5.3 Indemnification of Committee Members. 
  
 The Company shall indemnify each member of the Committee
against any and all claims, loss, damages, expense and liability arising from any action or failure to act with respect to the Plan, except when the same is judicially determined to be due to the gross negligence or willful misconduct of such
person. 
  
 ARTICLE VI 
  
 Termination and Amendment 
  
 6.1 Termination of Plan and Discontinuance of Contributions.

  
 The Company presently intends to continue the
Plan indefinitely, but the continuance of the Plan is not assumed as a contractual obligation and the Company may terminate the Plan at any time by delivering written notice of termination to the Committee and each Participant and beneficiary then
entitled to receive distributions from the Plan. Upon the termination of the Plan, or upon the sale or exchange of all or substantially all of the Company’s assets, the merger of the Company or the liquidation of the Company (but only if the
management of the purchaser, exchangor or other successor organization is substantially different from the management of the Company prior to such sale, exchange, merger or 

  

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liquidation), the interests of all participants in the Plan shall become fully vested, notwithstanding any other provision hereof. 
  
 6.2 Procedure Upon Termination. 
  
 Upon voluntary termination of the Plan by the Company, the
Committee shall either (a) distribute to each Participant or beneficiary then participating in the Plan, in one lump sum or in five equal installments with interest at the minimum rate required in order to avoid the imputation of interest under
Section 483 of the Internal Revenue Code, or any successor provision, an amount equal to the then present worth of each such person’s interests in the Plan, computed in accordance with section 4.6, or (b) continue to make distributions in
accordance with the provisions of the Plan from all Pools existing at the time of termination, all as the Committee in its sole discretion may determine. If the Plan terminates automatically because of one of the events specified in section 6.1, the
interest of each person, valued in accordance with section 4.6, shall be distributed in one lump sum. Upon termination of the Plan, the interest of each Participant or beneficiary in each Pool under the Plan shall be 100% vested and shall be the
percentage interest of each such person in that Pool as of the end of the last Plan Year prior to termination of the Plan, adjusted to account for any forfeitures between the end of the prior Plan year and the time of termination of the Plan.

  
 6.3 Amendment by Company. 
  
 The Company may at any time amend the Plan in any respect by
action of its Board of Directors, but no amendment shall be made which would have the effect of materially and adversely affecting the interest of any person under the Plan with respect to then existing Pools. 
  
 ARTICLE VII 
  
 Miscellaneous 
  
 7.1 Right to Dismiss Employees. 
  
 The Company may terminate the employment of any Employee as freely and with the same effect as if this Plan were not in existence.

  
 7.2 Withholding of Taxes, Etc. 
  
 The Company shall withhold from all payments to Participants
and beneficiaries hereunder, and pay to the appropriate governmental authority, all amounts of 

  

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income taxes and other amounts which are required by applicable law and regulation to be withheld from wage payments to Employees of the Company. 

 
 7.3 Source of Benefits. 
  
 All benefits payable under the Plan shall be paid solely
from the general assets of the Company and no allocation of royalty interest or income on the books of the Company shall be deemed to create a separate fund or any ownership interest on the part of the Plan in any properties being used to measure
Plan income or in any production from such properties. 
  
 7.4
Ownership of Properties. 
  
 Nothing
contained in this Plan shall in any way restrict the right of the Company to sell, transfer, mortgage, encumber or otherwise deal with the properties giving rise to the revenues used to measure Plan income. 
  
 7.5 Beneficiaries. 
  
 Each Participant shall file with the Committee a designation
of the beneficiaries and contingent beneficiaries to whom income attributable to his interest under the Plan shall be paid in the event of his death. Such designation may be changed by the Participant at any time and without the consent of any
previously designated beneficiary. In the absence of an effective beneficiary designation as to any portion of a Participant’s interest under the Plan, income attributable to such interest shall be paid to the Participant’s personal
representative, but if the Committee believes that none has been appointed within six months after the Participant’s death, the Committee may direct that such income shall not be paid until a personal representative has been appointed or may
direct that such income shall be paid to the Participant’s surviving spouse, or if there is none, to his surviving children and issue of deceased children by right of representation, or if there be none, to his surviving parents. 
  
 7.6 Non-transferability of Benefits. 
  
 No Participant or beneficiary shall have any right to
assign, alienate, transfer, hypothecate, encumber or anticipate his interest in any benefits under this Plan, nor shall such benefits be subject to any legal process to levy upon or attach the same for payment of any claim against any such
Participant or beneficiary. 
  

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 7.7 Payments Due Minors or Incapacitated Persons. 
  
 If any person entitled to a payment under the Plan is a
minor, or if the Committee determines that any such person is incapacitated by reason of physical or mental disability, whether or not legally adjudicated as such, the Committee shall have the power to cause the payments becoming due to such person
to be made to his personal representative or to another for his benefit, without responsibility of the Committee to see to the application of such payments. The Committee shall have no responsibility to investigate the physical or mental condition
of a Participant and any determination of disability made by the Committee shall be binding on the Participant and all other persons. Payments made pursuant to such power shall operate as a complete discharge of the Plan, the Company and the
Committee. 
  
 7.8 Disposition of Unclaimed Payments.

  
 Each Participant must file with the Committee
from time to time in writing his post office address and the post office address of each of his beneficiaries and each change of post office address. Any communication, statement or notice addressed to a Participant or beneficiary at his last post
office address filed with the Committee, or if no address is filed with the Committee, then at his last post office address as shown on the Company’s records, will be binding in the Participant and his beneficiaries for all purposes of the
Plan. Neither the Committee nor the Company shall be required to search for or locate a Participant or beneficiary. If the Committee notifies a Participant or beneficiary that he is entitled to a distribution and also notifies him of the provisions
of this section, and the Participant or beneficiary fails to make his address known to the Committee within three calendar years after the notification, the interest in each Pool under the Plan of the Participant or beneficiary will be forfeited as
of the end of the Plan Year following the expiration of such three-year period and re-allocated among the Participants in each Plan Pool at that time. 
  

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 7.9 Governing Law. 
  
 The construction and interpretation of this Plan shall be governed by the laws of the State of Colorado.

  
 DATE: April 23, 2004 
  

									
	 ATTEST:
	 	 	 	 WHITING PETROLEUM CORPORATION

					
	 	 	 /s/ Patricia J. Miller
	 	 	 	 By:
	 	 /s/ James J. Volker

	 	 	
	 	 	 	 	 	

	 	 	 Vice President of Human Resources
 and Corporate Secretary
	 	 	 	 	 	 Chairman, President and Chief Executive Officer


  

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